Global Innovation Trends in Retail Banking
Efma Webinar, October 2013
Michael Pearson, Efma Strategic Adviser
Speakers
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• Hand icon: Click on the icon if you wish to jump in the conversation. The organizer will unmute your microphone and you will be able to speak.• Chat section: Type your question and click Send to submit it to the organizer.
Patrick Desmarès Secretary GeneralEfma
Michael Pearson Senior Retail Banking Adviser Efma
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Introduction
• 5th annual study of retail banking innovation
• 150+ banks from around the world participated in the research
• Focus was on how to overcome barriers to innovation
• Study measured of deployment of various channel innovations
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovation case studies
Many successful business leaders have claimed that innovation is essential for growth and value creation
“As I’ve looked at a number of industries, virtually all the value gets created by innovation. At our company, all of our revenue growth was
either organic innovation or it was through acquisition, and acquisition was a platform for
future innovation.”
AG Lafley, Chairman & CEO, Procter & Gamble
Academic research also shows that companies with growth track records rely heavily on innovation
“Growth outliers do a tremendous amount of experimentation and innovation. They develop and deploy new technologies, move into new
markets, explore new business models and even open up new industries. They take on acquisitions
and aggressively seek input from people and organisations quite unlike their own.”
Rita Gunther McGrath
“How the Growth Outliers Do It”, Harvard Business Review
Most banks say they are becoming more innovative and investing more in innovation
Innovation Level
More Innovative
Investment
Less Innovative
Investing More
Investing Less
Source: Efma/Infosys Innovation Survey 2013
+76%
-6%
+70%
-5%
Banks are also now more likely to have an innovation strategy than before
Percentage of Banks With an Innovation Strategy
37%
2009
60%50%
2011 2013
Source: Efma/Infosys Innovation Survey 2013
Most banks think that their innovation performance is improving
Source: Efma/Infosys Innovation Survey 2013
76%
17%7%
Improving Performance No Change Declining Performance
Percentage of Banks with Improving or Declining Innovation
The continuing threat of disruptive innovation may be a factor which is encouraging banks to be more innovative
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovation case studies
IT systems are perceived to be the most significant innovation barrier for banks, followed by culture
Source: Efma/Infosys Innovation Survey 2013
Large Banks Medium Banks Small Banks
1 IT systems IT systems IT systems
2 Culture Culture Regulation
3 Organisation silos Organisation silos Financial
4 Regulation Regulation Culture
5 Management priorities Management priorities Management priorities
6 Financial Financial Organisation silos
The problem with silo-based IT systems is mainly that they increase time to market and the cost of innovation
Source: Efma/Infosys Innovation Survey 2013
Innovation in service
Time to market
Cost of innovation
Innovation in products
Innovation in process
5.2
4.9
4.6
4.5
4.4
Very Low Impact
Average Impact
Very High Impact
Scale 1-7
Source: Efma/Infosys Innovation Survey 2013
The time to market for new offers is particularly high for large banks
Time to Market for New Offers in Months
6
Small Banks
12
8
Medium Banks
Large Banks
Source: Efma/Infosys Innovation Survey 2013
There are two specific IT-related factors which could improve innovation execution
Yes No Don't Know
Enterprise-widebanking systems*
Componentised deployment of banking systems*
* Question: Would enterprise-wide banking systems or componentised deployment improve innovation execution
Yes No Don't Know
There are several specific capabilities which would help banks improve their overall innovation capability
Product
Channel
Customer• Customer insight
• Single customer view
• Unified experience across channels
• Multichannel integration
• Personalisation of product offers
• Ability to launch in collaboration
Source: Efma/Infosys Innovation Survey 2013
Open innovation is being increasingly used although there are very mixed views on its effectiveness
Source: Efma/Infosys Innovation Survey 2013
Investment in start-ups
Partnering with IT companies or other suppliers
Online idea generation portals
Competitions for non-staff
Relationships with academic institutions
Very Low Effectiveness
Average Effectiveness
Very High Effectiveness
4.2
3.8
3.1
3.1
3.1
Scale 1-7
Investing in start-ups through a structured corporate venturing approach can be of value if done well
“Investing in start-up companies committed to new business models enables BBVA to learn and anticipate the emerging challenges facing the financial services sector.”
Jay Reinemann, BBVA Ventures
• $100m fund targeting start-ups with the potential to transform financial services.
• Based in Silicon Valley, early investments included SaveUp and Ribbit Capital.
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovation case studies
Source: Efma/Infosys Innovation Survey 2013
Out of 10 digital innovations surveyed, large banks had on average deployed the most
Number of Digital Innovations Deployed
1.2/10
Small Banks
2.8/10
1.7/10
Medium Banks
Large Banks
1. Mobile P2P payments
2. Mobile NFC payments
3. Mobile wallet
4. Mobile location-based offers
5. Voice recognition for mobile
6. Direct only banking
7. Self-configuration of products
8. Video conferencing
9. Gamification
10. Transactions via social media
Source: Efma/Infosys Innovation Survey 2013
Out of 10 digital innovations surveyed, large banks had on average deployed the most
Number of Digital Innovations Deployed (out of 10)
1.2
Small Banks
2.8
1.7
Medium Banks
Large Banks
Digital only banking…
“Hello bank! is fully geared to the new social habits that are now transforming people’s relationships with their bank.”
Plans for Digital Only Banking
Source: Efma/Infosys Innovation Survey 2013
23%
Currently Deployed
21%
Planned
56%
No Plans
% of banks at different stages of deployment
Mobile wallets…
Plans for Mobile Wallets
Source: Efma/Infosys Innovation Survey 2013
21%
Currently Deployed
56%
Planned
23%
No Plans
“CaixaBank, Santander and Telefónica to create first joint venture between banks and
telecom operators in Europe to develop new digital businesses.”
“Berg Insight expects that 2016–17 will be the first years in which
mobile wallets approach mass market penetration and more than 10m new wallet users will then be
added annually in Europe.”
% of banks at different stages of deployment
Location based marketing…
18%
Currently Deployed
51%
Planned
31%
No Plans
Plans for Location Based Marketing
Source: Efma/Infosys Innovation Survey 2013
“Barclaycard’s bespoke offers is the savvy shoppers ‘savings SatNav’, always at your
fingertips offering whatever you want, whenever you want it.”
% of banks at different stages of deployment
Gamification…
9%
Currently Deployed
35%
Planned
56%
No Plans
Plans for Gamification
Source: Efma/Infosys Innovation Survey 2013
“It is a good application to change our way of communicating with our customers, which is now more approachable and friendlier.”
% of banks at different stages of deployment
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovation case studies
Some of the speakers at the Efma Banking on Innovation conference described useful case examples
FNB (South Africa)
TEB (Turkey)
UniCredit (Italy)• How to co-ordinate across a multi-country,
matrix organisation, and invest in R&D
• Entrepreneurial culture, using multiple innovation activities and open innovation
• Long term commitment, driven by CEO, focused on an employee competition
Davivienda from Colombia is also an excellent innovation case study
Conclusions…
• The innovation “good news” is that performance is improving, investment is increasing and more banks have a strategy.
• The key challenges when trying to improve innovation performance are typically to do with IT systems and culture.
• Some banks are able to work around their IT systems issues but ultimately simplification and working across silos is key.
• Other banks have successfully addressed the innovation culture issues and are also actively using open innovation techniques.
Discussion session
Elisabet BrodinHead of Strategy RetailSEB Sweden
Dorel Blitz Innovation Manager, Strategy & International Operations DivisionBank LeumiIsrael
Rajashekara V. MaiyaAssociate VP and Head Finacle Product StrategyInfosys India
• What are the innovation investments that will achieve short term benefits and which ones are important in the long term?
• Increasing business process speed, agility and efficiency has been rated as having the highest impact on a bank's innovation capability. What can banks do to increase their agility and efficiency to be able to innovate better?
• The research has found that current legacy IT systems are one of the top three barriers to innovation. How should banks overcome this as a barrier?
Follow-up email:- Innovation in retail banking 2013 report - Webinar presentation - Recording link
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