banks and smarter commerce enabling their customers and ......enabling their customers and...

© 2009 IBM Corporation

Banks and Smarter Commerce2 Enabling their customers and themselves in a customer centric world.

IBM A/NZ FSS

Michael Aaron Director, Banking and Financial Markets


This is changing

the entire way

financial products

are delivered, sold

and serviced by

banks—and making

relationships more

complex

than ever.

Customer

expectations of

service, price and

delivery is soaring.

Customers now

have unlimited

access to

information and can

instantly share it

with the world

Social networking

and mobile

commerce have

dramatically

changed the

dynamic between

buyer and seller

We have entered the age of the empowered customer

155 million Number of tweets sent via Twitter each day and growing

90% Percentage of bankers that believe that transforming from the status quo is critical to profitability

55% Percentage of Gen Y over the general population that conduct mobile banking


Disruptive market forces are rippling through banking

3

Individuals

The connected customer

The networked workforce

The empowered citizen

Industries

Value migration

Value chain redefinition

Fragmentation

Enterprises

Evolved business models

Optimized digital operations

Connected enterprise

"The under 30 segment of our

population is very large. We just need

to understand their attitudes and

preferences better, as they start to

seek financial services.”

Senior executive, National bank, Asia

Pacific

“Disintermediation of clients by

smaller niche players (such as

mobile players) is cause for concern.“

Financial Markets CEO, Canada

“The new normal for banks is going to

be a lot more client-centric, with less

focus on proprietary activities.”

Senior Executive, Global Bank, United

States


CEOs believe that outstanding customer insight and intelligence is the first step towards creating deeper and better relationships …

49%

63%

66%

78%

Other CEOs

Other CEOs

Customer focused CEOs 18% more

29% more

CEOs who identified getting closer to customers as a priority, are 18% more likely to focus on customer insight and intelligence to realize their business strategy

Customer focused CEOs are 18% more likely to adopt strategies on getting closer to customers:

Customer-focused CEOs are 29% more likely to believe that the explosion of data and information obtainable (given technological and operational advances) will have a profound impact on their organizations

Banking and financial markets CEOs see that investments now in customer intimacy will drive value over the long-run

“We do not think providing short-termed

"Hit and run" value is not satisfying clients

expectations. We would like to realize

clients' satisfaction by building long-term

value delivery relationship.”

CEO of a major Japanese banking group

“Information and data is key to driving

greater insight, analysis and mining data

for value … this is key to driving

differentiation in the marketplace.” CEO of a major north-American bank FSS data only

IBM analyzed how the priorities of CEOs who value getting closer to customers compare to CEOs

who do not believe getting closer to customers is a main concern

Customer focused CEOs


And that customers want to be collaboratively involved in product and service design

25% 16% 59%

21% 11%

Financial Services

All Sectors 69%

Banking and financial services CEOs recognize the importance of developing collaborative relationships with customers to:

– Support conception and refinement of new products and services

– Refine channels strategy and drive more value from customer touch-points

– Build stronger relationships and deeper emotional attachment among customers

– Mitigate risk and customer attrition

Customer expectations over the next 5 years as perceived by CEOs surveyed:

Customer expectations of collaboration

and information sharing

Increasing Static Decreasing

Knowledge

Sharing

(Contribute)

No longer centralized

Collaboration using social computing or networking

Blogging, Wikis, Podcasts

Portals providing search capability on multiple applications & personalization on plug and play options

Access to key internal & external data in one location

Communities

Getting at Tacit Knowledge

Knowledge

Management

(Manage)

Migration

Commodity

that has to

be managed

Explicit

Knowledge

Knowledge Transfer

(Consume)

Person to Person interaction

Hard drives to team rooms

Not necessarily in writing

Instant messaging

email

Tagging

Collaboration PortalsWikis

Blogs

Social Networking

“It is not sufficient to just

understand customer needs

... We [need] more

collaboration and information

sharing.”

CEO of a major Japanese bank

“Collaborating and partnering

externally is important

because innovation cannot be

achieved through technology

… only.” CEO of a top Asian

cards business

FSS data compared to all sector data


0% 20% 40% 60% 80% 100%

Green Factors / CSR

One Stop Shop

Modularity

Tailored Products

Best In Class Products

Convenience

Reputation / Integrity

Transparency

Client Service Excellence

40% 44% 48% 52%

Client Service Excellence / Unbiased Advice

N=7343

Such collaboration promotes transparency and understanding which can support a foundation of integrity and trust.

LessValue Driver Future Importance: Equal More

Higher WillingnessPay Premium: Must Have Lower Willingness

Strongly

agree

Neutral

Strongly

disagree

N=762

0%10%20%30%40%50%60%70%

Americas

EMEA

AP

Americas

EMEA

AP

Clients Indicated Future Value Drivers vs. Pay For Premiums

(Percentage of Survey Respondents1)

Client Opinion: Providers offer products in the firm’s best interest

(Percentage of Survey Respondents1)

IBM Research indicates that customers have become suspicious of the motivations of financial services

firms, believing providers structure products to optimize their own benefit, not customer interest

While customers expect, but are

unprepared to pay more for,

robust product attributes, in this

atmosphere of suspicion, there

is a willingness to pay more for

guaranteed transparency and

integrity

1 Institute for Business Value Fit, Focused and Ready to Fight 2009

FSS data only


Sources of Actionable Data

Communication

Social Business adds new strategies for customer experience, front

office interaction, and data analytics.

7

4 Gather new ideas from new sources

5 Share knowledge and debate

6 Find shared interests

7 Deliver new “social” products

8 Enhance customer service

9 Expand a delivery channel

10 Leverage a new source of customer data

Put a new face on the bank

Build a sense of community

Communicate in a more trusted way

1

2

3

Top Ten

Image & Marketing

© 2009 IBM Corporation 8

Smarter Commerce drives a focus on the customer by addressing key business imperatives

DRIVE SMARTER ENTERPRISE

MARKETING

DELIVER SMARTER PAYMENTS

Generate new sources of

revenue and to improve

customer retention and

increase market share

Achieve operational excellence

to improve efficiencies

Bankers must deliver new and existing services with innovative offers of bundled products and services to attract new customers and to retain existing ones by cross-selling them additional products

SMARTER ENTERPRISE MARKETING enable enterprise campaign management and dynamic product bundling to offer the right product at the time to the right person

RESULTS:

• Increased Revenue

• Improved customer retention

• Lower marketing costs

Bankers can no longer use proprietary

formats and protocols to lock in their

customers. Customers are demanding

that the bank be easier to do business

with

SMARTER SECURE CUSTOMER

CONNECTIVITY AND PAYMENTS

enable SECURE, agile, flexible,

reconfigurable processes to support new

customer collaboration and

communication requirements

RESULTS:

• Faster time to revenue

• Lower costs

• Improve customer service

• Flexible secure systems

© 2009 IBM Corporation IBM Confidential 9

DRIVE SMARTER ENTERPRISE MARKETING

© 2009 IBM Corporation 10

Leverage customer information and

insight to optimize sales and marketing

processes

Maintain an authoritative and operational

source of customer data.

Manage access and distribute data in a

standardized way that meets legal and

privacy requirements

Gain a more holistic view across

customer segments and understand

typical customer behavior and deviations

from that behavior

Analyze customer information to drive

intelligent business decisions; improve

customer loyalty and target the most-

valued customers

Transform channels including branch,

internet, call center, kiosk, ATM and

mobile

Smarter Enterprise Marketing starts with the three ‘I’s

Information

Insight

Interaction

+

+


Intelligently manage highly targeted marketing across multiple interaction channels to drive higher value

sales

• Gather relevant, timely and actionable customer insights to intelligently drive marketing campaigns

• Define and plan customer specific marketing campaigns using cross-channel campaign management

• Intelligent recommendations track consumer actions and make relevant recommendations

• Campaigns and recommendations are directly integrated with any interaction channel

• Customer experience with responsive interaction is guaranteed by workload optimized systems

Marketing messages and campaigns are defined and planned

Deliver custom landing pages, mobile and online with targeted messages and promotions in any interaction channel, and make offers visible in all channels including the branch or call center

• Optimize display and search results

• Generate demand: email creation, delivery, tracking)

Insights from social media , websites, and other sources gathered

Capture responses

and refine

Smarter Commerce enables bankers to optimize the planning and execution of targeted marketing campaigns


What does Smarter Commerce mean to these banks?

12

First Tennessee

For First Tennessee Bank, a

large regional US bank with

200 locations in 16 States,

Smarter Commerce means

improving marketing campaigns

deliver a 642% ROI and a 2-

month payback.

ING Bank

For ING Bank, serving over 8M

customers, Smarter Commerce

means transforming their

marketing so personalized

product offers can be delivered

across multiple channels in real

time resulting in €20M increase

in corporate earnings, 35%

reduction in marketing costs,

and shorter cycle times.*

DBS Bank

For DBS , the largest Bank in

Singapore, and a top 100 bank

globally, Smarter Commerce

means that DBS’ corporate

customers are empowered with

new services and options that

give them greater control, while

providing DBS with a higher level

of channel visibility.*

*Case study based on Unica, Coremetrics and Sterling Commerce solutions


DELIVER SMARTER CUSTOMER PAYMENTS


The marketplace is driving payment companies to create better mousetraps to

satisfy customer’s information and transaction needs – the innovators will win

the hearts of consumers

Mobile User taps smart

posters for promotions

Mobile: Customers can use their mobile devices as electronic wallets by downloading credit and debit card applications – death of the plastic card?

Targeted Marketing: Customers can receive coupons and promotional information by tapping on a smart poster or through locational marketing. Banks and retailers will offer real time rewards programs.

Loyalty Programs: Loyalty cards and programs can be linked directly with retailers and merchant acquirers at the point of sale

Ticketing: Chips can be used to house tickets for transit, entertainment or other events.

Enhanced Security: NFC devices have inbuilt security and can be remotely disabled in real-time. At the same time, handset manufacturers are building in security features such as biometrics (e.g. Kyocera Wallet)

Mobile User uses

phone as wallet


Innovative providers have entered the fray – empowering customers to meet

their own needs and often dis-intermediating the banks

15

How many ways can new disruptive players dis-intermediate the banks ? How secure are some of these players?

New entrants are cherry-picking select customer segments and banks are taking notice: 28% of executives mentioned online and mobile players as potential threats Source: IBM CIO Study 2010

Apple changed the way music is distributed The Internet changed the way people look

for credit, compare financial services and manage their accounts

Google, PayPal, Amazon and others have all

entered the payments business and created partnerships

PayPal wants to increase its global

ecommerce market share from 18% in 2010 to 20-24% by 2013 plus enter the “bricks & mortar” market

Is Square a Disruptive App? Valuation of $1bn As of end of June



Facebook has created its own community of buyers and sellers and its own

f-currency across B2C, C2C and C2B

Courtesy Prof. Venkat Venkatraman, Boston University

http://www.abercrombie.com/anf/lifestyles/html/homepage.html


Business Models – value chains must change

• Evolving business models

• Collaboration among banks, retailers, telecoms, social networks, and other service providers

• Convergence of virtual and traditional “bricks & mortar” operating environments

To enable new business models

payment providers will need the

following capabilities:

ability to analyze massive amounts of

disparate data in a real time manner

ability to perform predictive analytics for risk

and payment “spend”

ability to collaborate with retailers, banks

and consumers in real time and offer

dynamic bundling of products and services

ability to interconnect and interact with all

social networks

ability for consumers to control private

information and to feel their data is secure

ability to handle transactions that will be 100

fold times more than today and to cross

borders

Technology and new competition will drive change

Individuals are already in

control -- The connected

consumer and SME business


In Australia today, Banks based payments dominate, but what may the future hold?

Internet banking is the most heavily used online payment method, accounting for 51 per cent of the number

and 88 per cent of the value of online payments (Table 3). This reflects the use of internet banking for a wide

variety of transactions, such as wage and salary payments, personal transfers and some types of corporate

payments. BPAY – used mostly for bill payments – accounts for about another 24 per cent of the number of

online payments and 10 per cent of the value. While credit and scheme debit cards also account for a

sizeable share of the number of online payments, they account for only 2 per cent of the value. The

specialised online payments providers currently constitute a relatively small share of the overall market,

by both number and value.

PAYMENTS SYSTEM Board ANNUAL Report | 2011, page 11


A pre-emptive strike by Commonwealth Bank for leadership in new payments,

bringing together P2P Mobile and email payments, Social Media, and NFC.


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