April 2017 Issue 736 www.retailbankerinternational.com CRACKING LATIN AMERICA

WITH SCOTIABANK AND BANCOLOMBIA

● OPINION: Customer Service ● DISTRIBUTION: Skipton Building Society ● RESEARCH: Mobile & Fintech ● GUEST COMMENTS: GFT, Collinson Group & Tola

RBI 736.indd 1 20/04/2017 10:43:23 Simple, secure and effortless digital solutions for fi nancial services organisations

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IE Adverts - 2017.indd 1 21/12/2016 11:53:12 Retail Banker International EDITOR’S LETTER

CONTENTS 2 AWARDS: RBI ASIA TRAILBLAZERS UK right-sizing accelerates: RBI takes a look at the 8th annual RBI Asia Trailblazer Awards, sponsored by Tagit Mobile, as well as the Digital the definitive RBI branch ranking Banking Club’s upcoming Power 50

3 DISTRIBUTION: SKIPTON BUILDING SOCIETY Skipton has partnered with retail and design agency M Worldwide to devise a future vision for its in-branch experience. Douglas Blakey writes ore than one in four UK bank By contrast, CYBG has accelerated its clo- branches (26.3%) have been sure programme since gaining its independ- 4 RESEARCH: FINTECH shuttered in the past five years, ence from National Australia Bank. Six-in-10 UK financial firms believe that up to 40% of their revenue could be lost and the new year has kicked off Clydesdale-branded branches, currently to standalone fintech firms. Is defeat a M totalling 111, will reduce to 71 later this with more of the same. foregone conclusion or is there a way for HSBC, TSB and Clydesdale/Yorkshire year, down from 152 five years ago. Sister banks to fight back? Patrick Brusnahan reports have all announced fresh branch closure brand Yorkshire will reduce from 137 to 99 programmes, resulting in total UK branch over the course of 2017; the brand had 178 5 DISTRIBUTION: SCOTIABANK numbers set to fall from 11,000 in 2011 to branches in 2011. Scotiabank is rolling out a digitally enabled customer-centric branch design below 8,000 in 2017. In percentage terms, the beleaguered Co- across its Latin American and Caribbean Ranked by brand, Barclays retains the operative Bank has been the most aggres- (LAC) operations. Robin Arnfield talks largest presence on the high street, starting sive closing more than seven in 10 branches, to Katherine Hayward, vice-president of customer experience and retail banking 2017 with 1,309 outlets, down a net 424 shrinking from 354 to 105 units. units or 24% since 2011. Bucking the trend, Sweden’s Handelsbank- 8 GUEST COMMENT: COLLINSON GROUP HSBC has seen the most aggressive branch en has doubled its footprint to 207 branches Will the future driven by digital first strategies? Can banks move fast closure of the Big Five banks, down from while Metro Bank is on target to reach 58 enough? Or will legacy systems prove 1,286 in 2011 to 728 with plans announced stores by the end of 2017; it remains com- their undoing? Christopher Evans, to shrink its network to 625 during 2017 mitted to the store format and is aiming to director at Collinson Group, writes meaning a reduction of 51% in its branch reach 100 by 2020. 9 STRATEGY: MEXICO numbers in the past five years. Over the next five years, Lloyds Bank - Latin America’s third-largest economy Santander – down from 1,177 to 841 – ing Group’s 2,038-branch network across could slip into recession if US President Donald Trump’s toxic cocktail of threats has reduced its network by 28%. its three high street brands offers consider- to upend the North American Free Trade Of the Big Five banking groups, the UK’s able scope for rationalisation. Its ongoing Agreement or impose heavy tariffs largest retail bank by market share, Lloyds successful drive for digital channel growth on Mexican exports come true. Ivan Castano investigates Banking Group, has been slower off the – 12.5 million active online customers, two mark in axing branches. billion online logins in 2016 – will be used to 10 DISTRIBUTION: NEQUI Only 12% of Lloyds-branded branches justify further channel optimisation. Designit has partnered with Nequi bank in Colombia to go 100% digital. The have closed since 2011, down from 1,302 to The release of Lloyds 2016 results con- bank is creating offerings for millennials 1,140, while challenger brand Halifax has tained a number of interesting digital who are starting to drift toward a post- only inched down a net five outlets to 657 metrics: both evidence of success and scope app world. Douglas Blakey reports units. North of the border, Bank of Scotland for further improvement. 12 OPINION: CUSTOMER SERVICE has closed less than one in five units, from Only 37% of LBG’s total current accounts With the Seven Day Switching Service 295 to 241. are opened via digital channels – albeit up in full effect, losing a customer is more likely than ever. How can a bank Arguably, Royal Bank of Scotland faces from 18% a mere two years ago; LBG also differentiate itself in such a crowded the biggest branch headache in the light of has scope to improve its flow volume of new market? Customer service could be the its failure to hive off the Williams & Glyn accounts opened digitally as a percentage of answer. Patrick Brusnahan investigates business unit of 280 RBS-branded branches the market volume of all digitally opened 14 GUEST COMMENT: GFT in England and Wales. accounts. By the last metric, it has only a Digital initiatives remain a priority It has successfully downsized the NatWest 16% share of new credit cards and 21% of for retail banks seeking to meet the challenges of new regulations, start-ups footprint from over 1,500 to 1,058, and in consumer lending. and changing expectations. Christian Scotland reduced the network from 336 to If LBG is to hit its cost-income ratio target Ball, head of retail at GFT writes below 200. of around 45% by the end of 2019, from 15 RESEARCH: MOBILE A total current network across the two its current 49%, it seems inevitable that the Are digital services an opportunity or a RBS brands of over 1,500 seems implausi- LBG branch network will shrink by several burden for banks? Patrick Brusnahan bly large, given the bank’s current ambitions. hundred outlets. reports on what the sector needs to do Of the challengers, TSB will have closed 20 GUEST COMMENT: TOLA only 10% of the branches carved out of PSD2 will have a far-reaching impact on Lloyds TSB by later this year, while the larg- digital commerce. The integration of third-party providers into the regulatory est mutual Nationwide is down only a net 20 Douglas Blakey framework will increase transparency units to 691 since 2011. [email protected] and security, writes Simon Pepper

www.retailbankerinternational.com April 2017 y 1

RBI 736.indd 1 19/04/2017 17:03:05 AWARDS: RBI ASIA TRAILBLAZERS Retail Banker International

The 8th annual Retail Banker

International Asia Trailblazer < FULL LIST OF WINNERS Excellence in Mass Affluent Kasikorn Bank Awards Banking Excellence in Service Innovation Citi Malaysia A record number of entries, categories and a full house at the Excellence in SME Banking Maybank Parkroyal on Pickering, Singapore for the 8th annual Retail Banker Malaysia International Asia Trailblazer Awards sponsored by Tagit Mobile Best Initiative in Financial Citi Malaysia Inclusion he top institutional award was • Digital Financial Services Rising Stars Best Mortgage Offering Krungsri snapped up by DBS recognised as RBI Asia Trailblazer of the year: • Digital Innovation in Collections Best Loan Offering RCBC Bankard in all DBS scooped five of the 32 Best Bancassurance Product Bank T Muamalat awards on offer. • Digital Innovation in Vehicle Finance The major individual award was collected Outstanding Investment Service Citi Singapore by Andrew Chia, head of retail banking at October 19th, London – Retail Clients Standard Chartered, Singapore. The winners will be announced in a supple- Best Card Offering Stand Chart The awards recognised outstanding finan- ment in the September/October edition of RBI Singapore cial institutions for their trailblazing innova- and will be invited to receive their awards at Excellence in Loan Origination ANZ tion and superior service standards in the the October Live Debate. The debate will be Singapore past year and were presented by Douglas held on Thursday 19 October at the Law Soci- Excellence in Client Onboarding DBS Bank Blakey, group editor consumer finance, Ver- ety, London. and Communication dict and Richard Fahy, Regional Director Excellence in Business Model BTPN Bank APAC, GlobalData plc. Nominations Innovation (Misys) “Innovation is a key core to the DNA of Nominations are sought initially from mem- Dynamic Third-Party Partnership DBS Bank DBS. The bank has blazed a trail in terms of bers of the DBC plus readers of RBI. Nomi- its digital transformation strategy, recognis- nations are to be sent directly to Douglas Excellence in Customer Axis Bank ing that digital is not a threat to the banking Blakey – [email protected] Centricity (Tagit) sector but a tool of cooperation to innovate before 12th May 2017. Best Social Media Marketing Kasikorn Bank products and services,” said Blakey. They should include a full name, job title, Campaign Other notable multiple-award winning company, and a URL to a LinkedIN profile. Best Digital Marketing Campaign Citi Malaysia banks included Maybank, Citi, UOB, Stand- Excellence in Internal ANZ ard Chartered and Kasikorn Bank. Judging Panel (to date): Communications Singapore Douglas Blakey, editor of RBI and chair of the Excellence in Social Media and DBS Bank The Digital Banking Club Launches the 2017 Digital Banking Club is acting as chair of the Customer Relations & Brand European Power 50 Awards – Nominations judging panel. Engagement Now Sought Other confirmed judges are: Best New Product, Service or Siam The European Digital Financial Services Innovation Commercial Power 50 winners will be made up of influen- • Alessandro Hatami, Founder, The Best Marketing Campaign – Citi Malaysia tial thought leaders working in digital within Pacemakers & ex-Innovation Director, Overall financial services companies, regulators and Group Digital, LBG Most Innovative Branch Stand Chart analyst houses. The judging panel will also Offering Korea consider nominations for recognised innova- • Daryl Wilkinson, Managing Director, tors and industry influencers. DWC Innovation in Service Delivery UOB – ATM Singapore The European Digital Financial Services 5 Rising Stars are compiled of digital inno- • Fred Crawley, Chair of the DBC for Excellence in Internet Banking CTBC Bank – Overall vators aged 35 and under who are making Collections changes in the way their financial services Excellence in Internet Banking – DBS Bank organisations are operating. • Jerry Mulle, Director of Customers, Cross Border This year we have introduced two new Intelligent Environments and Co- Excellence in Mobile Banking – UOB awards as a result of the DBC expanding into Founder, DBC Overall Singapore new verticals, the Collections and the Vehicle Excellence in Mobile Banking – UOB Finance industries. Therefore, out of the Power • Jonathan Minter, Chair of the DBC for Customisation Singapore 50 winners, one will be recognised for Digital Vehicle Finance. Excellence in Multi-Channel Citi Singapore Innovation in Collections and one for Digital Integration Innovation in Vehicle Finance. • Roy Vella, Digital Expert & Consultant. Best Graduate Employment Alliance Bank One Power 50 winner will be awarded Scheme - Retail Banking Personality of the Year in recognition of out- Note on exclusions: We are not seeking Best Staff Training and Maybank standing service. nominations for journalists, PRs or individu- Development Programme Malaysia The Award Categories in 2017: als working for payments providers, unless Best Bank in Community ESUN Bank their work is part of a broader digital finan- Outreach Initiative • Personality of the Year cial service, mobile platform or back office Institution DBS Bank technology supplier. Nominations by these • Digital Financial Services Power 50 groups on behalf of others are welcome.< Individual Andrew Chia

2 y April 2017 www.retailbankerinternational.com

RBI 736.indd 2 19/04/2017 17:03:06 Retail Banker International DISTRIBUTION: SKIPTON BUILDING SOCIETY

Skipton rolls out branch concept catering for over 50s

The UK’s fourth-largest building society by assets, the Skipton, has partnered with retail and design agency M Worldwide to devise a future vision and flexible framework for its in-branch experience, environments, and communications. Douglas Blakey reports on the developments and their results

he location: Guildford in Surrey and in-life’ perspective – it’s a homely place that’s the financial institution: Skipton much more proactive, open, and welcoming. Building Society. Not perhaps the It celebrates the fulfilment of those hopes most likely combination for one of and dreams that had to be put on hold whilst T focusing on career or raising the family.” the more interesting branch projects of the year. Holden adds: “Customers feel valued The Skipton, the UK’s third-largest build- and appreciated in this relaxed environment, ing society by branches (95) and fourth-larg- allowing them to engage with our colleagues est by assets (see tables) has spent the past and remain open-minded about financial 18 months working with retail and design arrangements that can help them achieve agency M Worldwide to craft a new their retirement dreams.” branch concept. The pilot branch offers cus- culture we wanted to bring into the branch In February, a pilot branch tomers a clear view of what in a bright friendly welcoming and hospita- opened its doors with big is termed the ‘Ideas Kitch- ble environment.” ambitions: to redefine the en’. Just like the kitchen He added that the branch staff are key to idea of retirement. is the heart of the home, making the project work. Lee Holden, division- the Ideas Kitchen is at “It is always a big challenge on projects like al manager at Skipton the heart of the concept this, not just in banking, but the staff service Building Society says: branch. levels and their approach have been brilliant. “We’ve always had brilliant Martin adds: “The It helps that a lot of what we have done is existing customer service domestic setting – with supporting is what was there already.” scores, but our challenge was items such as globes and As Skipton continues its rollout of the new how to encourage more people travel books that staff can use concept, a scalable kit of parts allows it to across the threshold, then inspire as conversation starters – combine retain the spirit of the Ideas Centre concept and engage those people to help fulfill their with gestures like starting every chat with no matter the branch size. hopes and dreams.” a cup of tea, just as one does when visit - Martin concludes: “We need to be inven- With a range of specialist financial prod- ing friends. This results in an environment tive in how we create these environments to ucts, this mutual organisation largely caters that encourages discussion, to help people support the right experience without throw- to the over 50s. In light of the changing unearth and fulfil their later-in-life desires. ing a whole lot of money at it. needs of its customers, staff, and technology, “At Skipton, the tea-making ritual is one “There is scope to import elements of the Skipton tasked M Worldwide with devising of those key gestures. People used to congre- Guildford pilot in other branches – not all a future vision and flexible framework for gate around the fire, then they congregated branches will have a full refit – but we need its in-branch experience, environments, and around the TV, but they’ve always congre- to be pragmatic about the elements that can communications. gated around a cup of tea. That’s the sort of be dropped in.”< David Martin, joint managing director at M Worldwide told RBI that retirement holds n TOTAL GROUP ASSETS BY SOCIETY (£BN), n UK BUILDING SOCIETIES RANKING BY infinite possibilities – but that landscape also 2016 NUMBER OF BRANCHES, 2016 changes with each successive generation. “60 is the new 40. There is now a world of opportunity out there for retirees, to go 250 800

back to university, to sail around the world, 700 instead of just going home to do the garden.” 200 600 “The pilot features an ‘Ideas Centre’ con- cept reflecting this ‘anything is possible later- 150 500 400 100 300

200 50 100 0 0 Leeds CoventrySkipton Leeds Yorkshire Newcastle Skipton Nationwide Principality Nottingham Yorkshire Coventry Cumberland Nationwide West Bromwich

Source: Building Socieities Association Source: Building Socieities Association

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RBI 736.indd 3 19/04/2017 17:03:10 RESEARCH: FINTECH Retail Banker International

Are fintechs the biggest threat to the banking sector?

While fintech is often considered to be an opportunity for the financial sector, six-in-ten UK financial firms believe that up to 40% of their revenue could be lost to standalone fintech firms. How are firms planning to combat this growing threat? Or is defeat a foregone conclusion? Patrick Brusnahan reports

intech has progressed from start-ups n n wanting to challenge the incumbents to PERCENTAGE OF INCUMBENTS WHO BELIEVE FOCUS ON EMERGING TECHNOLOGIES (%), PART OF THEIR BUSINESS IS AT RISK 2017 a wide ecosystem of different business- es looking to expand. The problem is F 2016 2017 2016 2017 with garnering scale with regards to custom- 100 50 ers. This is where partnerships could greatly

help, if also bringing a share of its own risks. 80 40 According to a new report from PwC, which surveyed more than 1,300 finan - 60 30 cial service leaders worldwide, 61% of UK financial service industry leaders believe up to 40% of their revenue is at risk, compared 40 20 to 51% of financial service leaders globally. Some 88% of participants were worried that 20 10 part of their business is at risk to standalone fintech companies. In addition, DeNovo’s 0 0 monthly consumer survey stated that while Latin Asia North Africa Global Artificial Europe Blockchain America America Biometrics 30% of consumers plan to increase their usage intelligence of non-traditional financial service providers, a mere 39% plan to continue using solely tradi- Source: PwC Source: PwC tional service providers. Perhaps to combat this, 47% of UK firms more widely, is not about jumping on the latest financial institutions hope to respond to claim they plan to acquire fintech companies bandwagon – it’s about finding the best, most effi- innovation and address customer needs. over the next three-to-five years. Some 81% cient way to deliver your business strategy and Financial institutions will also need to state they plan to initiate strategic partner- ultimately better serve your customers. disrupt their own operations and processes, ships with fintechs over the same period. “The UK’s financial sector seems to have which will introduce culture and mindset However, currently UK financial services a more realistic understanding of the long- challenges. Overall, 77% of respondents firms only dedicate 9% of their annual turn- term returns on targeted investments. Man- expect to increase internal innovation efforts over to fintech and IT projects, below the aging expectations around returns is impor- over the next three-to-five years. global average of 15%. tant, particularly for firms facing significant Adopting effective growth strategies and Over a third (39%) plan to invest in cyber- cost pressures.” integrating with fintech will be essential security while 77% want to invest in data when partnering for innovation. Partnering analytics. A disruptive nature with fintech companies is up from 32% in Whether this is too little too late remains Post-2008, the global financial crisis kick- 2016 to 45% in 2017. However, there are to be seen, but 92% of UK incumbents started a number of business-wide trans - large discrepancies. For example, in Europe, believe that consumers use fintech to conduct formation programmes. A decade later, the Italy is at 41% while Germany is at 70%. payments, 81% say it is already used for per- results are inconsistent and there has been a In all countries, a large chunk of partici- sonal finance and 72% for funds transfers. lot of investment. Many are looking towards pants, 82% on average, expect to up their Steve Davies, EMEA fintech leader at PwC, fintech to break the cycle. level of partnerships within the next three- said: “The financial services industry has In total, 56% of respondents to PwC’s sur- to-five years. embraced fintech to help drive change and inno- vey agreed that disruption was at the heart This will allow incumbents to outsource vation. Fintech collaboration, and innovation of their strategies. By embracing disruption, part of the R&D to help bring their solutions to market quickly. Fintechs, in turn, will ben- efit from the large data sets that incumbents n CHALLENGES FOR FINTECH COMPANIES AND INCUMBENTS (%), 2017 already have. Integration will not be easy. Difference in IT security Regulatory uncertainty management and culture, as well as regulato- Difference in culture ry uncertainty and legacy infrastructure dif- Differences in business models ficulties are all roadblocks to true integration. IT comatibility The report concluded: “The financial ser- Differences in operational processes vices industry will be unrecognisable in five Differences in knowledge/skills Required financial investments years. The innovators of today will not nec- 0 10 20 30 40 50 60 essarily be the innovators of tomorrow. The question then that companies need to ask

Source: PwC themselves is: what can I do to ensure that I am not caught at the back of the pack?”<

4 y April 2017 www.retailbankerinternational.com

RBI 736.indd 4 19/04/2017 17:03:11 Retail Banker International DISTRIBUTION: SCOTIABANK

Scotiabank’s digital distribution designs

Scotiabank is rolling out a digitally enabled customer-centric branch design across its Latin American and Caribbean (LAC) operations. Robin Arnfield talks to Katherine Hayward, vice-president of customer experience and retail banking at Scotiabank International, about the bank’s objectives and strategy

cotiabank serves 9.5 million retail open digital factories in Chile, Colombia, ogy, tablets for some staff, and digital mes- customers across 1,500 branches in Mexico and Peru this year,” Hayward says. sages displayed throughout the branch.” 29 countries in the LAC region. Sco- “The goal with our new, simpler-to-use Scotiabank has a consistent customer tiabank’s Mexican unit, with 600 digital banking services is to increase our pri- experience model across all its subsidiaries, S mary customer relationships through digital Hayward says. It also has an in-house-devel- branches and 2.7 million customers, is the largest subsidiary in the region, followed by technology.” oped geographical information system (GIS) Colombia (1.6 million customers) and Peru tool which maps all its locations and all its (1.9 million), both with 200 branches. Branch redesign competitors’ branches. In addition to its own branches, “We try to build new branches every year “The tool uses market data to show current Scotiabank partners with correspondent as our markets are developing much more and projected growth for these locations,” banking agent networks in Mexico and Peru. rapidly than the Canadian market,” says says Hayward. “We can see which markets “In Mexico, our customers have access Hayward. “As well as looking for oppor- are up and coming, and where we need to to 18,000 non-bank locations through our tunities to find new locations, we’re always move to in order to be in the right place at relationships with [retailers[ Oxxo, Soriana trying to be where our customers are in our the right time for our customers.” and City Club, where they can make depos- existing markets.” its, pay credit card bills, and withdraw cash,” Working with international design con- What are Scotiabank’s goals? Hayward tells RBI. “In Peru, customers can sultancy Ideo, Scotiabank created a set of “At the start of our redesign programme, we access 5,000 non-bank locations through the branch design standards for its LAC branch- set three high-level goals: improve our cus- Agente Scotiabank and Cajero [cashier/tell- es, which it will apply selectively for refur- tomer experience in branch via the overall er] Express correspondent agent networks, bishments and new builds. design, differentiate ourselves in our markets, where they can make deposits, pay credit “Our aim is to be extremely customer- and improve our efficiency and effectiveness card and utility bills, access loans as well as centric,” says Hayward. “We liked Ideo’s in our network,” says Hayward. top up their cellphones.” approach of doing ethnographic research “We want our branches to be places where Scotiabank’s LAC branch redesign pro- and prototyping design concepts with cus- customers can learn about our digital and gramme is taking place in tandem with a tomer at the heart. To find out what our self-service technologies. Also, towards the major digital investment in Canada and customers wanted in branch, we conducted rear of the branches we’re providing a pleas- the LAC region. This includes the launch ethnographic research involving accompany- ant area for customer interaction with our of a new version of Scotiabank’s online and ing them into their homes and offices on a staff. mobile banking platform in Mexico and 21 day-to-day basis, and following them when “We’re putting strong brand messaging on Caribbean countries, with Chile and Panama they conducted financial transactions. our flagship branches and using large digital due to go live on the new platform shortly. “Our new branches are notably more displays to differentiate them. The effective- “Following the opening of our Canadian digital with a host of self-service technology ness and efficiency goal relates to our new digital factory in January 2017, we will also available, concierges to explain the technol- hub-and-spoke model.”

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RBI 736.indd 5 19/04/2017 17:03:12 DISTRIBUTION: SCOTIABANK Retail Banker International

Since November 2016, Scotiabank has In Scotiabank’s new design there are financial matters like: What is a credit score? been deploying a new Net Promoter System four formats: the regional financial centre, How do you improve it? And how do you in Canada and the Pacific Alliance countries which includes a Premium Banking centre; teach children about savings? Historically, of Chile, Colombia, Mexico, and Peru. the Community Banking Centre; the Neigh- many of our markets aren’t retirement-sav- “It’s important to get rapid feedback from bourhood branch; and the in-store/bank- ings cultures but are consumer cultures clients and bring the voice of the customer to at-work branch. focused on obtaining credit to the heart of our branches and contact cen- Around 25% of make purchases.” tres,” says Hayward. Scotiabank transaction Instead of traditional “We partnered with [customer feedback in the LAC region are product messages, specialist] Medallia on this initiative. We use still branch-based, Scotiabank is roll- the word ‘system’ not ‘score’, as we have a and the bank’s ing out messag- feedback loop direct from customers to staff goal is to cut ing containing in the branches so they can act on issues. this to 10% by ‘hints and tips’ “We encourage our branch managers to 2010. about financial call three to five clients once a week to fol- “A lot of our literacy along low up on the feedback they received in the customers with customer branch, and we have a similar policy in the will queue up stories in its contact centres. Once we identify issues, we to use a teller, LAC branches. make sure they are escalated and any sys - as they don’t The messages temic issues are addressed, as well as mak- know how to use are provided via ing sure customers know their issue has been an ATM,” says a mix of digital responded to.” Hayward. “There displays and large are a lot of transac - static back lights. Hub and spoke tions they could either “The stories feature “We are moving to a hub-and-spoke model, perform on our digital chan- Scotiabank customers say- so we can focus resources on where they are nels or at a correspondent agent, ing things like: In my new house most needed. This will enable us to reduce instead of in a branch.” I have rooms for all my children; with my the size of spoke branches,” says Hayward. new car I can get to work on time,” says “The hub is where we have services for seg- Financial education Hayward. “The financial advice aims to help ments such as small businesses and premium “The new concept is centred on financial edu- customers reach similar goals to the people banking, and our spokes are about conveni- cation, aligned with our core belief that every in our stories, such as ‘your mortgage and ence banking. customer has the right to become better off,” bills shouldn’t exceed 40% of the household “Our customers are still heavy branch says Hayward. budget,’ or ‘if you’re buying a home, budget transactors, so there’s a big opportunity for “We found in our research with Ideo that for legal expenses.’” us to introduce them to our new digital chan- there is a lack of providers of financial lit- nels that we are bringing on board in LAC. eracy in our markets. Yet financial literacy is Three zones As they start to adopt our digital channels, an important skill, so there’s an opportunity As part of the new design, the branch is there will be less demand for teller services in for us to be involved in the community. We divided into three zones: a Welcome Porch, a spoke branches, so we will be able to reduce hold Scotia Presents financial literacy events Social Zone, and a Business Zone. their size.” offering refreshments where we teach basic “The Welcome Porch features a new Con- cierge role as the first point of contact for customers and to helps educate them on the self-service channels available,” says Hayward. “The Social Zone is a warm environment in the centre of the branch where staff can engage with customers in casual meeting spaces, and where we hold Scotia Presents financial educational events. “Tablets are provided for customers to use for digital banking and product information, and to access our Mi Plan goals-based finan- cial planning tool.” Tellers are housed in the Business Zone at the rear of the branch, and officer worksta- tions have been given a refresh. The reason for putting tellers at the back of the branch- es is to encourage customers to explore the space first before reaching the tellers and to enable the concierge to talk to them about self-service channels. “As we continue to enhance our technol- ❙❙“How do you grade your experience in the branch today?” ogy, we envision our sales staff being com-

6 y April 2017 www.retailbankerinternational.com

RBI 736.indd 6 19/04/2017 17:03:14 Retail Banker International DISTRIBUTION: SCOTIABANK

pletely mobile throughout the branch,” says Hayward. “A portion of our branch network has a special Premium Banking offering, designed for our mass-affluent segment. So we upgraded the Premium Banking centre design with upscale finishes as part of the new concept.” The Premium Banking centre features an exclusive area in the branch where custom- ers can read news on tablets and newspapers while waiting to meet investment specialists and premium relationship officers. “In our markets, premium customers expect to be given more recognition and a distinguished service,” Hayward says. “In our flagship locations, we’ve introduced large external digital displays to support our brand presence and differentiate ourselves in the marketplace. We’re not the only ‘red’ bank in Latin America, and sometimes our branches are located next door to a rival, ❙❙ such as Santander. So we use our full colour “Now my clinic functions better and I have time to watch a good football match” palette to help create a distinctive identity. As “The number of branch transactions in “In both Chile and Peru, we will also pilot a result, Scotiabank’s branches in the region the pilot branches are decreasing faster than a tellerless branch, which will be purely digi- are not fully red, as they are in Canada.” the average, because of customers’ adop- tal, with ATMs, intelligent deposit terminals, tion of self-service channels. Many of our and sales staff equipped with tablets,” says Pilots Mexican branches have external ATMs, and Hayward. Working with Ideo, Scotiabank built four Mexico is a security-conscious market. One “We already have tellerless Scotiabank digitally enabled branch prototypes in Mex- of our learnings for our new design was to Express and Scotiabank Solutions digitally ico City in early 2016, which it uses as the put ATMs inside our Mexican branches so enabled branches in Canada.” basis for its new branch design standard. the concierge can tell customers how to use Scotiabank aims to adjust its branch These range from a flagship branch with the system and because customers feel safer design formats for individual countries specialist services down to a small, in-store using an internal ATM.” across LAC, reflecting local market charac- branch. Scotiabank plans to deploy digitally ena- teristics, Hayward concludes.< “The four pilot branches in Mexico are bled branch pilots in Chile and Peru in mid- performing well in terms of sales growth 2017, which will use the design formats and customer experience, and are ahead of deployed in the Mexican pilot branches. It “Clever but not enough” the Scotiabank network average in terms will also roll out the new design formats in “Scotiabank has created an excellent framework of customer experience and sales growth,” Barbados, Costa Rica and the Dominican that will enable its branches to involve Hayward says. Republic during 2017. themselves with the community by providing facilities in their branches,” says UK-based international retail banking consultant David Cavell. “There are so many things Scotiabank can do in its redesigned branches. Currently, they are acting as a mediator between the physical and the digital. It’s a clever position to be in right now but its not enough.” Banks need to offer neighbourhood branches that reach out to the local community, Cavell says. “This is fundamental. The critical success factors are brand, location, branch design, and staff competence. Brands must use activities that take place in branch and reflect the brand’s differentiation to reach out to the community. “There is a playbook of around 50 non-banking activities you can do in a branch to provide greater value for the community. If digitally enabled branches are to evolve from being transaction shops and have a worthwhile role to play in the future, they must be more about the communities in which they reside. Turning a branch into a limited assisted-service or self- service centre is missing the opportunity of what you can do with a branch.” < ❙❙“Tell your family members about the scope and conditions of your insurance.”

www.retailbankerinternational.com April 2017 y 7

RBI 736.indd 7 19/04/2017 17:03:16 GEUST COMMENT: COLLINSON GROUP Retail Banker International

Banks should ditch cash to boost customer loyalty

The rise of digital wallets, coupled with the adoption of the mobile phone as a mobile payment technology, hint at a future driven by digital first strategies. Can banks move fast enough? Or will legacy systems prove their undoing? Christopher Evans director at Collinson Group reports

he cashless society is not a new con- nate the US mobile payments market, led by fastest, most convenient and secure digital cept. Debate about the future of cash initiatives such as Walmart Pay, Abra and payment option and offering a frictionless, has raged since the introduction of Samsung Pay. They also found that person- channel agnostic service is a way for brands magnetic strip cards decades ago but to-person (P2P) transactions are gaining to add value to consumer experiences. T more popularity in the US compared to other in the age of the digital customer, banks are To demonstrate the potential for banks, struggling to engage and retain customers, countries. In total, $7.5bn was transferred in China the two main players in this area with millennials and generation Z proving using Venmo, one of the most popular P2P – Tencent’s WeChatPay and Alibaba’s AliPay the most challenging. Could ditching cash be money transfer services, during 2015. – are far ahead of the West in terms of fre - the route to customer loyalty for the modern Many customers only use banking ser- quency of use and share of wallet across all bank? Collinson Group research suggests yes vices a few times a month but are likely to demographics. and that it is a win for both customer and make contactless payments several times a Alibaba is also expanding into other areas bank. day. Unlike a credit card, a mobile payment of financial services, with its proposed acqui- Collinson Group polled 2,500 loyalty also creates the opportunity to deliver a rel- sition of US-listed money transfer service, programme members across the globe and evant offer, reward or additional service to MoneyGram International. found that they used a mobile wallet (such the customer. as ApplePay or Android Pay) an average of For example, a reminder about a balance Overcoming barriers seven times a month – this figure was as high and the opportunity to transfer more money; Banks are taking steps towards a digital first as 10 times per month in the US. a chance to earn loyalty points in the future, engagement strategy but these changes are The research also found that 71% favour or to use those points to pay for purchases. incremental. brands that are early adopters of technol- These are powerful opportunities for banks One of the biggest barriers banks face is ogy. Despite consumer interest in these ser- to offer greater convenience, relevance, time- overcoming legacy systems and infrastruc- vices, a number of major banks have yet to liness and rewards to customers. ture, with new platforms facilitating rapid announce plans to support services such as Organisations are recognising the conver- analysis of big data and increased collabo- Android Pay, including Barclays, Natwest gence between payments and loyalty, with ration with third parties through open APIs. and Santander. First Data acquiring Perka (a loyalty plat- By working with the right partners and form) and Clover (a point of sale solution), adopting a digital first mindset, such as facili- Convenience and reward and Visa investing in Square, so that it can tating the reduction of physical cash, banks Mobile phones are an integral part of eve- offer a closed-loop digital payment and retail have a massive opportunity to increase rev- ryone’s lives – from capturing and sharing system. enue and boost loyalty. memories, to booking travel, grocery shop- ping and keeping up with news. There are Using data and digital wallets Final thoughts now more mobile phones on the planet than Perhaps the biggest opportunity arising from Banks have an opportunity to build real-time people. the cashless experience is the chance to gener- loyalty initiatives based on behavioural data, With apps providing information on every- ate more data and use this to retain customers. enabling customers to collect and redeem thing from how we eat, exercise and source A traditional card payment gives the bank rewards that are relevant, personal and entertainment, to how we sleep, it is natural insight about a purchase based on outlet, broad enough to engage more members. for people to use their phones to complete time and location. A completely cashless society is still a financial transactions. For mobile payments, more information long way off, but there are many reasons Using mobile as a payment technology is available such as links to social media why banks should champion contactless makes customers’ lives easier and is more profiles, mobile browser history and other payments and couple this with loyalty pro- efficient. No more fumbling around for cash contextual information through collabora- gramme apps or messaging platforms. or trying to remember different pins – just a tion and shared application programming It provides the opportunity for consumers simple wave of a mobile device or a biomet- interfaces (APIs). to pay with points and cash, increasing the ric scan and the transaction is complete. By Analysis of this behavioural data, includ- utilisation of loyalty currency, and presents making mobile payments even more acces- ing real-time data, can help banks to create an improved customer experience and more sible, banks will generate positive brand better services, deliver great experiences and value to customers overall. association and will build loyalty with their provide more valued rewards for customers. For financial services brands, it offers the customers. Today the majority of consumers have opportunity to deliver a differentiated, per- If they don’t they risk missing out on rev- used digital wallet services such as PayPal, sonal, relevant and unique customer experi- enue. Research from financial analyst firm, increasingly for face-to-face as well as online ence. It is undoubtedly a win for customers Lafferty, reveals that non-bank players domi- transactions. Consumers will choose the and a win for banks.<

8 y April 2017 www.retailbankerinternational.com

RBI 736.indd 8 19/04/2017 17:03:26 Retail Banker International STRATEGY: MEXICO

High altitude, higher stakes?

Latin America’s third-largest economy could slip into recession if US President Donald Trump’s toxic cocktail of threats to upend the North American Free Trade Agreement or impose heavy tariffs on Mexican exports come true. However, Mexican banks are – at least for now – unconcerned, writes Ivan Castano

exico’s payments sector is shrug- 2.5%. MXN4.3trn banking sector, where penetra- ging off concerns that US Presi - The deepening uncertainties are putting tion is about 4% of GDP,” Benitez says, add- dent Donald Trump’s protec - investors and businesses on tenterhooks, ing that Chile has an 80% banking rate while tionist threats could hit its for - triggering a sharp fallout in foreign direct Brazil has 80%. M investment that is unlikely to recover until Enrique Mendoza, an analyst at broker tunes, forecasting strong revenues despite monitoring portfolios more closely. the two governments tentatively wrap up Actinver, is more pessimistic, adding that a “So far, we haven’t taken any provisions,” negotiations to modify NAFTA by the sum- sharp economic downturn could severely hit says Miguel Angel Laurencio de La Vega, mer. issuers. “Banks would have to provision very investor relations director at Banorte, which Amid such risks, Banorte will focus on rapidly, even if there is a small default change with roughly two million customers is Mex- growing business with existing clients, and from one institution or if credit bureau ico’s third-largest bank. largely shunning new ones or entering new reports worsen,” Mendoza notes. “Overall, consumption remains strong and market segments until Mexico’s future pros- Joel Cortes, co-founder of consumer card- there are no [portfolio] deterioration signs, pects become clearer. comparison site Kardmatch, says issuers despite future uncertainty.” “We will be more cautious and seek to grow would struggle to pass on higher interest Employment continues to grow, with the similarly to last year. We will not be launch- rates to customers who would likely fall nation adding 500,000 jobs in the past year, ing any new products or targeting new mar- behind on payments. De La Vega says. Unemployment stood at ket segments aggressively,” De La Vega notes. Cortes adds that 2017 “will be very bor- 3.6% in January, down 4.2% year-on-year “Many of our customers use our cards very ing” for new plastic launches or product according to the latest data from statistics little, so the plan is to increase this through innovation, except perhaps in the digital institute Inegi. reward programmes and promotions.” arena where online and mobile purchasing “If unemployment rises that would give Others are also being cautious. BBVA is growing strongly. us a reason to act, but so far our past due Bancomer, which leads Mexico’s banking He highlights Banregio, a tiny lender in portfolio remains at 5%, which matches the sector, has begun lowering card limits and Northern Mexico, as this year’s top innova- industry’s, with an improving outlook,” De more closely monitoring its accounts, ana- tor after it launched a platinum card offering La Vega adds. lysts say; much smaller Inbursa, which 1% cashback, 5% interest and no annual fee. Banorte, which intends to double its pay- belongs to telecoms tycoon Carlos Slim, is “You hardly see cards with such high ments market share to over 16% by 2022, also becoming more selective, they add. rewards and low interest rates,” he notes, matching arch-rival Citigroup’s Citiban- Jorge Benitez, an analyst with broker GBM, adding that the bank has an innovative amex, expects card revenues to climb 14% has a sanguine outlook for 2017. He says issu- online application feature. to MXN8.2bn ($435m) this year, helped by ers continue to enjoy high margins and improv- “Banregio has an interesting philosophy, soaring interest rates in Mexico. ing credit quality, with interest rates hovering which is sort of populist because it wants to The central Bank of Mexico has stepped at 26.4%. This, coupled with an expected 9% be seen to be offering a product that won’t up benchmark rates six times to 5.25% rise in plastic issuance this year, will drive rev- break your finances,” Cortes says. since Trump swept into the White House, in enues up 11% to MXN94bn. That could chime well with impoverished a move aimed at shoring up the plummet- That said, if the economy were to decline Mexicans who have boycotted US brands ing peso and combatting soaring inflation, by more than expected in the second half – Starbucks, McDonalds and Walmart to which is currently hovering at 5% – well over something economists expect if a trade war decry Trump’s calls that Mexico pay for his its 2% target. erupts – lenders could suffer amid rising border wall, on top of his well-publicised The increases will add 200 basis points to unemployment and defaults. insults against its population. the 28% average rate that Banorte charges “We could see a small decrease in employ- However, Cortes says the actions have not for its silver, platinum and gold products, ment which would affect banks’ portfolios hurt the likes of Visa, Mastercard or Ameri- offsetting a slight decrease in its portfolio and they would stop issuing credit,” Benitez can Express, which has a $2.2bn exposure growth. explains. that analysts believe it is looking to trim. “This year, we will probably grow less in To protect themselves, institutions could “Each bank has customer complaints or our portfolio but more in revenues,” says De cut risky personal loans and raise their expo- issues, but nothing has changed because of La Vega, adding that last year its outstanding sure to safer direct deposit credits, he adds. Trump itself,” Cortes adds. balance grew by 10% to roughly MXN26bn. However, even if that happens, the pay- Meanwhile, De La Vega says Banorte is Despite rising margins, Mexico’s economy ment sector’s long-term prospects look keen to grow its digital business as Mexico’s is set to cool this year, with the government bright, largely as a result of Mexico’s low e-commerce market is growing rapidly amid recently cutting GDP growth projections to banking penetration. falling mobile data rates, catching up with 1.3-1.5%, down from a previous estimate of “Credit cards represent 33% of the leading markets in Brazil and Chile. <

www.retailbankerinternational.com April 2017 y 9

RBI 736.indd 9 19/04/2017 17:03:30 DISTRIBUTION: NEQUI Retail Banker International

Nequi: a unique Colombian offering

Designit, an integrated design agency recently acquired by Wipro Digital, has partnered with Nequi bank in Colombia to go 100% digital. The bank has redesigned the mobile banking experience, and is creating offerings for millennials who are starting to drift toward a post-app world. Douglas Blakey reports

he goal is ambitious: Bancolombia’s RBI: What was the brief from Nequi to towards the next big potential thing for the digital brand, Nequi, aims to chal - Designit? Why did the bank elect to work bank. lenge traditional banking models and with Designit? We started in December 2014 and created highlight the general cultural move to a new team of people comprising our visual T AV: Bancolombia started with a blank sheet designers, researchers, business designers mobile banking and app-centric offerings. The bank worked with Wipro Digital and and approached Designit in order to bring and people from different areas of Banco- Designit, utilising what the tech vendors in knowledge about human-centred innova- lombia. Together we would be able to create term a design-thinking approach, challeng- tion models and service design methodolo- what we call the ‘first neobank’. ing traditional norms and innovating at a gies. We needed people with no expertise in We started out by understanding the inter- faster pace, from which they believe other traditional banking who, at the same time, nal future vision Bancolombia had for its industry verticals can learn. were experts in user experience and usability. business, consumers and the market. Nequi CEO Andrés Vásque (AV), and After aligning Bancolombia’s expectations, Mikal Hallstrup (MH), founder and CEO of RBI: Can you explain how Designit went agreeing the timeline and the business model, Designit, discuss the project with RBI: about implementing the project and deliver- the team came up with a new business model ing on the brief for the bank? where the revenue does not come from trans- RBI: Can you give some background infor- actional fees but from a range of products mation on the launch’s project timeline? MH: Bancolombia is the largest bank in and services created depending to a user’s Colombia and one of the top 10 largest lend- real needs. AV: Bancolombia came to the conclusion that ers in the Latin American region. It has made After analysing prototypes and user tests the way people were willing to interact with its name by offering universal banking solu- in universities – the smallest representation banks and use their money was slowly but tions to all types of customers. Bancolombia of our target market – we enabled Nequi critically changing in a society that is becom- is a bank that takes pride in being the bank accounts to be created and implemented a ing more digitally driven by the day. for everybody, for whatever they might need. payments ecosystem where both merchants Therefore, in December 2014, we decided The vice-chair of corporate services and users used Nequi. The prototypes were to mix a team of people from many areas of approached Designit to clarify its innova- successful and in June 2016 Nequi was the company with a team of designers not tion strategy and help move the organisation launched in beta mode. related to the banking industry, with the goal of understanding how could they structure n LATIN AMERICAN BANK RANKINGS, 2017 what they called a 100% digital “neobank”. After aligning Bancolombia's expectations, Country Assets ($m) Liabilities ($m) Equity ($m) agreeing the timeline and the business model, Itaú Brazil 338,108 305,834 32,274 the team came up with the idea of design - Bradesco Brazil 309,580 283,355 26,224 ing a service that would allow people to use Santander Brazil 166,555 143,125 23,429 and manage their money from their mobile phones, with no physical branches, and BBVA Bancomer Mexico 110,958 101,033 9,926 above all, in accordance with their routines Banamex Mexico 77,200 66,868 10,331 and synced with their everyday lives. Santander Mexico 71,381 64,590 6,792 After many prototypes and testing with potential users, they started the development Banorte Mexico 70,170 62,157 8,014 of an MVP that was available in closed testing BTG Pactual Brazil 65,887 59,375 6,512 as of November 2015. From that moment they Bancolombia Colombia 63,323 56,777 6,546 started the stabilisation and optimisation stage, that led to an open App Store and Google Play Banco Santander Chile Chile 52,261 47,824 4,278 Store release in June 2016. Source: Bancolombia

10 y April 2017 www.retailbankerinternational.com

RBI 736.indd 10 19/04/2017 17:03:41 Retail Banker International DISTRIBUTION: NEQUI

RBI: What were the goals and aims of the MH: Nequi has two different apps: one for n COLOMBIAN MARKET SHARES (%), project? users and one for merchants. The user app is DECEMBER 2016 available in the Apple and Google app stores 30 MH: At first, Bancolombia came to us to and at www.nequi.co. The client was com-

help it explore new opportunities for innova- missioned to launch Nequi and therefore has 25 tion in the market, not knowing what might been tracking the success of the results. Gross Loans come out. However, during the sprints we made Deposits 20 At this point it could have been anything. some prototypes and hypotheses that we had We convinced the bank to allow us not to to validate with different users, using stand- stop there but continue to create some con- ard qualitative techniques. 15 cepts and even validate those with people. This way the initial briefing turned from RBI: Is Nequi a first in the Colombian bank- 10 ‘help us see what can be done’ to ‘help us cre- ing market? ate the bank that might kill us in five years’. 5 The key idea was to create a new bank AV: While it is not the first financial app, it’s concept, with a new way of thinking and definitely not something you’ll find else - 0

tools in only 15 weeks. We did it! where in the Colombian market. The possi- BBVA Banco Banco Nequi is a neobank. It operates under the bility of letting people use their money at no Davivienda Bancolombia de Bogota same banking license as Bancolombia but cost for basic transactions, a fast, ever-evolv- de Occidente

everything is new – new core banking, a new ing service, and a local language approach Source: Superintendency of Finance of Colombia team, new branding, a new company and a differentiate us from the usual financial ter- completely new human experience, business minology. All these aspects come together to gerprint – for security and usability purposes. model and services. make Nequi a unique offering in the Colom- It also launched during November 2016 at Nequi offers everyday banking: but it’s not bian market. the same time as the first transactional Face- a bank, it’s a platform. It’s API-ready and book bot in Latin America. The bot is called strives to provide value beyond transactions. RBI: What are the initial products on offer Eva, and can check customers’ balances, Nequi was created upon the belief that from Nequi? send money and recharge cellphone credit. banking should be a platform where users Nequi has been built as an open platform, can reach out to several relevant services pro- AV: A simplified savings account is offered aiming to develop an innovative business vided by either the same bank or third parties. that can be opened entirely from a mobile model based on application program inter- Users have the right to choose. phone. With this account users can manage faces. their money with no transaction or admin- RBI: How did Designit engage with consum- istration fee, no minimum balance, send RBI: What is the initial market reaction? ers prior to launch? money everywhere in Colombia, make with- How has the launch gone? drawals at over 4,000 ATMs and recharge MH: We developed a toolset to help people their cellphone credit; customers will never AV: Nequi has been in full production manage their money better. It was created have to walk into a branch. Finally the app mode since July 2016. The app has been on the model of how people handle their offers ‘pockets’, a saving vault with goals to downloaded by almost 200,000 people and money every month, how they save, what help users manage their money. already boasts around 40,000 users. they understand by saving, and the different rhythms their lives tune into. RBI: And on costs, how does the Nequi pric- MH: Nequi launched near the end of July One might want to be a great saver one ing compare to traditional banks? 2016 in beta mode. We used a launch strat- week, but care less about saving the week egy based in a small ecosystem to trigger net- after when they go out on a date. AV: This is at the very heart of the Nequi work effects quickly in the platform. Banks have rigid rules for people whose proposition. The basic core of Nequi is that Nequi gained more than 12,000 customers lives aren’t rigid at all; we change constant- there is no cost to users – a feature very hard in the first month and there’s an ever-grow- ly, our needs change and evolve. Banking to come by in Colombia. ing network of merchants and ATMs where should evolve along with us and adapt to us. people can use Nequi. During the project, there was no way we RBI: How has Nequi promoted itself? How were going to create a neobank and not pilot has it used social media? RBI: How has Designit and Nequi’s relation- it, so that's what we did. ship expanded since the launch? We decided to use a university as the play- AV: Nequi has opted for a low-scale and ground, and during three days we enabled organic promoting strategy using social MH: After launch, the board in Medellín Nequi accounts to be created and imple - media, word of mouth, and paid advertis- decided to start the process of internationali- mented a payments ecosystem where both ing with Facebook and Google. Free press sation, with Panama chosen as the first coun- merchants and users used Nequi. has also played an important role at certain try due to geographic convenience. This pilot not only showed us a real per- points. Moreover, we have created a framework formance of the service, but also served as a that allows the bank to build relationships place for user testing. RBI: Can you comment on Nequi’s use of and conversations with clients under the biometrics same model across all departments. RBI: How did Designit record successful It is an important aspect of our offering; by results? AV: Nequi is the first financial app in Colom- engaging in and maintaining dialogues with bia using biometrics – facial, voice and fin- our customers we can serve them better. <

www.retailbankerinternational.com April 2017 y 11

RBI 736.indd 11 19/04/2017 17:03:44 OPINION: CUSTOMER SERVICE Retail Banker International

How customer service is becoming the true differentiator

Retaining and gaining customers is a constant concern for banks across the UK, and with the Seven Day Switching Service in full effect, losing a customer is more likely than ever. How can a bank differentiate itself in such a crowded market? Customer service seems to be the answer. Patrick Brusnahan investigates

ustomer acquisition has always been anywhere and not have to deal with the has- One aspect that has drawn consumers a tricky task for banks. Previously, sle of lining up. to the mobile experience is how easy it is. an easy way to differentiate yourself “It’s a generational gap perhaps which is Marieke Flament, MD for Europe at social from your competition was on price. the tipping point right now, especially in payments mobile app Circle, says: “The C the West. It’s different in emerging mar - main feedback we get is the easiness of the In the current UK market, this is a hard task. The interest rates and service charges for cur- kets where it is more about opportunity of app. That is consistent. Setting up an account rent accounts are all within a small margin access, where travelling to a bank branch can with Circle probably takes less than a minute. of each other. involve long distances and there may not be That’s what we think makes it easy to adopt.” Shashi Nirale, senior vice-president and any ATMs. In those markets, it’s more about Pendar Ostovar, executive director of GM EMEA for Servion, tells RBI: “The access than convenience.” strategy and research at the BBA, says: “Peo- sector is very commoditised at the moment. While much has been said across the sector ple like convenience. The initial phase of digi- Everyone is offering the same interest rates about how millennial consumers love tech- tal involved moving core paper-based client and loan products, and there is little to no nology, it can be overstated. propositions onto the web browser interface. difference between banks.” Dr Nicola Millard, head of customer Come smartphones and tablets, the internet As a result, the real differentiator becomes insights and futures at BT, says: “The millen- became user-friendly and accessible through customer service. nial thing is a bit overblown. A lot is univer- apps. People started to think what interac- sal, regardless of your age.” tions could easily be migrated onto such What are customers looking for? Nirale also highlights the many different devices. This was the second phase of digital The story behind what customers want has, types of customer a bank can have, all with development. in general, always been the same. They desire different preferences. He says: “Different- “The next phase is designing and manufac- convenient and secure services, but in the size banks have different customers. Differ- turing propositions primarily for apps, while new digital age, this can mean many things. ent regions have different customers. They all making maximum use of data analytics to cre- According to customer experience manage- vary in nature.” ate tailored and relevant customer journeys.” ment company Servion, customer complaints “If you design a mobile-based customer in the UK alone are costing the banking The mobile channel journey, you can rethink the product and Don’t have online account details? industry $37bn. Mobile banking has seen a large uptake. the way it interacts with customers,” adds “Banks are not offering true omnichan - According to the British Bankers’ Association, Danilkis. nel customer services to their clients, and it there were 11 million banking app logins a “From a customer point of view, you can You and your associates may be entitled to online affects loyalty,” Nirale says. “In this industry, day in 2015, a 50% rise from the previous even think differently on what an account if you’re not offering an enhanced customer year. In addition, the number of payments is supposed to be. If you design it from a login credentials. The benefits of full online experience, you’re losing customers and you made using banking apps in 2015 was 347 mobile-first perspective, you could have access are as follows: don’t want to do that right now.” million, an increase of 54% from 2014. multiple pools of accounts that merge into With new mobile and digital services avail- Bridge says: “Customers have been trans- an account more relevant for the user. able, more than ever before banks need to acting online for a reasonable time now.” “If you rethink the products, you have a • Timely daily news updates acknowledge the desire for these options. “The majority of day-to-day transactions are better way of designing a mobile-first expe- However, the physical strands of service, probably done via smartphone,” Millard adds. rience rather than simply exposing products • Access the latest analysis such as branches and ATMs, are still in play Danilkis says: “The mobile side is one to mobile channels.” • Monthly editions sent directly to your inbox and must not be ignored. Choice is crucial to that has been embraced by even established keeping a customer happy. organisations. The difference is the ones tak- Artificial intelligence • News alerts direct to your inbox As James Bridge, assistant director of The ing a digital-first approach and rethinking One way institutions are hoping to improve Association of British Insurers, puts it: “How the entire customer journey. customer service is through the implementa- • Comments from key industry influencers and leaders do you accommodate a huge range of cus- “Older organisations are adding it as a tion of artificial intelligence (AI). Rather than tomer journeys?” new way to interact, but the newer players speak to a person while trying to remember • Search for specific, relevant content Speaking to RBI, Eugene Danilkis, CEO of are thinking about how much of the entire multiple passwords, AI can streamline this • Access the archive Mambu, says: “There’s a new wave of peo- customer journey they can put into mobile entire process through utilising data. ple. Some enjoy the experience of a branch as the primary factor – the mobile-first cus- Nirale says: “Based on data analytics and and don’t find it cumbersome. tomer experience. AI and the tools available, they are not har- “The new generation has been raised on “That is the part that is new to many. It’s a nessing the power of the data they already To create or activate your account please contact: mobile technology and they would rather be completely different design and process than have about customers. All that can be done. able to do anything transactional at any time what you would get from a traditional bank.” “If I am on a loan page on a bank’s website, [email protected]

12 y April 2017 www.retailbankerinternational.com www.privatebankerinternational.com

RBI 736.indd 12 19/04/2017 17:03:48 Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 Retail Banker International OPINION: CUSTOMER SERVICE

nobody is offering a chat or additional going to solve? There has to be a specific use. Nirale adds: “Big banks have invested in advice. Nobody knows that I’m on that “Data is a fundamental fabric that will technology that is old, monolithic. For them loan page. If I have an omnichannel plat - change the customer services industry. The to free up capital and invest in new technol- form working in the background to provide bank has to use tools that are available today.” ogy is difficult and slow. In a smaller bank, context to my interaction, then an agent or Ostovar adds: “Today, customers’ expecta- it is easier for them to make a move. All the advisor should be able to offer me a deal or tions are being shaped through their experi- processes are easier and the customer base is a discount based on my history. Intuitive ser- ences of solutions offered by different indus- smaller and the systems are relatively newer vices of this nature are not there. tries such as retail tech providers. and move quicker. That’s the key difference.” “If you do happen to have something there, “One area ripe for transformation is robo- He concludes: “Post-2008, there were so the customer is delighted. It’s a relief and advice, which can make maximum use of many regulations added to banks. In total, doesn’t feel like an upsell,” Nirale notes. customer data, propensities and risk appetite 80% of their budget was allocated towards AI can also be used to improve security to bridge the advice gap.” regulations and fines. Flament explains. She says: “From the bot- “They didn’t have the money to spend on tom up, we have a lot of AI that is probably What’s holding banks back? new things, but the costs will go down and it better than having someone asking you 20 Why don’t banks already offer this level of will become an interesting playing field.”< questions. I would argue that the level of customer service? It goes back to a very com- < security we have is even better than some mon answer: legacy systems. UK CURRENT ACCOUNTS BY INTEREST RATE, 2017 banks. We have touch ID, a PIN code, and “Banks have enormous amounts of legacy Account Rate you can set your own limits.” code which constrains system development Nationwide FlexDirect 5% Bridge purports that AI in the form of and roll-out of enhanced customer solu - TSB Classic Plus 3% chatbots could be helpful for the customer tions,” Ostovar says. experience by creating an experience where “Making maximum use of fintechs to Tesco Bank 3% customers feel they are dealing with you, some extent circumvents the legacy system Bank of Scotland 2% even when they are not. issues and allows firms to deliver customer Lloyds Bank 2% “Various banks are in various stages of functionality quickly, without adding to the implementing this,” Nirale adds. “It’s not legacy code problem. Some big banks invest Santander 123 1.5% just going in and adopting it. They key part in such firms to facilitate their takeup within Clydesdale 0.85% is: What are you going to do? What are you their organisation.” Source: Comparethemarket.com

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RBI 736.indd 13 20/04/2017 10:44:41 GUEST COMMENT: GFT Retail Banker International

That’s enough lipstick Digital initiatives remain a major priority for retail banks as they seek to meet the challenges of new regulations, disruptive start-ups and changing expectations from consumers. Christian Ball, head of retail for the Atlantic region at GFT, writes on the importance of this changing mindset

ddressing these competing and con- lower cost. This fact highlights further the tion, with smaller, newer banks finding it dif- current challenges, whilst making need for banks to become fully digital if they ficult to grow. the transition to full digitalisation, are going to survive and compete against Banks will be required to share data is a daunting task for banks. How younger, more agile competitors. they have historically held, with A consumers and third parties. they undergo this transformation while still At present, banks have constrained by their historic business mod- been slower to address the Third parties can access els, processes and methods of doing business seismic shift of technol- this data by connecting remains problematic. Many still have legacy ogy from the preserve of directly to customer IT systems and architecture which consume large institutions into bank accounts via a significant amounts of their IT spending, the hands (and pock- standard application making it difficult to invest in innovations. ets) of the mass market. programming interface In this environment, digitalisation requires This has driven change (API). This access will banks to adopt new technologies and re- in business, society and enable tailored services evaluate their traditional business models in consumer expectation. to be delivered. pursuit of strengthening customer relation- The three waves of change ❙❙Christian Ball, head of retail, GFT ships. This process is already underway but are technology, connectivity, A new relationship the results fall short of what is genuinely and automated intelligence. Open Banking will radically required. Too many banks believe digital The significant, era defining, transform the relationship between transformation means creating digital prod- changes that have and continue to impact banks and their customers. Power has shifted ucts and services whilst still maintaining consumer lifestyle and expectation trace from the traditional bank to the customer. existing business models and systems. their roots to these three distinct waves. They With this development, banks must reconsid- This approach cannot be considered to be are neither sequential nor concurrent and er how they create value – it requires banks real digital transformation; it is merely cos- have neither a start nor an end. Each wave to adopt a customer and data centric view of metic in its approach to change. continues to have an impact on the other. how they do business. This point was illustrated by Mark Mullen, Banks are being buffeted by these forces of With customer experience now at the heart CEO of Atom Bank, one of the UK’s leading change taking place within the industry and of the new banking model, data has never digital only banks. He says: “Banks are try- wider society. been a more valuable commodity. The dif- ing to be hip, building cool digital front-ends, ficulty for banks is that they have always but it’s like putting lipstick on a pig – ulti- Moving to Open Banking held vast amounts of data but have not mately it’s still a pig and the new front-end is Financial institutions have seen a number always been good at interpreting it to extract still running into an awful digital back end”. of different approaches by challenger banks, insights. The prospect of best utilising data To create a truly digital business, banks start-ups and some notable fast movers such to support customers remains limited with must put down the lipstick and make a more as BBVA, either unencumbered by legacy banks continuing to rely on legacy back-end concerted attempt to understand the cultural infrastructure or rapidly evolving from such systems that lack the functionality to support and technological changes required for digi- heritage. They can rapidly deliver and deploy the needs of the front-end. tal transformation. low-cost, market-ready solutions themselves Digital transformation requires banks or through third parties with reduced over- to show a commitment to innovation Cultural and technological change heads. They are more platform-like in terms and a desire to develop a customer centric Established banks find themselves in the of the operating model, focusing on the cus- approach enabled by technology. unenviable position of playing catch-up to tomer and data needs of a digital economy. In 2015, the information technology newer competitors. Digital only challenger Banks need to change their approach in how research company Gartner, said of banks: banks and start-ups are beginning from they address their own infrastructure and agili- “To be truly digital, banks must pair an a point where their business models and ty issues. To make the transformation to a truly emphasis on customer-facing capabilities relationship are in a fundamentally differ- digital world, banks must adopt Open Banking. with investment in the technical, architectur- ent place to that of more established banks. Regulators in the UK and Europe are pushing a al, analytic and organisational foundations Atom Bank and Germany’s Fidor are perfect model of ‘open banking’. that enable participation in the financial ser- examples. Open Banking is about creating more com- vices ecosystem.” They do not have to contend with historic petition and transparency within the indus- In 2017 this statement continues to remain business models or legacy IT systems and try. In the UK, the Competition and Markets pertinent. Remaining banks must ensure they they can provide specific niche services tar- Authority (CMA) 2016 report concluded that ‘engineer in’ flexibility and agility of the busi- geted to particular customers rapidly and at traditional banks do not face enough competi- ness model to meet future challenges.<

14 y April 2017 www.retailbankerinternational.com

RBI 736.indd 14 19/04/2017 17:03:57 Retail Banker International RESEARCH: MOBILE

Put your money where your mobile is

It would not take long to find an article or a comment on how the banking industry is embracing the digital realm, but is this actually true? Are digital services an opportunity or a burden for banks? Patrick Brusnahan reports on what the sector needs to do in order to compete in the cyberworld

hile every bank has made efforts improving. Some 43% of personal banking Save-and-resume is an essential feature with mobile and digital services, products can be opened on a mobile device, but results from Avoka’s survey show that the levels of success widely differ. up from 31% in 2016. not much has changed over the past year. All According to PwC, only 22% of However, banks are still not taking action three geographies show low availability of W the feature across product lines. The highest UK financial services firms interact with their on the chances offered by digital sales. Less customer on mobile. In addition, Avoka’s than 30% of all products can be applied for was Australia at 31% in 2017, the same level State of Digital Sales in Banking study sug- using digital channels. as 2016.< gests that there is a lot of work to be done. In 2017, 28% of banks’ accounts and The report states that a poor experience, loans can be opened via a mobile device, up n for example an application process designed from 20% in 2016. Europe and Australia PERSONAL BANKING: APPLYING FOR PRODUCTS ON MOBILE DEVICES for a desktop rather than a mobile, could were the regions with the largest rises while lead to the current 70–90% abandonment North America showed only a 6% increase 50 2016 2017 rates for new product applications. While over the year. marketing may be working, the digital sales Larger banks, according to the report, 40 experience was not adequate, resulting in the were actually the most dedicated to improve- loss of a potential new customer. ments in this area. Two large US banks Only nine of the 32 banks surveyed across showed an improvement of over 30% ver- 30 Europe, North America, and Australia, were sus the previous year in terms of the percent- getting serious in terms of readiness for digi- age of personal accounts that were ready for tal sales of personal banking products. mobile sales. Three European banks and two 20 Australian banks surveyed also made signifi- Progress and opportunity cant improvements. 10 Luckily for banks, Avoka states that there Omnichannel efforts need to improve. are plenty of opportunities for improvements Starting on one platform and finishing it on to their digital sales capabilities. another can be crucial. Starting an applica- 0 While most banks are struggling to create tion on mobile can be easy, but consumers North Europe Overall both a superior online customer experience may need more documents and would prefer America Australia and offer digital account opening across their to finish the application on a desktop with broad product line, mobile experiences are little to no extra effort. Source: Avoka

www.retailbankerinternational.com April 2017 y 15

RBI 736.indd 15 19/04/2017 17:04:05 NEWS: DIGEST Retail Banker International

DISTRIBUTION REGULATION TECHNOLOGY Alior Bank to downsize branch UK Government to create anti- IBM launches new cloud network by 2020 money laundering watchdog developer tools

Poland’s Alior Bank has unveiled plans to IBM has launched a new set of tools to offer trim its branch network and invest in tech- essential building blocks to fintech firms nology in response to the rise of digital bank- looking to develop financial services apps ing channels. using the business’s cloud facility. The bank currently has a network of The IBM Cloud for Financial Services will 324 branches and 786 franchise outlets. It give developers access to application pro- expects to reduce this figure to 200 branch- gramming interfaces, data and content to es and 680 franchise outlets by 2020. The build and monetise cognitive-enabled apps. remaining branches will be modernised and Currently being beta tested, developers equipped with mobile tools. will also have the ability to build in custom- On top of its existing spend on IT systems The UK Government has announced plans er insights, regulatory compliance analytics, and infrastructure, the bank plans to invest to launch a new anti-money laundering security, privacy and compliance readiness PLN400m ($100.4m) in IT and innovation watchdog to tighten its defences against ter- to help reduce the time needed for develop- projects by 2020. rorist financing. ment and testing. Alior is currently working to deploy face The proposed Office for Professional The new tools aim to simplify the time- and voice biometrics and artificial intelli- Body Anti-Money Laundering Supervision consuming tasks of selection, mapping and gence technologies, and plans to use cloud- (OPBAS) will sit within the Financial Con- data integration, enabling developers to use based solutions, blockchain and open appli- duct Authority. IBM services or integrate them with their cation programming interfaces banking and It will aim to strengthen oversight of the own data. PSD2 tools. laws, which is currently carried out by 25 IBM senior vice-president for industry The bank has set a target of generating different organisations, of which 22 are pro- platforms, Bridget van Kralingen said: “Our 40% of key product sales through digital fessional bodies for accountancy and legal experience in the commercial deployment channels over the next three years. services. of artificial intelligence across financial ser- Alior CEO Wojciech Sobieraj said: “To The treasury said that supervision by mul- vices with enterprise and startup builders has face the technological revolution in the tiple organisations often leads to inconsisten- informed these new tools which we hope banking industry, the changing expectations cies that can exploited by criminals. OPBAS will help establish new industry standards. of clients, and the competition, Alior Bank will have powers to penalise sectoral bodies “We’re excited to see how they put them to must transform from a financial firm with a for anti-money-laundering rule violations. work to quickly create the latest solutions strong IT angle into a fintech with a bank- It will be funded by a new fee imposed on powered by cognitive computing and block- ing licence. professional body supervisors, and should chain for everything from new payments Banks that ignore out the wave of digital be operational by early 2018. directives support, and eventually regulatory innovation will be left behind.”< Economic Secretary to the Treasury Simon technology solutions.”< Kirby said the new standards will: “Send a M&A strong message that money laundering and TECHNOLOGY People’s United Financial- terrorist financing should not and will not Sidian Bank opts for IBM cloud Suffolk Bancorp merger secures be tolerated.”< and cognitive solutions regulatory approval STRATEGY Kenya’s Sidian Bank has selected IBM Cloud Connecticut-based People’s United Finan- Diebold Nixdorf plans to offload and Cognitive solutions to accelerate its digi- cial has received approval from the board legacy Diebold business in UK tal transformation. of governors of the US Federal Reserve for The vendor explained that its solution its merger with New York-based Suffolk Diebold Nixdorf, a provider of self-service will allow the bank to offer customers faster Bancorp. solutions, is planning to divest its legacy access to debit and credit card processing, The deal, which is valued at $402m, was Diebold business in the UK following bank account opening, teller, and wealth announced in June 2016, secured the nod the Competition and Markets Authority management services. from shareholders in October and approval (CMA)’s observation that a structural rem- “The solution will also free up a typical from the Office of the Comptroller of the edy is required. business day’s working hours at the bank, Currency in February 2017. Aside from satisfying the CMA’s con - which was earlier spent on problem isola- Suffolk Bancorp shareholders will receive cerns, the move will help Diebold to for- tion, as well as help it realise 34% savings 2.225 shares of People’s United Financial mally achieve CMA permission regarding in capital costs and a 60% improvement in stock for each Suffolk Bancorp share. its $1.8bn merger with Wincor Nixdorf. transaction times across all teller counters As part of the deal, Suffolk Bancorp presi- In August 2016, the CMA said that the and ATMs,” IBM said. dent and CEO Howard Bluver will join merger could lead to a substantial lessening Sidian Bank CEO Titus Karanja said: People’s United Bank as New York market of competition in the supply of customer- “This is the first collaboration of its kind in president operated ATMs in the UK, as there is a little this market. It not only cements our part - Suffolk will merge with and into People’s possibility of new competitors in market. nership with IBM but also creates new and United, while subsidiary Suffolk County Diebold Nixdorf is actively pursuing a unique partnerships that support our institu- National Bank will merge with and into Peo- divestiture of its legacy Diebold business in tion’s growth strategy and enhance the effi- ple’s United Bank, National Association.< the UK with a potential purchaser.< ciency of our entire infrastructure.”<

16 y April 2017 www.retailbankerinternational.com

RBI 736.indd 16 19/04/2017 17:04:06 Retail Banker International NEWS: DIGEST

MOBILE TECHNOLOGY STRATEGY iSentric collaborates with Commercial Bank of Africa taps Accenture establishes Public Bank to launch Tieto technology for digital card Innovation Centre for Finance & m-payment solution in Malaysia and payment solution Risk in New York

iSentric has announced that its wholly Kenya-based Commercial Bank of Africa owned subsidiary, iSentric Sdn Bhd, has has introduced its latest digital banking solu- signed an agreement with Public Bank to tion: Loop. collectively develop and launch a mobile Tieto developed the solution that enables payment solution for the Malaysian market. the Nairobi-headquartered lender to seam- The solution will use similar mobile tech- lessly and instantly issue MasterCards, pro- nology to that employed by Apple Pay, Sam- viding customers instant money transfers sung Pay, Alipay and Tenpay. between accounts and transaction manage- iSentric will serve as the sole solution pro- ment tools. vider for Public Bank, processing payments Commercial Bank of Africa seeks to serve from merchants. unbanked Kenyans and is aiming its solu- Expected to be introduced in the third tion at younger clients, replacing branches quarter of 2017, the new m-payment app in favour of smartphones. will be made available on the Android and Commercial Bank of Africa general man- iOS platforms. ager of new business ventures Eric Muriuki iSentric plans to tap Public Bank’s user said: “Commercial Bank of Africa chose and merchant base to expand into the Tieto as its provider of card issuance and Malaysian mobile payment industry, which payment processing solutions due to its currently consists of Touch N Go and Sam- extensive experience and proven reputation.” sung Pay. Tieto head of retail payments and cards iSentric CEO Sean Tham said: “Given that Maris Ozolins said: “Commercial Bank Public Bank’s strategy is centred on growth of Africa’s initiative to serve the unbanked in the retail banking business, we are confi- youth through a smartphone app is a bold dent that the mobile payment solution will innovation and a future-proof approach to be able to gain traction. Our goal is to use banking and payments solutions. Public Bank’s regional presence to penetrate It was our pleasure to work alongside other markets. ” < such an innovative partner that understands the need to put its customers first. This could MOBILE prove to be an important generational mile- New mobile bank Koho formally stone,” Ozolins added. < Accenture has launched the Innovation Cen- launches in Canada tre for Finance & Risk in New York to help MOBILE financial institutions accelerate and scale Doha Bank introduces new advanced data and analytics capabilities. The centre will develop finance and mobile app to reward credit risk data management, data engineering, cardholders advanced analytics, artificial intelligence, Doha Bank, a commercial lender in Qatar, and reporting solutions, enabling financial has launched a new mobile app that offers a providers to improve regulatory controls range of benefits to credit cardholders. as they deploy advanced data and analytic The co-branded app, My Book Qatar, capabilities. It will allow institutions to informs users of deals and voucher schemes accelerate transitions by using technology Following a successful period of beta test- to help save money. enabled by the Accenture Insights Platform ing, a Vancouver-based neobank Koho has Available for download on the Apple and Accenture Labs. launched in Canada. App Store and Google Play Store, the new Accenture Analytics innovation centre Koho has developed partnerships with app features over 900 buy-one-get-one- lead Antonio Castro said: “Our new Innova- Peoples Trust Company and Visa, and offers free offers and more than 300 vouchers for tion Centre for Finance & Risk fosters deep customers a prepaid Visa card, a person-to- hotels, restaurants, cafes, leisure attractions, collaboration between our clients, data sci- person payment facility, live chat support, health and fitness spas. entists and technology experts. Touch ID-based security, and money man- The value of vouchers and deals on the “Together, we can work quickly and effec- agement capabilities. app totals QAR250,000 ($68,660). tively to ideate, prototype and scale solu- Koho CEO Daniel Eberhard said: “Cana- Doha Bank head of retail Gul Khan said: tions. The centre has already enabled us to dians are paying some of the highest bank “The app’s launch reflects our dedication to accelerate the delivery of next-generation fees in the world while being sold products redefining the lifestyle experience of our cus- data platforms for a number of leading they don’t need or understand. We don’t tomers.” financial institutions.” think that’s right. Doha Bank founder and MD Mohamad The centre, part of Accenture’s interna- “The response during the private beta was Saleh added: “An integrated map enables tional innovation network, already has over amazing. More than 10,000 Canadians signed users to spot those deals close to their cur- 20 partnerships with universities, fintech up and we transacted over $1.3m.”< rent location.” < startups and global financial institutions. <

www.retailbankerinternational.com April 2017 y 17

RBI 736.indd 17 19/04/2017 17:04:10 NEWS: DIGEST Retail Banker International

PRODUCTS PRODUCTS STRATEGY Fiserv adds credit scores to Starling Bank to launch beta Singapore and Japan form online and mobile banking version of current account in UK fintech co-operation framework

Leading US fintech business Fiserv has Starling Bank, a UK-based digitally native The Monetary Authority of Singapore launched a new solution that allows finan- mobile challenger bank, has announced (MAS) and the Financial Services Agency cial institutions to offer personalised credit plans to launch a beta version of its current (FSA) of Japan have set up a co-operation information to customers by integrating account app. framework to strengthen fintech links credit score monitoring into the digital bank- Initially, it will be available on iPhone, between the two countries. ing experience. with an Android version to follow. Each will refer fintech companies in their The vendor said its new solution, Credit Making use of customer feedback, the jurisdictions to each other’s markets. The Sense, will offer credit scores and daily lender plans to improve performance and framework outlines how fintech businesses credit-monitoring functionalities, as well as application ahead of a full-scale commercial can start discussions with watchdogs in the insight into factors influencing the score. launch, the estimated timeframe for which is respective jurisdictions, and obtain advice The offering will display customers’ credit yet to be established. on local regulatory frameworks. scores within the online or mobile banking Commenting on the launch, CEO and The collaboration is expected to help user interface, enabling banks to make pre- founder Anne Boden said: “Our vision is eliminate regulatory uncertainty and reduce qualified lending offers customised to indi- to give everyone the opportunity to enjoy barriers to market. vidual needs. a healthy financial life. We believe that this MAS chief fintech officer Sopnendu The solution will be available through should be the basic rule of banking. Mohanty said: “Technology and innova- a number of core account-processing and “Today is another step on that journey. tion remain key enablers of financial sector online and mobile banking platforms offered Widening our beta testing programme growth in Singapore and Japan. by Fiserv. means we can continue to develop the Star- “The establishment of the framework is Fiserv depository institution services ling Account; testing it, getting feedback, a great opportunity for the fintech ecosys- group president Byron Vielehr commented: improving it so that in the future all our cus- tems of both nations to enhance the already “It is a natural fit for financial institutions to tomers can benefit.” strong financial and economic cooperation provide credit-monitoring capabilities and The account will feature a MasterCard, between the two countries.” financial literacy resources. direct debit, transfer and overdraft facilities, Commenting on the launch, FSA vice- “People trust their financial institutions as well as a real-time feed of transactions commissioner for international affairs and will turn to them first for their financial and biometric security with facial recogni- Shunsuke Shirakawa said: “We believe that needs, including loans, particularly when tion technology. this framework not only strengthens the they are able to access customised offers Plans are in progress to synchronise the relationship between our two countries, but directly embedded within a digital banking app with digital wallets such as Apple Pay also promotes innovation and technology in platform.”< and Android Pay.< our respective markets.”<

STRATEGY DISTRIBUTION TECHNOLOGY Citi confirms Piazza as Siemens to set up merchant bunq expands service into permanent head of fintech bank in Singapore Germany and Austria

Citigroup has promoted interim fintech Siemens Bank, the financing arm of Ger- Dutch mobile banking startup bunq has head Yolande Piazza to permanent head of many-based technology giant Siemens, expanded into Germany and Austria with the unit. has obtained a licence from the Monetary the launch of its open application program- Piazza had held the role on an interim Authority of Singapore to operate as a mer- ming interface (API). basis since August 2016, when the previous chant bank. The startup said its new API will allow CEO, Heather Cox, left the firm for a role The new office will enable the lender to developers to integrate bunq’s real-time pay- with USAA. Piazza has been working with provide project and structured finance lend- ments system into their own apps. Citi for 30 years and has held numerous ing for businesses and governments in Asia Founded by Ali Niknam in 2013, the technology leadership roles. and Australia, and offer selected finance startup opened for business at the end of In a memorandum, Stephen Bird, CEO of advisory services for Siemens group compa- 2015. Operating under a Dutch banking Citi’s global consumer bank, praised Piazza’s nies in the region. licence, the company enables clients to send contributions to the business since taking over In 2016, Siemens Bank financed projects money requests, open shared accounts, and as interim CEO. with assets totalling €26bn ($28bn), includ- pay bills. Bird said: “Under her leadership, we suc- ing more than €3bn in Asia and Australia. bunq CEO Ali Niknam said: “We are the cessfully launched a new set of features for CEO Roland Chalons-Browne said: “The bank to enrich your life with all kinds of US retail bank clients that make us the first decision to open a branch in Singapore was a unique applications. Daily routines become global bank to integrate banking and wealth logical step in expanding our local footprint smarter and more fun as we’re offering short management on mobile. in Asia. We aim to deeply establish ourselves cuts for existing services. “Client feedback is terrific, colleagues in the local project financing market at an “Think of it like WhatsApp. That relatively have a powerful platform for engagement, early stage to make ourselves indispensable simple concept has simplified the way we re-engineered processes and are reducing in the space.” communicate. We believe that everybody costs and improving speed, all of which has Anton Conradie has been named general should be able to enjoy bunq. Launching our allowed the team to establish itself as a trust- manager of the new branch, while Hugo app in Germany and Austria brings us one ed partner with businesses.”< Teixeira will be deputy general manager. < step closer to that dream.”<

18 y April 2017 www.retailbankerinternational.com

RBI 736.indd 18 19/04/2017 17:04:11 Retail Banker International NEWS: DIGEST

M&A DISTRIBUTION DISTRIBUTION Misys to merge with D+H in RBS's Ulster Bank takes axe to Trade union warns of layoffs $2.2bn collaboration Irish branch network over Lloyds' outsourcing deal

Private equity firm Vista Equity Partners Lloyds Trade Union (LTU) has expressed has agreed to acquire D+H, a Canada-based concerns over mass layoffs with the £1.3bn provider of financial software solutions. ($1.6bn) outsourcing deal that Lloyds Bank- Vista intends to merge D+H with UK soft- ing Group is likely to sign with IBM. ware company Misys, which it acquired for The union, which was derecognised by £1.27bn ($2bn) in 2012. the bank in 2015, said the bank is looking The merger will create a fintech firm with to save £760m a year through this contract, $2.2bn in revenue, around 10,000 employ- which will see the movement of nearly 2,000 ees, and more than 9,000 customers in 130 IT jobs to IBM. countries, including 48 of the top 50 Banks, In a newsletter to its 35,000 members, Vista said. LTU expressed fears that over 1,961 staff D+H CEO Gerrard Schmid commented: outsourced to IBM would ultimately be laid “By combining D+H with Misys Vista we off after four years. will be creating a global leader in financial LTU said that 1,961 staff “will be trans- technology. Royal Bank of Scotland (RBS)’s Ireland sub- ferred to IBM, including permanent staff, “D+H adds depth in North America and sidiary Ulster Bank is to axe one in seven of contractors, third parties, and offshore sup- leadership qualities in payments and lending, its branches in Northern Ireland. pliers. However, after four years, only 193 while Misys has a strong market position in Nine outlets will close in the fourth quar- of the staff transferred to IBM will be still Europe, the Middle East, Africa and Asia as ter, reducing Ulster’s branch network in working on the LBG contract.” well as leadership capabilities in banking, Northern of Ireland from 64 units to 55. Citing a presentation by Lloyds CIO capital markets, investment management Ulster Bank’s MD of personal banking Morteza Mahjour, the union said the major- and risk solutions.” in Northern Ireland, Sean Murphy, said: ity of employees from the bank’s data cen- Misys CEO Nadeem Syed said: “By com- “Banking has changed radically. More of our tres in West Yorkshire and Edinburgh will ing together, we have the opportunity to cre- customers are using digital technology and be transferred to IBM. ate a global fintech powerhouse, positioning fewer are using our branch network. The outsourcing discussion, which was us to lead the corporate banking software “Closing a branch is never an easy deci- reportedly initiated in January this year, was space, accelerate our cloud-based offerings, sion and one we do not take lightly. Recog- delayed as many staff expressed their con- and expand our footprint in North America, nising that customers expect different ser- cerns over layoffs and cybersecurity. a market we’ve been eager to penetrate.” vices from their bank, we continue to invest “One of the reasons the deal is being Vista Equity Partners co-founder and in a range of channels to improve access delayed is the mounting internal criticism of president Brian Sheth said: “D+H is an out- in a sustainable way, such as our Bank on the bank’s proposals from senior managers standing company with impressive talent Wheels, 24/7 telephone banking and our and head of functions in IT concerned that and deep experience providing technology services available through the Post Office.” critical systems which underpin the bank’s solutions to financial institutions worldwide. In 2010, Ulster Bank operated over 140 major payment, treasury trading, settlement Together, Misys and D+H have the promise branches in Northern Ireland. RBS ended and digital services are being outsourced to to shape and lead the future of financial soft- 2016 with 174 Ulster branded branches a third party to eventually be run offshore,” ware.” in Ireland – 110 in the Republic and 64 in the LTU newsletter added. The combined entity will be privately held Northern Ireland. LTU expects the agreement to be following the completion of the transaction Up to 30 of the Ulster-branded branches announced by the end of April, although the at the end of the third calendar quarter of in the Republic are reportedly set to close bank is yet to reveal further details on the 2017.< over the next 12 months.< developments. <

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www.retailbankerinternational.com April 2017 y 19

RBI 736.indd 19 19/04/2017 17:04:19 GUEST COMMENT: TOLA Retail Banker International

PSD2 – a catalyst for Pay by Mobile PSD2 marks a revolutionary development and will have a far-reaching impact on digital commerce. The integration of third-party providers into the Finance Conduct Authority (FCA)’s regulatory framework will provoke new levels of transparency and security. Simon Pepper, head of product at Tola, writes

he last few years have brought an provide the basis for extending the reach of fy the FCA that they are benefiting from the explosion in payment innovation, financial amenities. exclusion and detail how a €300 consumer with each development designed to In these markets, the mobile phone spending limit – across all services, includ- T make it quicker and easier to make a has naturally taken centre ing voice, SMS, digital content – is to be payment wherever you are and with which- stage for online purchas- managed. ever method is most convenient. Increasingly, ing. The mobile-centric It is a complex task, and to this involves the mobile phone. flow greatly improves avoid a breach networks may Deloitte’s 2016 UK Mobile Consumer sur- the customer experi- need to implement a ‘hard vey reveals that as of mid-2016, four out of ence and allows con- stop’ when the limit is reached. five UK adults have a smartphone – equiva- sumers to complete a The type of content or service lent to 37m people. Perhaps a more reveal- transaction without and the price per service are ing statistic is that one in three adults, and involving a tradition- reasonably easy to control almost half of 18–24-year-olds, check their al banking provider, through contractual arrange- phone in the middle of the night. as no credit or debit ments between the telecom oper- This same trend is reflected in more recent card details are required. ator and their intermediaries, but statistics from programmer Kevin Holesh, the overall consumer spend on third- who wrote an app called Moment to track A catalyst for change party products is not. how long a user is interacting with a screen. Of course, we’re looking at a very different Where an individual subscriber spends For 88%, it was more than an hour a day – market in the UK, with a well-established more than €300 in any month, it may push with the average being three hours. banking and card infrastructure and a the operator into a technical breach of the Little wonder then, that the phone is tak- high level of financial inclusion. Demand payment services regulation if they are not ing centre stage as a payment device. With for mobile payment technology is growing registered as a payment service provider. Android Pay joining Apple Pay as an option rapidly, with businesses also recognising the for UK consumers last year, recent figures importance of delivering quick and seamless Digital dilemma from WorldPay show that £288m was spent payment capabilities to improve mobile com- Under PSD1, digital service and content pro- on mobile contactless payments in 2016, rep- merce and enhance the overall experience. viders were able to operate under this exemp- resenting a staggering year-on-year growth The introduction of PSD2 will provide tion; this will change from January 2018. rate of 247%. new clarity on use of mobile phone accounts Service providers looking to use, or contin- Consumers have come to expect one-tap to make purchases against your bill – Pay ue to use, a Pay by Mobile offering will need or one-click ease when making a payment – by Mobile. The regulation will legitimise to be careful that the intermediary they are they expect it to be quick, and they expect to and improve security around this payment working with has an e-money licence. In this be offered a range of options on how to pay. mechanism, regulating it in the same way as payment mechanism, the intermediary sits in These expectations follow through to the credit cards. However, this will bring signifi- the value chain between the MNO and the purchase of goods or services online. cant restrictions on the distribution of funds consumer, handling mobile-based payments The fifth annual MasterCard Digital Pay- through the value chain. To ensure maxi- to ensure that all transactions are correctly ments Study, released in February 2017, mum protection for merchants and consum- regulated both by the FCA and under the reveals that consumers are showing an ers, any party providing a payment service current watching brief of the Phone-paid increasing interest in the application of new to a consumer or other entity will need to be Service Authority. technologies to make shopping faster, easier licensed as a Payment Service Provider. At the same time, Pay by Mobile provides and more secure. There are a few notable exceptions and consumers with real-time payment authenti- exclusions within this. One relates to tele- cation and authorisation during the payment Mobile overseas communications providers, which provide a process, and complete transparency during In Africa, 2.5bn people are unbanked and payment service to their customers alongside and immediately after a purchase. rely on cash or informal financial services their core services. This trend is gathering PSD2 opens the gate for innovative new which are typically unsafe, inconvenient and pace, as mobile network operators (MNOs) payment services – and mobile is poised to expensive. see the success their counterparts have had in take centre stage. More traditional banking infrastructures the payments space in Africa, and have start- Pay by Mobile sits comfortably within this struggle to make the business model work to ed to find ways to monetise billing relation- new landscape. The model brings value to all serve low-income customers, particularly in ships outside their core business offerings. parties in the ecosystem – merchant, MNO rural areas. However, over a billion of these These operators do not need to register as and consumer – to drive payments that are people have access to a mobile, which could payment providers, although they must noti- fit for a digital world.<

20 y April 2017 www.retailbankerinternational.com

RBI 736.indd 20 19/04/2017 17:04:20 Retail Banking Conference & Awards: London 2017 11th May 2017 • Waldorf Hilton, London

Retail Banking: London 2017 brings together high-street banks, Why Attend? retailers, new market entrants, financial professionals and industry • Hear from key senior industry thought leaders via informative and disruptors in an active discussion of the key issues facing the industry: inspiring keynote sessions • How is the Internet of Things (IOT) driving industry change? • Network with speakers, participants, partners and share best practise • Artificial Intelligence - friend or foe? with your peers • Generation Y Banking Solutions • Discover the latest key industry trends and discuss practical solutions to the most pressing industry questions • Challenger Banks disrupting the landscape • Celebrate at our black tie awards dinner recognising those at the top • Cybercrime, Identity Theft and the DarkWeb of their game • The Future of Payments

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