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Digital Banking Strategy Roadmap March 24, 2015 S trategic Banking Insights

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Page 1: Digital Banking Strategy Roadmap - 3.24.15

Digital Banking Strategy RoadmapMarch 24, 2015

Strategic Banking Insights

Page 2: Digital Banking Strategy Roadmap - 3.24.15

Our Digital WorldIn today’s Digital World, consumers expect to have an interconnected experience that allows them to use any digital means to seamlessly communicate, transact business, connect with friends, order products and services, refill prescriptions, order pizza and track the status of the delivery online, make investment decisions, track package shipments, etc.

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Our Digital WorldNot to be left behind, even Children’s Board Games are shifting their business strategies to conform to the reality of a rapidly changing Digital world.

As a matter of fact, the average 2-4 year old child can use a computer tablet before they can tie their shoes.

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Current State of Digital BankingThe Banking industry has evolved to incorporate Digital technology into its business products, services, processes, and operations.

A few, well-financed major players, have led the way with innovative Digital banking options for customers.

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What are the Digital Banking Leaders Offering?

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Mobile Banking Description of Services CitibankBank of

America

Wells

Fargo

Capital

OneChase

Deposit checks from anywhere √ √ √ √ √

View recent activity for your credit card accounts, including pending transactions

√ √ √ √

Pay credit card bills and view payments √ √ √ √

Schedule and cancel future credit card payments √ √ √ √

View your available credit line √ √ √ √

Find ATMs & branches nearby √ √ √ √ √

Contact Customer Service 24/7 √ √ √ √ √

Check the balances in your linked accounts—checking, savings, credit card, home equity or personal lines and loans, and mortgages

√ √ √ √ √

Pay virtually any person or business in the U.S and track payments √ √ √ √

See recent activity √ √ √ √ √

Transfer money between accounts √ √ √ √ √

Transfer money to friends with accounts at other banks √ √ √

Learn the minimum credit card payment due (and due date) √ √ √ √

Track rewards Points √ √ √ √

Schedule appointments with banking specialists √

Report lost or stolen cards √

Receive Cash Back deals on purchases √

Ability to make purchases with ApplePay √ √ √

View Credit Score Online √

Receive alerts of factors affecting credit score √

Digital Banking Strategy Roadmap Strategic Banking Insights

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What are the Digital Banking Leaders Offering?

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Mobile Text Banking Description of Services CitibankBank of

America

Wells

Fargo

Capital

OneChase

View account balances √ √ √ √ √

Credit card payment details √ √

Recent transactions √ √ √ √ √

Additional transactions (up to 15) √ √ √ √

Nicknames for bank and credit card accounts √ √

Support—online or by phone √ √ √ √

View Reward Balances √

Find Branch and ATM Locations √

View Rewards Balances √

Overdraft Protection has been utilized √

Account balance is below/above targeted amount √ √

NSF fee has been charged to the account √ √

A Direct Deposit has been posted to the account √

Transfer money between accounts √

Changes to your personal information √

Digital Banking Strategy Roadmap Strategic Banking Insights

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What are the Digital Banking Leaders Offering?

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Tablet Banking Description of Services CitibankBank of

America

Wells

Fargo

Capital

OneChase

Manage your accounts in a whole new way that's optimized for your

iPad® or Android tablet√ √ √ √ √

Finances truly come to life with rich displays, charts, data and more. √

View account balances, check recent activity, make bill payments,

transfer funds or simply read up on personal finance and money

management.√ √ √ √ √

Access to linked accounts and credit card accounts—check balances,

view recent activity, pay bills and more√ √ √ √ √

A streamlined flow to quickly set up payments and transfers from

checking/savings, including payments to your credit card account√ √ √

Interactive, graphic displays to help you visualize your current spending

and plan for your future√

Easy tools and useful information to help you manage your personal

finances√

Digital Banking Strategy Roadmap Strategic Banking Insights

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What are the Digital Banking Leaders Offering?

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Online Banking Description of Services CitibankBank of

America

Wells

Fargo

Capital

OneChase

Live Online Chat Services √ √ √

Online Customer Survey √ √ √ √ √

Online Business Credit Card Application √ √ √ √

Online Consumer Credit Card Application √ √ √ √ √

Open checking and savings account online √ √ √ √ √

Apply for Personal Line of Credit Online √ √ √

Apply for Home Mortgage or HELOC online √ √ √ √ √

Person-to-person ability to send and receive money to individuals with accounts at other banks

√ √ √ √

Small Business ability to make payments to vendors, employees, or anyone else, and also send invoices to customers for payment

√ √

Transfer money between checking, savings, credit card, home equity line of credit, installment loan, mortgage, or investment accounts. √ √ √

Transfer money to my accounts at other banks √ √ √ √

From a single site, you can set up budgets, get organized for tax season and track spending in all your accounts, even at other financial institutions. Sign into your all accounts dashboard for easy accounts access and comparison so you never have to hop from site to site again.

√ √

Year-end credit card spending report summary √ √

Financial Management Software √ √

Enroll in Business Online Banking online √ √

Free Credit Score √

Digital Banking Strategy Roadmap Strategic Banking Insights

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Traditional Banking Model for Delivery of

Products, Services, Marketing, Channels

Underlying Digital Technology

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Commercial / Treasury

Management

Retail / Small Business

Trust / Wealth Management

Mortgage Insurance

Digital Banking Strategy Roadmap Strategic Banking Insights

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Convergence of Digital Products, Services,

Marketing, Channels, and Delivery

Digital Banking Delivery

Cards

ATMs

Internet

Payments

Mobile

BiometricsBranch

Call Center

Marketing

As Digital technology continues to evolve, and as increasing numbers of consumers embrace the digital delivery of products and services as the norm, we will continue to see the convergence of the various banking customer touchpoints.

Customers expect a seamless integration of the Digital experience from initiation to fulfillment.

As such, banks will need to re-think their traditional stove-piped and duplicative Digital delivery strategies.

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Digital Banking Model for Delivery of

Products, Services, Marketing, Channels

Underlying Digital Technology

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Commercial / Treasury

Management

Retail / Small Business

Trust / Wealth Management

Mortgage Insurance

Digital Banking Strategy Roadmap Strategic Banking Insights

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Traditional Banking Model Versus Digital Banking

Model for Digital Delivery of Banking Services

Traditional Banking Model

• The Bank Branch is the center of the banking experience

• All interactions with customers originate with a branch experience

• Customer definition is confined to branch footprint

• Digital delivery is layered on top of branch system

• Duplicative products and services offered through various channels

• Inconsistent customer experience across channels

Digital Banking Model• The Customer is the center of the

banking experience• Customers choose how they interact

with the bank. Some may never enter a branch.

• Customer definition is not confined to branch footprint

• Digital delivery is the centerpiece of product & service offerings.

• Product and Service offerings are tailored to the customer’s delivery preferences

• Channels are non-existent, which provides a consistent customer experience

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Implications for Traditional Banks

• Most banks erroneously believe that implementing a Digital strategy is simply continuing their traditional branch-based banking strategy, but with a new focus on mobile enablement of some banking functions.

• However, it is important to point out that a “mobile banking strategy” is simply a component of an Enterprise Digital Banking Strategy.

• This distinction is important, because banks that simply layer mobile delivery on top of a traditional branch-focused delivery strategy will not achieve the business results they expect.

• Further, whatever limitations the bank has in its current traditional delivery of banking services will be replicated in its mobile banking experience, and will not be tolerated by customers.

• And since customers’ digital delivery expectations have been shaped by their experiences with Amazon, iTunes, eBay, etc., banks that pursue such a mobile enablement approach will fail.

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Implications for Traditional Banks

• Traditional branch-based banks’ competitors are already providing integrated Digital delivery of banking products and services.

• Banks that are just now focusing on enterprise digital banking strategies are playing catch-up.

• Therefore, in order to achieve maximum competitive advantage, The Traditional Bank’s Digital Banking Strategy will need to be a part of its overall Business Strategy.

• This approach will require a complete re-thinking of the bank’s business delivery model.

• Banks must also realize that non-banks have entered the digital banking arena and are offering financial services to customers who previously depended on banks for these offerings (digital payments, financial management software, credit cards, loans, account aggregation, ability to view accounts online, P2P payments, etc.).

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Implications for Traditional Banks

• In order to be successful, a bank’s Digital Banking Strategy will need to be a direct outcome of the organization’s overall corporate strategy.

• There will also need to be a recognition that the traditional branch-based banking delivery model needs to be replaced by a digital banking delivery model.

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Corporate Strategy

Business Strategy

Enterprise Digital

Strategy

Digital Delivery of

Products and

Services

Digital Banking Strategy Roadmap Strategic Banking Insights

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The Bank Business Strategy will Drive the

Digital Banking Strategy

• Consumers expect end-to-end digital delivery of products and services, from initiation to fulfillment.

• The Digital Banking Strategy will need to focus on enhancing the customer experience to provide multiple options to interact and transact business with the bank.

• Traditional branch-based banks will need to re-define who is a “customer” because this will shape how the bank applies its Digital Banking Strategy.

– In the new Digital age where, through the use of social media, banks can “touch” individuals far outside of their branch footprint, a “customer” should be considered as anyone who comes to your website to “shop,” or who uses your ATM, or who cashes a check at your bank, etc.

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Redefining the Customer

• If we re-define the customer as anyone who comes to your website to “shop,” or who uses your ATM, or who cashes a check at your bank, etc., rather than as defined in a traditional branch-based banking model as someone who has an account with the bank, then the digital banking customer experience will be different than what it is today. Some points to consider:

– Can your bank’s “customers” – with no existing account – apply for a credit card or open a new checking account online and receive immediate notice of approval?

– Can your bank’s “customers” – with no existing account – apply for a personal line of credit or auto loan online and receive immediate notice of approval?

– Can your bank’s business customers – who have established checking accounts with the bank – complete the enrollment for BOLB online?

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Digital Banking Strategy and Social Media

• 74% of online adults use social media, which has the potential to provide up-to-date and inexpensive access to customers’ opinions about your bank, your competitors, the banking industry, which products and services customers want, what customers don’t like about their banking experiences, etc.

• But on a cautionary note, banks must be careful, because social media today is still largely unregulated.

• Nevertheless, there are two main types of Social “media”, and each presents different opportunities for banks in this space:

– Social Media – forums for advertising and pushing the organization’s brand, products, services, reputation, etc.

– Social Networking – forums for connecting with consumers through a digital format

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Social Networking and Social Media

• Social Networking – forums for connecting with individuals through a digital format.

– In the digital age, many individuals spend more time connecting and communicating with others via Social Networks (e.g., Facebook, Twitter, Instagram, LinkedIn, etc.,) than they do in person.

– These social networks are primarily designed to make “connections” and build relationships with other individuals, and to share ideas, opinions, perspectives, etc.

– Banks should NOT try to use social networks as sales tools, because this is not how customers view this medium. Rather, banks must view social networks as a global “community relations” venue to foster and enhance trust, visibility, and value in the organization to the digital community.

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Social Networking and Social Media

• Social Media – on the other hand, are forums to share information with a broad audience as a media relations tool (e.g., YouTube). However, unlike traditional media relations formats, the communications are two-way – individuals have the opportunity to give their opinions about your brand, customer service, policies, pricing, etc.

– Social media is a communication channel similar to newspaper, magazines, radio, etc., and should be used to push the organization’s brand, products, services, reputation, etc.

– Social media functions as a “truth in advertising” forum similar to an online Better Business Bureau, because customers have the ability to comment on the validity of whatever claims banks may make in this space.

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Digital Messaging and Marketing

• In addition to Social Networks and Social Media, Traditional banks’ competitors are gathering and analyzing customers’ online search data to understand their buying habits and preferences.

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• And through the use of Big Data gathered from partnerships with Google, Bing, Bankrate.com, Lendingtree.com, TrueCar.com, etc., these competitors are able to tailor targeted offerings to customers – far outside of their branch footprint – each time they engage the digital web whether via mobile or computer.

Digital Banking Strategy Roadmap Strategic Banking Insights

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Implications for Traditional Branch-Based Banks

• Since Traditional branch-based banks’ Competitors are already providing integrated Digital delivery of banking products and services, traditional banks will have to adopt a digital banking strategy in order to survive.

• The challenge, then, for a traditional bank will be to realistically evaluate its strategic options for going digital.

• There are basically three options:

– Pioneer/Innovator Approach

– Early Adopter Approach

– Late Adopter Approach

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• Pioneer/Innovator Approach

– Benefits:

• Set the standard by which others are compared

• Later entrants are compared – usually unfavorably – to the pioneers

• Pioneers become the generic “brand” for the industry

– Downside:

• Extremely expensive strategy. Requires large infusions of funding for R & D, customer focus groups, beta testing, etc.

• There will be some R & D efforts that will be discarded because they are not accepted by the marketplace.

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Implications for Traditional Branch-Based Banks

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• Early Adopter Approach

– Benefits:

• Close behind the Pioneers, they benefit from the research and customers’ reactions to the early prototypes.

• Better able to utilize lessons learned to tweak products and services for the next phase of delivery.

• Still able to get in on the early market acceptance of the new technology (e.g., UPS began electronic tracking of packages after Federal Express).

– Downside:

• Still a costly proposition, but not nearly as expensive as the Pioneer approach.

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Implications for Traditional Branch-Based Banks

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• Late Adopter Approach

– Benefits:

• Least costly strategy with minimal risk because the technology already exists, and customers’ expectations are already established.

• Not a bad strategy if you have a loyal customer base that will wait around for you to offer what is already available from the pioneers and early adopters.

• Can tweak the product based on historical data and experiences of Pioneers, and create a successful niche that customers want.

– Downside:

• Always in “catch-up” mode.

• Customers who demand the latest technology will likely move on to banks – and non-banks – with more progressive offerings.

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Implications for Traditional Branch-Based Banks

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Future Trends in Digital Banking

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• Chase Bank has already unveiled the next generation of ATMs which use a mobile phone to authenticate the user.

• Banks are experimenting with allowing users to use their mobile devices to send withdrawal messages to ATMs, and then dispense the money when the customer drives through the ATM (like ordering movie tickets online and then pick up at the theater).

• Expect to see more banks partner with new digital payments vendors such as Apple, Samsung, and Google to offer these payment options to merchants and customers.

• Facebook is poised to launch its new P2P payment feature that allows individuals to send money to any friends on Facebook.

• Mobile banking applications for Small Businesses are already in various stages of development and deployment.

• Virtual branches are being deployed with no live agents, and where customers can access interactive video terminals and ATMs to speak to live agents to withdraw money and handle various banking needs.

Digital Banking Strategy Roadmap Strategic Banking Insights

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Choices for Traditional Branch-Based Banks

• The Digital delivery of banking products and services is already a reality.

• Like it or not, your customers will compare their digital banking experience to shopping on Amazon, iTunes, eBay, Southwest Air, etc., and to their digital experiences with large banks that already have robust digital banking offerings.

• Traditional banks can’t just push out mobile apps and capabilities to customers and call it a digital banking strategy. Customers expect a seamless integration of the entire online banking experience from initiation to fulfillment. If they are forced to drop off somewhere along the digital experience to print documents, call a representative, and/or visit a branch, you have lost the customer.

• In the new digital world, banks will have to understand that customers do business online 24/7, 365 days a year. As such, banks will need to have 24/7 online chat capabilities and call centers available to assist customers who encounter problems online.

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Choices for Traditional Branch-Based Banks

• Most traditional banks have some digital banking capabilities, but they are not equal to what the major competitors offer, and they are not effectively connected to an enterprise digital strategy that offers a seamless customer experience consistent with the digital marketplace.

• Traditional banks will need to re-think their current business models and realign their traditional branch delivery systems around the customer, rather than the branch, to realize the benefits of a true enterprise digital banking strategy. This will be no small task, because there will be stakeholders throughout the organization who will resist such an effort.

• There is continued digital convergence across all banking customer touchpoints and segments that must be considered in any digital strategy. The implications are much broader than mobile capabilities.

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Choices for Traditional Branch-Based Banks

• In order to transition to a successful digital banking strategy, top leadership will have to embrace the organizational and cultural changes that such an undertaking will require.

• There will need to be tight coordination, collaboration, and engagement among stakeholders in all areas of the bank to guard against a “stove piped” and “piecemeal” digital strategy implementation.

• The traditional bank must decide whether it wants to be a Pioneer, an Early Adopter, or a Late Adopter in the digital banking strategy space.

• Traditional banks will need to partner with data accumulators and aggregators to gain deep insights into customers’ needs, wants, browsing histories, purchase patterns, etc., in order to tailor targeted product and service offerings to satisfy these needs.

• Traditional banks will need to re-define “customers” in the new digital age of social networking, social media, and digital advertising.

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Next Steps for The Traditional Branch-Based Bank

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We also invite you to visit www.strategicbankinginsights.com for additional information.

Digital Banking Strategy Roadmap Strategic Banking Insights