the future of banking - ccg catalyst consulting …...the future of banking transformation to a new...

© 2015 CCG Catalyst Consulting Group

The Future of BankingTransformation to a new norm

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In the not so distant future

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Disruptions like never before


Outdated models get replacedOut with the old In with the new

http://www.money2020.com/speaker/paul-schaus

http://www.money2020.com/speaker/paul-schaus


ConsolidationMargin Less diverse revenue streamWaning market share in consumer, real estate, commercial + industrial lending marketsLegacy systems

Cost of customer acquisition –customer’s switching costs

Customers demand for more self service – they want it now!

Crowdsourcing

Threat of new entrants like Google, Apple and PayPal, traditional retailers like Wal-Mart, and new firms like Moven and Venmo.

Competition outside of traditional banking are new forms of exchange like peer-to-peer payments and crypto-currencies, such as Bitcoin.

Competitor rivalry within the bank

industry

Disruptive forces in banking


TRANSFORMING

THE PAYMENT PROCESSING ECOSYSTEMAcquirers/Processors Issuers

Gateways ISOs/MSPs

Card Networks

CONSUMER TECHNOLOGY

Remittances

P2P Payments

Carrier Billing

Mobile Wallets

Phone-Only


Future View


Branch transaction activity declined 45% since 1992.

Check use declined 68% since 2003.

Top 50 U.S. banks have reduced branch networks.

…but branch density hasn’t changed significantly.

With a 40% decline in US bank branches since 1991 and projected continuing decline of 25% by 2018.

Source FDIC

Summing it up

Internet of EverythingMove to connected the thing learns the needs, negotiates and recalibrates at will.

Move to free markets

Move to integrated

Move to optimize

Move to programmable

Move to two-way

Started out web enablement of household equipment

Banking apps moving towards a similar path

Source: Nest


We are at the beginning of a major transformation to the financial services industry.

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Transitional factors

Internal ExternalStrategic Development

Planning

Segmentation

Capital

Consolidation [M&A]

Changing demographics

Creation of aggressive 3rd competition

Technology innovation

Economic shift

CHANGE

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Moving towards transformation


Changing perspectivesBUSINESSESWant help to increase revenue

See global markets

Self-Serve

See technology as a way to get closer to more customers and faster service

Transactions to be in real time

CONSUMERS WANTLife experience

Integration and automation

Self-Serve

To make better, more informed decisions

Transactions to be in real time

Scheduling and tasks

What do they need?


Convenience

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Insights

25

-

500

1,000

1,500

2,000

2,500

3,000

2014E 2015E 2016E 2017E 2018E 2019E

Mill

ions

Of D

evic

es S

hipp

ed

Source: BI Intelligence, 2014

Estimated Device ShipmentsBy Sector

EnterpriseGovernmentHome


Transaction Level: accurate, convenient, flexible, rewarding

Integrated Level: Enhances experience by linking together payment and related products and experiences.

Life experience Level: Everything ties together and provides guidance to individual that incorporates everything.

Historical

Coming now and growing

A few years out, but coming quickly.

Banking moving from transactional to experience

Deep

er C

onne

ctio

n

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9 Ways this will impact banking6. More customer centric

bank organization. 7. More customer centric

internal committees. 8. Bank brands will change9. More of a relationship

sales approach

1. Strategic planning 2. Banks will move to become

engaged with what happens before and after a transaction

3. Cooperative Partnerships4. More modular add-on

technology. 5. More bank “programming.”

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What’s a Bank to do?

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Follow the leader?

31


Listen to your vendors?

32


Are you uncertain of how to proceed?

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Who are you?

34


What is your business?

35


Is it current?

36


Are you a leader?

37


Differentiation, what is it?

Image source: Wikimedia Commons, the free media repository Image source: Digital Trends

38

http://commons.wikimedia.org/wiki/File:Starbucks_and_Bank_of_America_Drive_Through.jpg

http://www.digitaltrends.com/cool-tech/banks-launch-atms-with-human-tellers/


Differentiation, what is it?

Image source: Wikimedia Commons, the free media repository Image source: Digital Trends

39

http://commons.wikimedia.org/wiki/File:Starbucks_and_Bank_of_America_Drive_Through.jpg

http://www.digitaltrends.com/cool-tech/banks-launch-atms-with-human-tellers/


What is a Customer Centric business model?

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Banks with strategies that are working

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2006 2007 2008 2009 2010 2011 2012 2013 2014

ROA Before and AfterThree Strategies that worked

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Bank with strategy that workedStrategy: Specialize in high net worth

individuals.

Structure: Three separate but integrated Trust, Wealth Mgmt, and a Private Bank. Specialty in Family wealth and education

Financial: Fewer but higher paid staff and lower occupancy. Low losses, low margin, only

slightly above average non interest income, and high liquidity.

Online presence: Website more of a content site. Weekly economic and market forecasts. Weekly family wealth education seminars. No

Facebook.

Other comments: Philanthropy as a competence to train others with wealth.

Bank 1Size: $509 Million

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Bank with strategy that workedStrategy: Industrial bank, captive home improvement

loans under a retail energy company

Structure: Only do home improvement loans, funneled through contractors, funded by primarily

brokered CD’s.

Financial: Very high interest income and high credit losses, netting way above average margin 8.19% with 1% of Assets credit loss and no fee income. Risky lack

of liquidity. Efficiency in delivery.

Online presence: Facebook reads like newsletter to home improvement contractors. Advertising to a

large extent happens through indirect.

Other Comments: A number of negative comments on Facebook from consumers. Risk in indirect

lending.

Bank 2Size: $1.07 Billion

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Bank with strategy that workedStrategy: Dominate a small area with traditional

banking. Mortgage Center, Heritage Club

Structure: Three branches, one in larger city. Market share leader in two smaller ones,

growing in large.

Financial: Mostly from margin with above average loan rates and below average deposit rates. Below avg salary, above avg number of

people.

Online presence: No Facebook. No content. No press releases. No mobile banking. Online

banking requires in person or US Mail.

Other Comments: The old school, heads down, own the local market still lives.

Bank 3 Size: $284 Million

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Bank with strategy that workedStrategy: Commercial Lender, Specialty in

Construction – expanded C&I and CRE

Structure: Five branches, large metropolitan market area. Market leader in their markets,

adding a branch, overall growing

Financial: Great margin due to the specialization above average loan rates and higher average

deposit rates due to growth requirement.

Online presence: Focused to their market and niche. Referrals from other banks

Other Comments: Progressive bank, long history (over 150 years) well capitalized, cherry picked

loan portfolio.

Bank 4 Size: $1.7 Billion

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Transformation is happening, let’s plan for it.

Banks are transforming from financial services firms to a part of a grand effort of the newly enabled customer to find a more optimal relationship with their money that improves their life experience.

It’s happening already. With changes coming at a breakneck pace.

There’s no one “answer” but many things can be done to prepare.

First step? Match the new economy and become more customer centric.

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CCG Catalyst is a banking consulting firm and the trusted strategic advisor to banking organizations throughout the Americas. We understand the needs of our clients. We solve problems that are brought about by the disruptions and changes in the financial industry, technology, and the economy. We strategically think about our clients’ business, partner with them, to make them successful; but more so we form a relationship, gobeyond the trends, imagine the future, and stimulate thoughts.

CCG Catalyst is headquartered in Phoenix, AZ, with consulting office across the US.

CCG Catalyst Consulting GroupTwo Renaissance, 40 North Central Avenue, Suite 1400, Phoenix, AZ 85004

Phoenix | Atlanta | Austin | Chicago | New York | San Francisco | Seattle | Washington

www.ccg-catalyst.com | 1-800-439-8710


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the future of banking - ccg catalyst consulting …...the future of banking transformation to a new...

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