EMEA Digital Banking Maturity Study

EMEA Digital Banking Maturity 2018 How to become a Digital Champion and why only few succeed? Digital banking 2011 2016 has become mainstream 1 Occurrence 55 Occurrences

Average occurrence of the word “digital” in annual reports of the 20 biggest European banks

Digital champions offer a wide range of functionalities relevant for customers and a compelling User Experience

…a wide range of functionalities… 3rd edition of proprietary Deloitte benchmarking framework of digital banking functionalities used in “mystery shopper” approach on real current accounts Functionality …relevant for customers… score Customer research1 focused on identifying the most important banking DBMaturity scoring activities and preferred channel (branch, An exhaustive overview of digital internet, mobile) for each activity channels maturity focused on functionalities and customer …with a compelling UX preferences. Supplementing analysis leveraging User Supporting analysis to understand what Experience Questionnaire2 and fulfilled UX score banking customers are thinking about by each banks’ core customers3 their mobile banking app UX.

1. Customer research (CAWI) covered 8 274 respondents from 28 out of 38 benchmarked markets. 2. M. Schrepp, A. Hinderks, J. Thomaschewski, www.ueq-online.org, used upon a permission of the authors. 4 | Copyright © 2018 Deloitte Development LLC. All rights reserved. 3. Customers who declared the examined bank is their main relation bank. We have identified 826 functionalities covering entire digital Customer Journey

…a wide range of functionalities…

28 31 40 396 322 9

Information Account Customer Day-to-day Expand End gathering opening onboarding banking relationship relationship Access to information on Assessment of account Guidance of customer in Availability of spectrum of Cross-sell of the Account closing process the products overview and opening experience, the first steps of everyday banking additional products and assessment including pricing dedicated to including available onboarding process and functionalities facilitating services, such as available channels, specific groups and needs channels and identity platform accessibility. managing the account and overdrafts, loans, saving retention offers and from various sources, verification methods. making transfers. accounts, term deposits, others. including public websites investment funds, and social media. insurance and others. 826 functionalities

Research1 of more than 8 000 EMEA banking clients provided us insights on customer preferences regarding 26 activities mapped across Customer Journey and 3 banking channels. Such approach enabled us to not only define importance of Internet (56%) vs. mobile (46%) channel on EMEA level, but also prepare country-specific weights.

How often are you 26 performing following activities banking activities? Information Account Customer Day-to-day Expand End gathering opening onboarding banking relationship relationship

Which of the channels is/would be your preferred 3 choice for each of the channels following banking activities? Branch Banking via Banking via PC/laptop smartphone

1. Customer research (CAWI) covered 8 274 respondents from 28 out of 38 benchmarked markets. 6 | Copyright © 2018 Deloitte Development LLC. All rights reserved. Assessed 826 banks Size matters. 10 Functionalities Assessed benchmarked 238 FinTechs REAL current accounts investigated thoroughly by Deloitte proprietary framework based on customer research.

REAL insights, without vague truisms.

Covered Customer markets journey 136 steps Customers surveyed 38 Mystery shopper 6 researchers Digital +8k channels 3

Digital Digital Digital Digital champions smart followers adopters latecomers

PL RU ES CZ FI FR AT BE BG HR DK EE IS IE IL

CH TR NO ZA DE HU IT LT LU NL JO KW LB LV

QA RO RS SK SE UK SA SI AE

Note: To achieve comparable data, country averages are based on the results of the top 5 biggest banks in given market in terms of assets. Countries within the 4 categories are in alphabetical order – the position of the flag within the group does not imply the score against other countries from the same group.

9 | Copyright © 2018 Deloitte Development LLC. All rights reserved. 100% Digital champions IS Digital smart followers NO Internet banking DK Digital adopters NL FI usage is highly Digital latecomers EE SE 75% correlated with LU CH BE UK internet access, LV FR IE but it doesn’t LT AT DE 50% IL CZ SK explain digital ES RU PL maturity HR SI HU

Internet banking usage banking Internet IT 25%

TR RS

BG RO 0% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Internet access

CZ NO ZA FI Market pressure FR on the banking sector BG AT SK Analysis of results revealed that market pressure is a key driver of Digital Banking NL SE IT DK Maturity: UK EE • Customer pressure – expectations RS regarding level of service which should be BankingDigital Maturity available in digital channels HR LT LU DE BE • Competitor pressure – digital “arms race” RO HU IS SI ignited by a number of banks which LV decided to leverage their digital channels IE as key competitive advantage IL Low Low Market pressure High on the banking sector 12 | Copyright © 2018 Deloitte Development LLC. All rights reserved. PSD2 and High

FinTechs will AT BG SK CZ FI FR increase market ZA NO PL RU pressure ES CH TR A A A Foreign Digital champions as attackers

Digital champions will compete for BE HR HU highly demanding clients fueled by implementation of PSD2 DK EE DE B Digital BankingDigital Maturity IE IL IT B FinTechs as challengers of IS LU NL status quo LV LT RO

Banking sectors which will not live up SE UK to market pressure will face RS SI competition not only from other countries, but also FinTechs Low Low Market pressure High on the banking sector 13 | Copyright © 2018 Deloitte Development LLC. All rights reserved. FinTechs challenge incumbents as high entry barriers dropped considerably

Total Number of offered Core products1 in banking products mobile channel +11 p.p.

36% -15 p.p. 14 27% 25%

5 12%

FinTechs avg. Incumbents avg. FinTechs avg. Incumbents avg. FinTechs avg. Incumbents avg.

If we look at total score, on average …as majority of FinTechs still offer only …yet situation looks completely different FinTechs are benchmarked lower than selected banking products, which is not if we focus on core products in mobile incumbents… satisfying more complex customer channel, where FinTechs shine. needs…

15 | Copyright © 2018 Deloitte Development LLC. All rights reserved. 1.Functionalities related to current account and debit card. Cooperation with partners enables FinTechs to expand product portfolio with speed not seen before

Feb 2016 May 2017 Dec 2017 International transfers Term Consumer Jun 2017 TransferWise Jul 2016 deposits credits WeltSparen Younited Credit Investment funds Insurance N26 Dimensional Fund Saving Clark Advisors accounts Raisin.

Travel Mobile insurance insurance Allianz Thomas Cook Personal loans Pensions Revolut Oct 2017 Jan 2018 Lending Works PensionBee

Mar 2017 May 2017

Digitalization Open Banking Beyond Banking

Approach Transformation of traditional Platform-based business Platform-based business banking products and services approach where data, processes, approach where multiple from brick-and-mortar into and business functionalities are services are provided to internet and mobile. The made available within an customers in an integrated and services in most of the cases ecosystem of customers, third- coherent suite through an come from banks with limited party developers, FinTech ecosystem of different service presence of strategic startups, or partners. The services providers. The services provided partnerships with external provided are financial, and may can be from any type (e.g. companies. Banks which are only come from banks as well as mobility, security, delivery, home focusing on this step try to from third parties. security), and banks can maintain status quo: old participate by providing niche banking world in new channels. and tailored financial services that consistently integrate the suite of services. 826 functionalities 695 110 21

18 | Copyright © 2018 Deloitte Development LLC. All rights reserved. High Focused on Open and Beyond banking (1%) Focused on digital supremacy (10%) Yet digital A few banks which differentiate themselves from the Leaders trying to future-proof their strong position in champions already mainstream by focusing on Open/Beyond banking Digitalization by expansion to Open/Beyond banking achieved strong position not only in Digitalization, but also Open and Not focused on digital (37%) Focused on Digitalization (52%) Basic digital functionalities fulfilling only simplest Digital offering reaching plateau phase as most of Beyond banking customer needs related to core banking products banking services are already transferred to digital

Digital champions

Digital smart followers Open and Beyond banking functionalities Digital adopters Digital latecomers Bank’s score Low Low Digitalization of traditional banking services High

Deloitte “bank of the future” model

BEYOND Banking & Services Exponential Platform What role do banks want to play BANKING Provider 1 beyond their traditional value Tomorrow chain/core business?

OPEN BANKING Banking Platform Banking Provider services]

[scope of products &[scope 2 What role do banks want to play

CURRENT in the emerging ecosystems? BANKING Banking Provider

CONNECTED ECONOMY Today’s Bank Today products (very limited cases) & serv.

PLATFORM OWNED BY OWN PLATFORM OTHERS CONNECTED CUSTOMER [control of client relations, distribution channels, ecosystems]

Deloitte “bank of the future” model

Digital latecomers BEYOND Banking & Services Exponential Platform BANKING Provider 1 Digital latecomers will need to move from their comfort zone of current banking status quo and become banking platforms if they do not want to stay behind more digitally mature incumbents and OPEN FinTechs. BANKING Banking Platform Banking Provider services]

2 However, given the high investment needs necessary [scope of products &[scope 1 2 for the development of banking platforms, some CURRENT players may decide to focus their business model on BANKING Banking Provider

CONNECTED ECONOMY Today’s Bank specific products and services and in consequence products (very limited cases) & serv. they will become a banking provider.

PLATFORM OWNED BY OWN PLATFORM OTHERS CONNECTED CUSTOMER [control of client relations, distribution channels, ecosystems]

Deloitte “bank of the future” model

Digital champions BEYOND Banking & Services BANKING Exponential Platform 2 Provider 1 Digital champions should leverage their current strong position to expand Beyond Banking and develop their own exponential platform before other 1 incumbents and FinTechs will try to fulfil this space. OPEN BANKING Banking Platform Banking Provider services] 2 To do so, they will need to work closely with financial and non-financial services providers as level of [scope of products &[scope complexity of this strategic movement will require CURRENT deep integration with external partners. BANKING Banking Provider

CONNECTED ECONOMY Today’s Bank products (very limited cases) & serv.

PLATFORM OWNED BY OWN PLATFORM OTHERS CONNECTED CUSTOMER [control of client relations, distribution channels, ecosystems]

Deloitte “bank of the future” model

FinTechs BEYOND Banking & Services Exponential Platform BANKING Provider 1 FinTechs will need to face pressure from two sides: 1 • to not stay behind digital champions, they will need 1 to develop further in the direction of exponential platforms, OPEN Banking Platform 2 Banking Provider BANKING 2 • to meet customer demand for more complex services] 2 banking products, they will need to expand their services in area of traditional banking services. [scope of products &[scope

CURRENT BANKING Banking Provider Collaboration with incumbents and other specialized CONNECTED ECONOMY Today’s Bank (very limited cases) products FinTechs is a critical success factor to face both & serv. challenges. Examples of N26, Revolut and others are showing that FinTechs have such capabilities, PLATFORM OWNED BY OWN PLATFORM OTHERS however they will need to work hard to maintain this flexibility with a growing scale of the business – an CONNECTED CUSTOMER [control of client relations, issue which was a stumbling block for digital maturity distribution channels, ecosystems] of many incumbents.

Deloitte Digital Banking Maturity objectively FinTechs challenge incumbents as high entry 1 distinguishes Digital champions from laggards. 4 barriers dropped considerably. To achieve this, we conducted a comprehensive FinTechs digital maturity is being curbed by limited offer of benchmarking of functionalities and customer preferences in banking services, but cooperation with partners enables them 248 financial institutions from 38 EMEA markets. to expand product portfolio with speed not seen before.

EMEA is highly diversified from point of view Open and Beyond banking will decide who will 2 of digital maturity. 5 be future Digital champion. We can distinguish four groups of banks: digital champions, Vast majority of identified functionalities are around smart followers, adopters and latecomers. Internet banking digitalization of traditional banking products, yet digital penetration is highly correlated with internet access, but it champions already achieved strong position in Open and doesn’t explain digital maturity. Beyond banking.

Market pressure from customers and Incumbents and FinTechs need to be ready for 3 competitors created digital champions. 6 connected economy and connected customer. In the nearest future, PSD2 and FinTechs will increase market Available strategic options for digital laggards, champions and pressure which will create new opportunities to digital FinTechs depend on their current position and aspirations to champions. become a platform.

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Olivier de Groote Grzegorz Cimochowski Daniel A. Majewski Leader of EMEA FSI Digital Leader of CE FSI Strategy Manager at CE FSI Strategy Consulting Consulting

[email protected] [email protected] [email protected]

Adriatics – Croatia & Slovenia Austria Baltics – Estonia, Latvia & Lithuania Mitja Kumar Werner Kolarik Roberts Stugis Partner Partner Partner [email protected] [email protected] [email protected]

Rado Bekes Beate Edl Antons Ponomarjovs Manager Manager Manager [email protected] [email protected] [email protected]

Belgium Bulgaria Czech Republic Cédric Deleuze Sylvia Peneva Diana Rádl Rogerová Štěpán Húsek Partner Partner Partner Partner [email protected] [email protected] [email protected] [email protected]

Emanuel Nuyts Dimitar Popov Pavel Šiška Director Senior Manager Partner [email protected] [email protected] [email protected]

France Germany Hungary Michel De La Belliere Julien Galabert Juergen Lademann Corin Targan Balazs Merth Partner Senior Manager Partner Manager Partner [email protected] jgalabert@deloitt|e.fr [email protected] [email protected] [email protected]

Patrice De Villeroy Mioara Petre Andras Fulop Partner Senior Manager Partner [email protected] [email protected] [email protected]

27 | Copyright © 2018 Deloitte Development LLC. All rights reserved. Ireland Israel Italy David Conway Rani Argov Gianluca Loparco Elisa Andreatta Partner Partner Partner Manager [email protected] [email protected] [email protected] [email protected]

Anthony Day Tomer Grinapell Giovanni Fontanini Director Consultant Director [email protected] [email protected] [email protected]

Luxembourg Middle East – Kingdom of Saudi Arabia, Kuwait, Netherlands Lebanon, Qatar, United Arab Emirates & Jordan Pascal Martino Khaled Hilmi Robert Collignon Partner Partner Director [email protected] [email protected] [email protected]

Xavier Turquin Arzoo Ahmed James Ransome Senior Manager Senior Manager Senior Manager [email protected] [email protected] [email protected]

Nordics – Denmark, Finland, Iceland, Norway & Sweden Poland Romania Kirsti Merethe Tranby Kasper Loke Grzegorz Cimochowski Dimitrios Goranitis Partner Consultant Partner Partner [email protected] [email protected] [email protected] [email protected]

Kathrine Laerke Sondergaard Daniel Majewski Dinu-Mihail Bumbacea Senior Manager Manager Partner [email protected] [email protected] [email protected]

28 | Copyright © 2018 Deloitte Development LLC. All rights reserved. Russia Serbia Slovakia Sergei Neklyudov Pavel Aharodny Negica Zekic Peter Longauer Tomas Vrsansky Partner Senior Senior Manager Partner Senior Manager [email protected] [email protected] [email protected] [email protected] [email protected]

Ilya Etko Marko Nikolic Michal Kopanic Partner Manager Partner [email protected] [email protected] [email protected]

South Africa Spain Switzerland Olivier Grandjean Gerard Sanz Marius Virmond Senior Manager Partner Director [email protected] [email protected] [email protected]

Andre Liebenberg Sergio Peña Manager Consultant [email protected] [email protected]

Turkey United Kingdom Hasan Kilic Jonathan Gray Angus Heslop Partner Partner Manager [email protected] [email protected] [email protected]

Osman Aytaman Michael Robinson Senior Manager Partner [email protected] [email protected]

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