www.retailbankerinternational.com Issue 761 / may 2019

TOWERING OVER THE COMPETITION

ING TAKES BEST GLOBAL RETAIL BANK AT THE 34TH ANNUAL RBI AWARDS IN LONDON INTERVIEW FEATURE INNOVATION

A closer look at digital-only Canada’s new digital-only Forter on navigating challenger Pepper with its motusbank focuses on new regulations while CEO, Michal Kissos Hertzog high-quality service maintaining security

RBI 761 May 2019.indd 1 22/05/2019 12:36:02 contents this month

COVER STORY NEWS 10 05 / EDITOR’S LETTER 22 / DIGEST • UK payday loan complaints rocket to five-year high • OCBC rolls out instant approval for retail banking products • Brits wary of new tech, despite high demand • Four new virtual banking licences granted in Hong Kong • CIBC unveils new SME banking platform • UK BCR: Nationwide, Investec, Co-op Bank bag £80m • CYBG network inches down by another 17 branches • BBVA abandons plans for Atom Bank takeover

RBI AWARDS

Editor: Group Editorial Director: Head of Subscriptions: Douglas Blakey Ana Gyorkos Alex Aubrey +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Senior Reporter: Sub-editor: Director of Events: Patrick Brusnahan Nick Midgley Ray Giddings +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]

Junior Reporter: Publishing Assistant: Briony Richter Asena Değirmenci +44 (0)20 7406 6701 +44 (0)20 7406 6592 [email protected] [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected] Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0261-1740 25 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online access to Retail Banker International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London Office: John Carpenter House, John Carpenter Street, London, EC4Y 0AN Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow RBI on twitter @retailbanker

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RBI 761 May 2019.indd 2 22/05/2019 12:36:07 contents may 2019

10 18 INNOVATION FEATURES INDUSTRY INSIGHT 06 / FORTER 07 / MOTUSBANK 20 / FINASTRA The financial industry is undergoing Wholly owned by Canada’s third-largest credit We are witnessing a once-in-a-generation unprecedented changes. Focusing on how union, motusbank offers attractive savings transformation in the financial services to navigate through the new regulations has rates, low-rate loans and mortgages, fee-free industry, as banks face up to competing in become a challenge, especially while keeping banking and a focus on high-quality digital the digital age. Eli Rosner, chief product and security a priority. Briony Richter reports customer service. Robin Arnfield reports technology officer at Finastra, writes 18 / PEPPER 26 / COLLINSON 06 Digital-only Pepper has quickly gained ground Personal relationships are a key ingredient in its home market of Israel, as an arm of Bank of loyalty. However, research has found that Leumi but maintaining a very separate brand just one in three consumers feel their bank and operation. Patrick Brusnahan discusses treats them as an individual and not just an strategy with CEO Michal Kissos Hertzog anonymous customer. Steve Grout writes RBI GLOBAL AWARDS 20 10 / WINNERS Judging panel chair Douglas Blakey reports from the 34th annual Retail Banker International Global Awards. In all, 21 financial institutions were recognised following receipt of a record number of submissions

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0519_Timetric_MF_Ad.inddMF January 170.indd 4 1 11/12/201807/12/2018 16:37:33 10:10 editor’s letter

Metro Bank share price rollercoaster calmed by successful placement Douglas Blakey, Editor

etro Bank’s share price is at last settling down As reported in this issue, Metro is a deserved winner at RBI’s after a turbulent four months. annual global banking awards for best branch strategy. It also M Metro Bank has raised £375m ($477m) from achieved a notable double success in February, ranking top in shareholders amid high demand. Initially it had planned to raise the Competition and Market Authority’s service quality survey £350m; indeed, there were orders for the new stock of more among retail current account holders for overall service and than double the amount raised. service in branches. For fans of colourful founder Vernon Hill, such as this writer, Notwithstanding the hugely positive coverage resulting it has been a painful period to cover Metro. from its CMA double poll success, the Metro Bank share The trouble all started back on 23 January. An accounting price continued to tumble. No matter that on 22 February error and profits warning resulted in a drop in the Metro Bank Metro Bank was awarded £120m – the largest share – of the shares price from £22.00 to £13.40. In one day, it dropped Capability and Innovation fund, the £775m scheme funded by 40%. Press comment was scathing: I lost count of the number RBS dating back to its 2008 government bailout. The Metro of hostile articles in the tabloid and broadsheet press, including Bank share price again fell by 40% in the last week of February, the Financial Times. from £15.40 to £9.55. Metro Bank’s risk-weighted assets increased to £8.9bn, At this point, some of the press comment bordered on the about £900m ahead of analyst forecasts. As respected banking silly – and became markedly personal, with one headline writer analyst Ian Gordon of Investec wrote the other day: “Metro tastelessly opting for “Over the Hill”. Bank is well capitalised. It has an exemplary credit history, is By 13 May, the Metro Bank share price hit a new low of moderately profitable and is extremely liquid.” £4.75. The IPO price, by the by, was £20 – so pretty dismal. The bank was at pains to report it had not encountered any Now, having raised the fresh capital, the share price as RBI deterioration in the performance of its loans. Underlying profit goes to press is touching £7. As Ian Gordon fairly notes, Metro before tax for fiscal 2018 duly came in up by more than 130% does continue to “face real challenges around profitability on the prior year. It reported profits of £50m, instead of the and returns”. The bank’s targets of low-double-digit return on £59m forecast by analysts. equity by 2023 may be out of reach. As I have argued many times, Metro Bank has grown Metro will have lessons to learn from this very painful deposits at an exceptional pace. Since its launch, it has grown four-month period. There will be a small number of hostile deposits to £15bn, so funding has not been an issue. shareholders at the upcoming AGM; some will vote against the Perhaps it is terribly old-fashioned to argue that deposits chair and some of his board colleagues. The bank was arguably growth is crucial. So take the average cost of customer too slow to raise the fresh capital. It will also need to show deposits. By that metric, as Metro matured, its average funding suitable remorse when the FCA and PRA end their respective costs have declined, falling below the UK base rate in 2018. enquiries into the accounting blunder. It was, however, a shock to report that Metro Bank suffered I hope that there remains no question of the chair resigning modest deposit/outflows in late January and early February. at this stage. He has earned the right to leave at a time of I have often compared and contrasted the fortunes of Metro his choosing, perhaps next year when it ends its existing Bank and Monzo. Both are UK banking success stories since relationship with architects InterArch. I dare say that Legal and their respective launches. Metro and Monzo customer numbers General and Royal London Asset Management will do their are comparable; both banks enjoy phenomenally high levels of worst at the AGM; I also do not doubt that they will be in a customer advocacy and class-leading net promoter scores. minority. Only one of the two banks is, however, reporting revenue, Meantime, at current valuations, Monzo is worth more and only one has a £15bn lending book. It will be interesting to than three times the value of Metro Bank. And if you agree see the latest financials from Monzo – its last published results with those respective valuations, we will just need to agree to cover the period to end February 2018. disagree. <

Get in touch with the editor at: [email protected]

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RBI 761 May 2019.indd 5 22/05/2019 12:36:11 innovation | forter

our solution will then detect that trend in all other interactions. “At Forter, we ensure that there are tackling fraud head on: absolutely no cracks. We are offering a very broad single platform that ensures that we monitor all the activity between the consumers and retailers.” forter launches STAYING COMPLIANT

From 14 September 2019, PSD2 will merchant solution require merchants to authenticate all online transactions with the European Economic Area using Strong Customer Authentication (SCA). The financial industry is undergoing unprecedented The Forter PSD2 solution for merchants changes. Focusing on how to navigate through the new also provides SCA when authentication is regulations has become a challenge, especially while required. It will also immediately block any suspicious activity before a transaction is keeping security a priority. Briony Richter reports processed. Furthermore, under SCA, merchants will have to add additional friction into orter’s new payment processor- the purchasing process. This will essentially agnostic PSD2 solution allows result in increased abandonment rates Fmerchants across Europe to and potentially deliver a poorer customer strategically direct customers to a path that experience. Using the Forter solution will give causes the least friction. retailers the ability to route every transaction As the world becomes more interconnected, in real time, regardless of the processor used, prevention of fraud becomes ever-more while staying fully PSD2-compliant. As an essential for the growth and trust of retailers additional benefit, this will significantly and financial organisations. improve the customer experience, increasing Speaking to RBI, Forter CEO and co- trust and user loyalty. founder Michael Reitblat speaks about the Noting the upcoming deadline, Reitblat solution’s launch, and how it will transform discusses the current state of industry fraud prevention. preparation. “There is a lot of work to do,” “At Forter, we have expanded our solution he says. “It really depends on what types of to cover any type of interaction between the merchant they are and what their strategies digital buyer and the retailer,” he explains. are. It is complicated to comply with on a “One of the biggest damages of online technical level; the last thing you want to do fraud is actually turning away a lot of good Michael Reitblat, Forter is to make it so complicated that companies customers. What Forter is doing is replacing won’t comply. and removing that complexity away from “Our solution offers robustness and retailers, and offering them a simple solution NEW LANDSCAPE complete coverage. We are also best equipped that reviews all online transactions, regardless Forter’s innovative solution streamlines for this challenge, as we have the resources of how they are made.” and simplifies PSD2 compliance to offer both on an engineering and legal front. We Continuing, Reitblat notes: “We make merchants forward-thinking tools to detect understand how to embrace and work with real-time decisions on whether to approve a and prevent fraud. the regulation.” transaction or not and, if necessary, assume In delivering this, Forter increases its Reitblat concludes: “At Forter we provide the liability for any type of fraud that comes brand trust and reach, while merchants a seamless integrated platform that ensures through that.” improve their overall customer experiences our customers, the merchants, are protected Despite the fast pace of growth in online across difference payment service providers. from any type of fraudulent activity. We are retail sales, checkout conversions and cart Real-time assessment of the risk associated actually the first to launch this merchant- abandonment are still huge problems for with each transaction will also allow Forter to focused PSD2 solution that is complete. many retailers across the globe. Forter aims detect any potential fraudulent activity before It solves both compliance issues and the to continually reduce friction and increase it even occurs. merchants’ problems.” acceptance, while keeping levels of fraud “In fraud prevention you have to perform Regulatory trends are spreading across the below those that retailers had experienced to prove the robustness of a solution,” Reitblat world. Kicking off strongly in Europe, other previously; in today’s e-commerce, everyone is notes. “We have a track record of success, regions and continents are following suit and trying to ensure they have the best experience. and because we detect fraud trends early on, evolving uniquely. <

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RBI 761 May 2019.indd 6 22/05/2019 12:36:13 feature | motusbank

motusbank enters canada’s digital-only banking market

Canada has another digital-only full-service banking contender, motusbank, wholly owned by Meridian, Ontario’s largest credit union, and the third-largest in Canada. motusbank is offering attractive rates for savings accounts, low-rate loans and mortgages, fee-free banking and a focus on high-quality digital customer service. Robin Arnfieldreports

sing technology developed by incumbent Canadian banks, Scotiabank and win the elusive prize of becoming a customer’s its parent, motusbank provides TD, both of which have developed digital primary bank. Uend-to-end digital platforms mortgage application processes. In addition, The biggest digital-only banks in Canada for deposit account opening, mortgages, two start-ups, Toronto-based Homewise and are Tangerine, owned by Scotiabank, which unsecured loans, and lines of credit. Montreal-based Nesto, offer digital mortgage has two million customers and was originally Through Meridian, which has C$20.6bn platforms. called ING Direct Canada; and Simplii ($15.3bn) in assets under management and In March, Scotiabank rolled out eHome, Financial, owned by CIBC, which currently 300,000 members, motusbank members have enabling Canadians to apply for a mortgage has 1.8 million customers. access to the Exchange Network, a Canadian completely online and track the application Others include Alterna Bank, owned by no-fee ATM network with 3,700 ATMs status through real-time updates. Scotiabank Alterna Savings and Credit Union, and EQ across Canada. eHome offers customers preferential rates and Bank, which specialises in savings accounts motusbank’s Digital Lending Platform savings of up to C$200 in appraisal fees. In and is owned by Equitable Bank. Simplii was allows members and prospects to apply for January, TD rolled out its digital mortgage founded by CIBC in 2017 following a mutual and receive mortgages, lines of credit and application tool. decision by CIBC and the supermarket loans completely online without paper forms. Canada has a relatively small number of chain Loblaw Companies to end their 20- The bank also offers Friends and Family digital-only banks, and unlike the UK, there year consumer banking joint venture under mortgages, enabling groups of up to four are no new entrants that are not owned by President’s Choice Financial. people to pool their financial resources and existing financial institutions. Also, unlike buy a shared home. UK consumers, Canadians are very loyal BRIGHTSIDE to their banks and credit unions, often DIGITAL LENDING maintaining a primary account with one bank Alberta provincial government-owned for day-to-day purposes and a savings account ATB Financial, originally known as Alberta With its special focus on digital mortgages or mortgage with another that offers better Treasury Board, will launch a digital and loans, motusbank competes with two rates; this makes it hard for new entrants to bank later this year called Brightside. The

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RBI 761 May 2019.indd 7 22/05/2019 12:36:13 feature | motusbank

Meridian is Canada’s third-largest credit union challenger has already started signing up early prepaid cards, and Mogo offers personal choice for a primary bank would be one of adopters. loans and mortgages. However, they are not the big five.” The digital banking market has already allowed, under Canadian banking law, to Christelis says that, apart from the big five, claimed one casualty. In November 2018, market themselves as banks. other FIs that tend to win primary banking Quebec-based co-operative financial group Like its digital-only rivals, motusbank relationships include National Bank of Desjardins said it would wind down Zag offers high interest rates on savings accounts Canada, Desjardins and Laurentian Bank – all Bank, its standalone digital bank. This and attractive rates for loans; however, its based in Quebec – as well as Vancouver-based launched in 2015 and was based on a Western mutuality business model – being owned by a credit union Vancity, and HSBC Canada. Canadian bank bought by Desjardins. credit union rather than shareholders – means Typically, consumers use digital-only “We reviewed our activities in Ontario and it can offer better deals than bank-owned banks as secondary providers because of their in the western and eastern provinces, and competitors. attractive savings rates, Christelis notes. “To decided to concentrate our efforts, resources succeed as a start-up digital-only bank, you and investments on innovation and growth INTRODUCTORY OFFERS need deep pockets,” he adds. “Fortunately for in property and casualty insurance, wealth motusbank, its parent, Meridian, is providing management and payment services,” says For example, motusbank has an introductory its technology platform and capital for its Denis Berthiaume, Desjardins Group’s senior mortgage rate of 3.09% applying to all fixed balance sheet.” executive vice-president and COO. mortgages of one to five years, and a secured “As a result, we determined that an online home equity line of credit at 2.75%. PRODUCT PLANS or direct bank was no longer a strategic fit “The mortgage market can accommodate with our long-term strategy.” many niche players, and having a fully motusbank has a number of products on its end-to-end digital mortgage offer like roadmap, says CEO Dave Baldarelli. “We PREPAID CHALLENGERS motusbank’s is very attractive,” says Christie want to get into wealth management and Christelis, president of Canadian consultancy will offer a hybrid robo-advisor product with In addition to digital-only full-service banks, Technology Strategies International (TSI). access to human advisors,” he notes. Canada also has several general-purpose “motusbank could use its mortgage offer to “This would likely involve a partnership prepaid card issuers such as Mogo and broaden its customer base into other services, with Aviso Wealth, and we would leverage Koho, which are positioning themselves as but it is still unlikely to be a consumer’s top people on our team who are licensed to offer low-cost alternatives to traditional banks choice for primary bank.” wealth management products.” for millennials. Both Koho and Mogo offer Christelis adds: “Research by TSI found Aviso is a wealth management business set financial management tools along with their that, for the majority of Canadians, their first up by Desjardins, the Cumis Group, and a

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RBI 761 May 2019.indd 8 22/05/2019 12:36:17 feature | motusbank

partnership of five provincial credit union launch,” Baldarelli says. “Demographically, “Meridian has a price-matching service centrals in 2018. we’re across the board in terms of our called Price Drop, which was developed with Another area for motusbank to enter is members.” a fintech in Winnipeg, and will be offered to small business banking, Baldarelli says. “I’m motusbank members soon,” says Baldarelli. very interested in the small business segment SEGMENTATION “Price Drop lets you take a photo of your as it is very underserved,” he explains. receipt from a big-box retailer and then it “The big banks are more focused on bigger Baldarelli continues: “Our target member searches for a better price than the one you companies; I think our value proposition will segment is 25-55-year-olds, who are very paid. You then show the resulting information really resonate with small businesses. We will comfortable about banking digitally. It’s very from Price Drop to your retailer to get a either build our small business service in- important not to lose sight of that target discount on your purchase.” house or partner with a fintech.” demographic when you’re doing marketing Once Canada introduces Open Banking, motusbank does not have any branches or launching services. You must ensure the this will be a great benefit to motusbank, of its own, nor does it use mortgage brokers language and tone of your value proposition Baldarelli believes. “Open Banking is or a mobile mortgage sales force. “That are aligned to that target segment.” definitely going to happen here at some could change later on, and I could see Baldarelli says motusbank has a telephone- point,” he adds. “For example, it will us introducing a mobile mortgage sales based member services team. “They are our greatly facilitate account switching, which is force,” says Baldarelli. “Also, I could see secret weapon, as they are available for phone currently not a seamless process in Canada.” us introducing branches eventually, like calls, emails and live chat, and we will soon Open Banking will also facilitate Tangerine has done with its Tangerine café- launch video banking,” he explains. “On the collaboration with fintechs. “Our motusbank style branches in big cities, which are good credit union side, we’ve achieved some of digital platform is our own internal solution, flagships for Tangerine.” the best net promoter scores in the business, and we leverage API technology,” says and we want to achieve the same with Baldarelli. “So we can use APIs to tap into LAUNCH ON THE RADAR motusbank.” relationships with fintechs such as Grow.” motusbank is capitalised by Meridian, As part of the motusbank rollout, the Currently, motusbank does not provide credit which has put cash onto motusbank’s balance company introduced its Money Mover service cards. “A credit card is on our roadmap for sheet to support its mortgage and loan offers. “When you open a motusbank account, all the next six to 12 months,” says Baldarelli. “We want to get that capital provided by you need to do is log into motusbank and “We do offer a credit card on the Meridian Meridian working by getting assets onto then into your existing bank account, and we side, so we have the infrastructure and systems the balance sheet in terms of loans and screen-scrape all the information needed from to offer a credit card to motusbank members, mortgages,” Baldarelli notes. “Loans and that account,” Baldarelli says. but we thought it would be good to have more scale on our membership base before launching a credit card.” We found out that rates and fees are the The reason why Meridian launched motusbank was because it wanted to expand number one reason why people would outside Ontario by taking Meridian’s value proposition to a larger market. “We decided consider shifting to another bank that obtaining a banking licence and setting up a separately branded company was the best way to do that,” says Baldarelli. “motusbank is mortgages are a priority, but we’re bringing in “This enables new members to transfer available nationwide except in Quebec, where members on all of our deposit products. Our funds from their existing bank to motusbank we can accept deposits but not offer loans.” most popular account is our free chequeing via EFT. We also offer remote cheque deposit Baldarelli says Meridian conducted market account, which is a massive success.” and Interac e-Transfers as ways to fund new research that indicated an appetite from Meridian is also keen to collaborate with motusbank accounts.” consumers for a company such as motusbank appropriate fintechs. “Some years ago, Getting people to make motusbank their to grab market share from incumbent banks. fintechs were seen as threats to financial primary bank is the million-dollar question, “We found out that rates and fees are the services incumbents,” says Baldarelli. “But says Baldarelli, adding: “We want to be the number one reason why people would now things have evolved and fintechs are primary relationship and we want to be really consider shifting to another bank,” he says. seen as partners to banks. So we’re looking relevant in the consumer’s life.” “The other reasons are simplicity in the at fintechs to see how we can partner with “We don’t just want to have their mortgage user experience, and being transparent and them to enhance the value we provide to our or line of credit. To become the primary honest with consumers. So, having found out members.” provider of financial services, the number what consumers wanted, we built motusbank one product you need is a chequeing account accordingly.” OPEN BANKING and you need to get the member’s direct In the two months prior to its April launch, payroll paid into their chequeing account,” he motusbank invited consumers to sign up. Meridian and motusbank’s unsecured lending concludes. “We were blown away by the number of pre- platform, which is used to offer loans to the “If you achieve that goal, you’re 90% on launch sign-ups and the number of members two companies’ members, was developed with the way to becoming their primary financial that we got in the first two weeks after our a fintech called Grow in Vancouver. services provider.” <

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RBI 761 May 2019.indd 9 22/05/2019 12:36:17 rbi global awards | winners

ing recognised as global retail bank of the year

Douglas Blakey, chair of the judging panel, reports from the 34th annual Retail Banker International Global Awards, an evening on which ING won Global Retail Bank of the Year. In all, 21 separate financial institutions were recognised following the receipt of a record number of submissions award winners Best Branch Strategy Diversity and Inclusion Award Middle East Retail Bank of the Year Metro Bank Barclays Emirates NBD Best Use of Data Analytics Best Self-Service Strategy Asia-Pacific Retail Bank of the Year Akbank Israel Discount Bank DBS Bank Best Use of Digital Marketing and African Retail Bank of the Year Security Innovation of the Year Standard Chartered UBS Social Media first direct Latin American Retail Bank of the Year Best Bank-Fintech Partnership Product Innovation of the Year Banco Bradesco RBS and Loot Alior Bank European Retail Bank of the Year Best Mobile Banking Strategy Best Loyalty/Rewards Strategy BBVA PKO Bank Polski Royal Bank of Canada Bank Launch of the Year Space, Georgia Best Open Banking Strategy Excellence in Customer-Centricity Starling Bank Intesa Sanpaolo Retail Banker of the Year Oliver Hughes, Tinkoff Bank Best IT Transformation and North American Retail Bank of the Innovation Year Global Retail Bank of the Year Raiffeisen Bank Royal Bank of Canada ING

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RBI 761 May 2019.indd 10 22/05/2019 12:36:18 rbi global awards | winners

global retail bank of the year ING

The accolade of Best Global Retail Bank 2019 at the RBI’s judges also noted ING’s cross-sell ratio rise. To 34th annual RBI Global Awards went to ING. illustrate, the average number of products per primary The judges noted ING’s success in growing primary customer is now almost three, double the rate for non- relationships; specifically, ING is growing primary primary customers. customers at the rate of one million per year. Success also translates into improved net promoter Back in 2014, ING had 8.4 million primary customers. scores. In seven of the 13 retail markets in which ING This is defined as active payment customers with operates, it ranks first by NPS. recurring income and at least one extra active product ING’s digital sales are also charging ahead outside its category. That number grew to 10.4 million in 2016; domestic market in the Netherlands. For example, today it is 12.5 million, and RBI’s Best Global Retail mobile channel sales at ING Spain in 2018 are 34%, Bank 2019 targets 16.5 million by 2022. On current up from 20% in 2016. In consumer lending specifically, form, it is unwise to bet against ING hitting its target. 88% of loans are sold via digital channels in Spain; for Increasing primary customer numbers accelerates investment products, the corresponding figure is an long-term value creation in its retail banking franchise. impressive 67%. Growth in customers and digital traffic translates into In Poland, assisted channel sales are being driven sales, higher revenues and strong financial results. down, from a high 82% in 2016 to only 28% in 2018. ING’s digital innovation is reflected in a successful Mobile sales in Poland are now 17%, from near zero digital model as it engages with customers in a mobile- only two years ago. Notably, ING’s app is now in the first world. top 10 app by penetration among mobile users in the Netherlands. ING m-banking customers in the country Digital sales soar hit 4.3 million in 2018, up by a quarter from 3.4 million By the end of 2018, 26% and rising of ING customers the previous year. were interacting with the bank solely by mobile, and some 90% of all ING customers engage with the bank Successful cost control via one of its digital channels. Excluding regulatory costs, ING’s cost-income ratio At the same time, this is translating most impressively is already below 50% (49.5%). The underlying cost- into digital sales. Annual non-deposit sales per 1,000 income ratio was down from 58.7% in 2014 to 54.8% active customers rose sixfold by the mobile channel in fiscal 2018. between 2016 and 2018. In the same period, annual ING’s financials show retail underlying profit before tax non-deposit sales per 1,000 active customers doubled, growing at a CAGR of 7% during 2014-2018 to €3.5bn and the average number of interactions per ING ($39.7bn). Moreover, ING’s retail banking return on customer per year soared to 198. equity is up from 19% in 2014 to 23% in 2018.

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RBI 761 May 2019.indd 11 22/05/2019 12:36:21 rbi global awards | winners

North American Retail Bank of the Year Royal Bank of Canada In 2018, RBC posted a record C$12.4bn ($9.2bn) in net income – an 8% increase over 2017. The bank again met and exceeded all of its medium-term objectives. It delivered double-digit diluted earnings per share growth of 11%, above a target of 7.5%. It raised its dividend yet again, and returned a further $1.5bn of capital to shareholders through buyback. At the same time, it reduced its cost-income ratio, exceeded its digital banking targets and continued to grow market share. Middle East Retail Bank of the Year Emirates NBD In 2018 Emirates NBD continued to grow its loan And then there is Liv-the UAE’s only digital lifestyle book – up by 6.7% - in a declining market. The bank is banking app. the most profitable consumer banking franchise in the Liv has got off to a flying start. In terms of customer UAE. It continues its digitisation journey with launch of acquisition, it is the fastest-growing bank in the UAE innovative solutions including paperless onboarding of with nearly 250,000 customers. Over 86% of Liv all products. customers are millennials and 90% are new to Emirates Emirates NBD is in the midst of a large-scale NBD. transformation programme, a key element of which One other banking metric is a standout: Liv’s cost- was to transform its architecture, with a budget of income ratio is an impressively low 18%, one-half of AED1bn ($272m). the group ratio. Asia-Pacific Retail Bank of the Year DBS Bank Key to DBS’s innovation is a cultural transformation In terms of data optimisation, AI and machine centred on the customer experience. Its aim is to learning, natural language processing, blockchain and adopt the culture of a tech company, not a bank. ecosystem partnerships, DBS innovation is truly world class. Examples of DBS’ 2018 innovations include its Start- up Xchange programme, which matches DBS and its corporate and SME clients to start-ups with cutting- edge technology solutions. It enables both parties to co-create solutions and address business problem statements in real time. The four core pillars of technology on which the platform focuses are AI, data science, immersive media and the Internet of Things. Since its pilot launch, Startup Xchange has successfully matched 21 start- ups with units in the bank, such as human resources. Meantime, DBS MAX removes the need for physical payment terminals, replacing them with mobile phones. The mobile app, designed for SMEs, enables customers to scan and make payments in real time.

12 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 12 22/05/2019 12:36:24 rbi global awards | winners

African Retail Bank of the Year Standard Chartered Standard Chartered is recognised for its pioneering proportion of retail banking clients that are digitally digital strategy. The bank has already successfully active reached 49.4% in 2018 from only 40% two launched its first retail digital bank in Côte d’Ivoire. years ago. Now the bank is expanding with the second phase of Meantime, the proportion of retail banking income its digital banking roll-out planned to launch in Uganda, generated from more affluent Priority clients rose to Tanzania, Ghana and Kenya. 47% in 2018 from 39% two years ago. Other digital banking highlights in 2018 included Retail banking income was up 4% in fiscal 2018 driven strong growth in digitally active customers. The by 8% growth in Greater China and North Asia. Latin AmericaN Retail Bank of the Year Banco Bradesco The launch of its standalone digital bank, Next, as well One million applications were in the approval phase, as the partnerships that has brought, helped Bradesco and there were 350,000 active clients, growing at the to enjoy another strong year. rate of 40% a month. As of October 2018, there were three million In October 2018, Next had 7.8 million transactions, downloads of the Next iOS and Android apps, of growing by a staggering 80% a month, and the which 94% were by high-income millennials and 86% inactivity rate was 2%, compared to the market were by people new to the bank. average of 24%. European Retail Bank of the Year BBVA BBVA’s financial results represent an excellent 12 Currently, 51% of its customers bank through digital months, not least earnings of €5.32bn ($5.95bn) in the channels, and 27.2 million now regularly use the digital year – a rise of 51.3% year on year in net attributable channel, up from just over 18 million in 2016. profit. Furthermore, mobile customers account for 43% of the Excitingly, more than half of BBVA’s customers are total, and BBVA wants this figure to reach 50% by the digital, thereby exceeding the target set for 2018. end of 2019.

Best Use of Data Analytics Akbank Akbank has successfully renewed its analytics model and designed a new advanced analytics engine. The project, known internally as FIZ – meaning financial intelligence – has transformed sales activities at the bank’s branches with outstanding results. This new engine consists of a new ‘next product to buy’ model, and a simulation layer. Akbank previously used linear models; with this project it started to use machine learning to capture complex customer patterns and relationships that go beyond simple business rules. It processed over 1,200 variables and created over 700 synthetic variables as model input.

www.retailbankerinternational.com | 13

RBI 761 May 2019.indd 13 22/05/2019 12:36:27 rbi global awards | winners

Best Bank-Fintech Partnership RBS and Loot While most incumbent banks continue to play catch- up with the new digital challengers, RBS is launching its own standalone digital bank, dubbed Bó. RBS has also taken a 25% stake in student-focused fintech start-up Loot. The fintech helps students and young people manage their finances, and currently boasts around 200,000 sign-ups. RBS has also teamed up with Tieto to launch a new virtual account platform for SMEs. Best IT Transformation and Innovation Raiffeisen Bank Raiffeisen is recognised for the successful completion The platform is available to all 11,000 employees at of one of European banking’s biggest IT projects. Its 900 separate Raiffeisen sites throughout Switzerland. IT transformation project, in partnership with Avaloq, Having now acquired Avaloq’s 49% stake in previous brings together 253 banks – 246 Raiffeisen banks, six joint venture Arizon Sourcing, Raiffeisen Switzerland branches and the central bank – on one platform. will now develop and operate the platform itself. Diversity and Inclusion Award Barclays Stonewall’s Top Global Employers list celebrates efforts Barclays has been praised as one of the Top Global made by organisations to improve equality for LGBT Employers for LGBT inclusion and was named a Star people around the world. Performer in the Stonewall UK Workplace Equality Building an inclusive culture within the workplace is Index 2017. a journey that requires a functioning network with It was the first to feature a same-sex couple in a clear aims and a continued dialogue so everyone can mainstream television advert, continues to sponsor communicate positively. London Pride and is a worthy winner of the award. Best Use of Digital Marketing and Social Media first direct This category proved to be one of the tightest, with outstanding entries from banks including Maybank and RBC. The winning bank, first direct, enjoyed another strong year in digital marketing and social media. first direct launched social media payments via WhatsApp and Facebook Messenger in 2018, and in a UK first, customers can now use PayKey technology to simply tap a payment icon on a phone keyboard and manage a payment within seconds. With continuous outstanding customer service on multiple platforms, first direct always places highly, if not first, in rankings.

14 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 14 22/05/2019 12:36:33 rbi global awards | winners

Best Branch Strategy Metro Bank Metro Bank continues to buck the trend of UK retail banking with its store expansion strategy – all as part of a successful omnichannel strategy. From four stores in Central London and 9,000 customer accounts at the end of 2010, it now has 66 stores and over 1.6 million accounts. Rather than spend money on marketing and advertising, Metro lets its stores and customers spread the word – with brand awareness in London at 86% and 54% nationwide. And in February 2019, Metro notably achieved a coveted major double success: top spots in the Competition and Market Authority’s service quality survey among retail current holders for overall service and services in branches. Best Mobile Banking Strategy PKO Bank Polski PKO’s IKO mobile app launched in 2013, and was At the end of 2018, the number of active IKO apps comprehensively refreshed in 2018. New features exceeded 3.1 million. In mobile stores Google Play and include push notifications about events, a foreign App Store, clients issued over 300,000 ratings for IKO, exchange office, a multi-currency card, saving and where the average is 4.8 out of 5. re-storing settings from clients’ other IKO apps, and PKO Bank Polski ranks first by market share for mobile invoice scanning. banking in Poland with 25% of the market. In the It also offers contactless payments in the Android, fourth quarter of 2018, IKO users completed over 28 Google Pay and Apple Pay models, and the possibility million mobile transactions. At the end of 2018, almost of paying with BLIK codes on the internet and in 2.8 million clients logged into the bank from a mobile stores, charged to the customer’s credit card. device at least once a month, 23% more than in 2017.

Best Loyalty/Rewards Strategy royal bank of canada For the past 20 years, Royal Bank of Canada has purchase volumes. It is a key part of RBC’s product invested in making RBC Rewards a unique, market- value proposition and brand promise. It has also leading programme. The scheme provides unparalleled allowed the bank to organically grow its credit value to Canadians, and is the country’s largest card portfolio at two to three times the rate of its proprietary rewards programme: in 2018 alone, RBC competitors. Furthermore, it has been the backbone of Rewards delivered over C$1bn ($0.74bn) in value to its its ongoing engagement and retention strategy. members. RBC is the only bank loyalty programme to include key Membership of RBC Rewards now exceeds more than partners such as West Jet, British Airways, American five million Canadians. Unlike traditional coalition Airlines, Cathay Pacific and Hudson’s Bay, so members programmes, RBC owns and controls its programme. have the flexibility to consolidate their points across This, says RBC, gives the bank the freedom to offer its different loyalty programmes. RBC also has a strong customers and partners unparalleled value. relationship with WestJet; in 2018 this helped to RBC Rewards has been core to the bank’s market- deliver over 36% year-on-year growth in purchase leadership position in credit card balances and volume and 70% acquisition via digital channels.

www.retailbankerinternational.com | 15

RBI 761 May 2019.indd 15 22/05/2019 12:36:37 rbi global awards | winners

Bank Launch of the year Space, Georgia Space Digital Bank is the first fully cloud-based For the first time, Georgian customers benefit from banking solution in Georgia. The fintech-inspired a truly end-to-end digital experience with intuitive initiative was taken from concept to launch in just interfaces, simple, real-time processes and features. eight months by TBC Bank, Georgia’s largest banking Space provides customers with the full range of retail group, and went live last May. banking services including loans, saving products and Structured as an autonomous business, Space provides payment cards. customers with a full range of retail banking services The business was developed with the support of including loans, saving products and payment cards. software-as-a-service engine Mambu. Best Self-Service Strategy Israel Discount Bank Israel Discount Bank was recognised by the awards This unique chatbot was the first AI-based banking bot judges for the successful implementation of its ever launched in Israel. Since launch, the service has innovative Chat with a Banker service, which was been attracting, on average, over 25,000 new users launched in February 2018. per month. Best Open Banking Strategy Starling Bank Starling has a fervour for embracing Open Banking. It has its own set of open APIs that are available for anyone to use through its developer portal, while its marketplace focuses on customer-centricity and strong partnerships. With customer consent granted, partners and outside players can use Starling data to enhance their products and services. Through the app, customers can easily view all their financial information and access services that suit their individual needs. The number of partnerships Starling has gained Growth Street partnered with Starling last July, through Open Banking in 2019 is impressive. It becoming the first SME finance provider to go active collaborated with FreeAgent to help small business on Starling’s in-app marketplace. owners cut the time spent on admin. The partnership Another recent success is Starling’s success in winning will enable small business owners to step back and a share of the £775m ($990m) RBS giveaway, along allow the FreeAgent platform to digitise their finances. with Metro Bank and ClearBank. Excellence in Customer-Centricity Intesa Sanpaolo Focusing on optimising its omnichannel strategy, At every stage of the product and service Intesa SanPaolo has put the voice of the customer at development process, Intesa utilises a comprehensive the heart of its customer-centricity strategy. feedback model. The result of the bank’s customer- Feedback is constantly sought out and utilised to centricity drive is reflected in the leading net promoter improve the customer experience for the bank’s 11 score of its peer group among incumbent retail banks million-plus customers. in Italy.

16 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 16 22/05/2019 12:36:40 rbi global awards | winners

Security Innovation of the Year UBS UBS’s Card Centre processes roughly 25% of all credit cards in Switzerland. It has reduced the amount of fraud write-offs per compromised card, stopped more fraudulent transactions and mitigated false-positive rates. The result: In 2018, the bank successfully stopped 84% more fraudulent transactions than just three years ago for UBS. This was attributed to leveraging the latest AI and machine learning capabilities of the FICO Falcon Platform. A new approach was also adopted. For the first time, The FICO Fraud Predictor aided the process with the Card Centre directly declined transactions that adaptive analytics. Fraud experts at UBS used the appeared to be fraudulent rather than creating an alert free-form rule writing within FICO’s technology to to be reviewed with the customer. As a result, UBS create complex rules. These deployed both the AI- was able to manage far more fraud cases while also enabled Falcon Fraud Score and innovative adaptive saving manpower and costs. Only if there is a further analytics to fine-tune the neural network models in fraud activity will a customer be contacted after an Falcon. These custom rules, added with the analytics, alert. Thanks to this, the UBS Card Centre managed a were the best way to improve false-positive and fraud- 42% increase in fraud cases without bringing in more detection rates. resources. Product Innovation of the Year alior bank Bringing online financial comparison to customers’ fingertips, Alior Bank has sped up the product process and given consumers peace of mind. Impressively, 50% of binding offers are given with two minutes of applying and it has lofty but achievable goals to be the biggest financial brokerage service in Poland by 2020. In 2018, Alior refreshed entirely its product suite for SMEs, which has been enriched with a completely new account, a multi-currency card and Lotus, a loyalty and rewards programme. Alior’s 4x4 account launched in June 2018. It is, Price parameters are aligned with customer needs says Alior, a unique banking product giving the and transaction types. Alior has also prepared four account holder the option to modify the account’s packages: cash, domestic, foreign and savings, while pricing and functions. The account combines basic entrepreneurs are provided a range of benefits and benefits free of charge, with the option of choosing reduced fees and commissions. Alior opened over additional packages tailored to individual customers. 4,000 new SME accounts in the second half of 2018. Retail Banker of the Year Oliver Hughes, Tinkoff Bank 2018 was an outstanding year – another record year share for credit cards, ranking second in Russia, and is – for the world’s largest digital bank by customer enjoying phenomenal growth in current accounts. numbers, Tinkoff Bank. Tinkoff kicked off 2019 in a similar vein, with net CEO Oliver Hughes set ambitious targets – and income up by 25% in the first quarter. Further growth smashed them. Net income grew by 43%, assets by is boosted by the bank’s expansion into lifestyle 45%, lending by 53% and deposits by 56%. In the products. Fees and commission income rose by 34% decade since formation, Tinkoff has a 12% market year on year, with total loans rising sharply by 22%.

www.retailbankerinternational.com | 17

RBI 761 May 2019.indd 17 22/05/2019 12:36:47 feature | pepper

pepper: aiming to become the customer’s first choice

Digital-only Pepper has quickly gained ground in its home market of Israel. It remains in the middle of two worlds, being an arm of Bank Leumi but maintaining a very separate brand and operation. Patrick Brusnahan discusses strategy and future plans with CEO Michal Kissos Hertzog

epper was launched in Israel nearly customers from other banks. This is another Pepper account; however, new rules mean this two years ago as a fully digital fact that emphasises our success. restriction does not apply to younger people. Palternative to incumbent banks, “It’s not only the facts though. It’s the Hertzog says: “There is a new regulation despite being part of Bank Leumi. understanding that Pepper is just at the that just kicked in two weeks ago, that It is completely mobile and has no account beginning of something. There was once a actually allows Pepper to open first bank fees other than for exceptional events question of ‘why do you need a digital-only accounts to young people between the such as a returned direct debit. Accounts ages of 16 and 18. We’re the first in Israel can be opened within eight seconds, and for this, and the amount of onboarding of other banking services such as loans and people between these ages is beyond our chequebooks are offered. expectations. Pepper CEO Michal Kissos Hertzog says “If you’re an adult, yes, Pepper will be your the goal was to offer something “as easy second account,” she adds. “Then our work as WhatsApp, as fun as Facebook, and as the onboarding of will be to make you want to be active – to intuitive as Instagram”. switch from your first account to your second people aged 16- account. CUSTOMERS COMING IN “It doesn’t really matter for me if you’re 18 is beyond our closing your first account or not, but I want According to Hertzog, the challenger you to use Pepper as if it is your first account. has attracted “hundreds of thousands of expectations I want you to bring your salary into Pepper; I customers” since launching; the real surprise, want you to take a loan in Pepper, to save, to however, is where most of these customers use our credit card as your main credit card have come from. and so on. So that means if you’re an adult, or She explains: “When we started Pepper, bank on mobile?’ I don’t think this question is if you are a teenager between the ages of 16 to we thought that 50% of Pepper’s customers being asked any more.” 18, Pepper will be your first account. There is would come from Bank Leumi. Actually, we Unfortunately, due to certain regulations no question there.” see now that only between 25% and 30% of in Israel, Pepper can only be a customer’s While Hertzog would not share exact our customers are coming from there; this second bank account. This means you need figures, she describes the number of active means that we are recruiting and acquiring to already have a bank account to open a users as “more than expected”.

18 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 18 22/05/2019 12:36:47 feature | pepper

START-UP OR INCUMBENT? to be obsessed about the customer. It’s an essence of your survival in the future. While Pepper is linked with Bank Leumi, “Pepper has to succeed. It’s not even a their core banking systems are not shared; question, because Pepper is the future for Pepper’s are completely different. It did not Leumi.” want to “just be digital scale, like the other She continues: “We are not dependent on apps”, but “digital from the core”. Leumi. Our core system is Temenos, whereas Building this ecosystem from the ground Leumi’s core system is IBM mainframe. Our up gives Pepper something unique, believes developers are different from their developers; Hertzog, especially given the number of other we have our own. I’m in charge of my own banks that are trying to do something similar. developers, who are building different things. She says: “We initiated our ecosystem Everything is different; it’s not just the brand.” versus, for example, the UK where the Looking to the future, Pepper has distinct incumbent banks are not initiating anything, plans. Its priority is to up its scale in terms they’re reacting. RBS building Bó now is not of products, and it is currently working on initiation or innovation: it’s reacting to the joint accounts and a third app, Pepper Invest, fact that people are switching from RBS to Michal Kissos Hertzog, Pepper an offering that will focus on securities and Monzo, Starling or Revolut.” The problem Hertzog has with this kind of investments. There are even rumours of So, does being a part of a bigger bank give investor is that they “don’t really care about Pepper launching its proposition in the US. Pepper the advantage over other start-ups the value proposition, or being customer “We are working on being better, trying to break into the market? obsessed, or being the innovator leader”. improving our proposition as we go,” Hertzog explains. “When you have hundreds of thousands of customers, you have more needs There was once a question of ‘why do you that you hear from them. It’s constant: when do you have this? How you improve this? need a digital-only bank on mobile?’ I don’t How do you do this? It’s constantly answering to demand and also to market change.” think this question is being asked any more Hertzog concludes: “We think we are dealing with a world where customers don’t like to handle their financials – either because “I think there is a pro and a con,” Hertzog In contrast, Leumi places that as a priority. they didn’t care, or because they were afraid, notes. “From the perspective of launching “Leumi understands that to be at the or they think it’s complicated, because we told a brand, people are more cynical about a forefront of innovation, you need to be truly, them it’s complicated. I think we are there to challenger bank that was built within an truly digital,” Hertzog adds. “You need really help them.” < incumbent. It’s easier for Monzo or N26. For a challenger bank that was built within an incumbent, there is sense that we need to prove ourselves more. “I think that the advantage is more than the disadvantage that I just mentioned, in that we are really using a lot of Leumi know- how. In cyber, in compliance, in legal and in regulation, we are getting these kinds of know-how. You need the years of experience, and we actually know that this is our advantage because we have them. “All the other stuff that needs to be new, different, innovative and breaking the status quo, that’s Pepper. This is the advantage that’s totally 100% Pepper.” The relationship with Bank Leumi is not hindering Pepper in terms of launching new products. The mobile-only bank considers Leumi to be more of an “investor”; however, the key difference is that it is not similar to “a regular investor like Monzo or Revolut has, because there the investor is looking to get the investment back in three to five years,” Hertzog notes. Pepper’s systems and branding were built from the ground up

www.retailbankerinternational.com | 19

RBI 761 May 2019.indd 19 22/05/2019 12:36:50 industry insight | finastra

bank culture: a crucial ingredient in a successful transformation

We are witnessing a once-in-a-generation transformation in the financial services industry as banks face up to what is required to compete effectively in the digital age. Eli Rosner, chief product and technology officer at Finastra, writes

ost banks recognise the need technology giants to gain a foothold in the the ‘big picture’ and their role in achieving to integrate digital technology market. common goals, it becomes much easier to Macross all areas of their business, Successful transformation must be driven encourage new ways of working. and the need to change their operations to by the business; it is not just about technology A change in mindset across the entire deliver greater value to customers. change. The culture of the organisation is organisation is needed to ensure digital-first, Banks need to open up their infrastructure, often the biggest barrier to overcome. So how customer-centric objectives are met. If no one be willing to challenge the status quo, to can banks drive cultural change across the is questioning the bank’s performance today, collaborate with partners and experiment. organisation? what it should be tomorrow and if things can There is not a simple recipe for success, and Five tips for success include: be done in a faster or more efficient way, you some initiatives may fail, but the culture of risk being left behind. the bank has to change to create the right 1. A clear vision environment for success long term. Digital transformation cannot be achieved 2. A technology roadmap Banks are at different stages in their overnight. Buy-in from the board and Legacy core banking systems at the heart of transformation strategies: some are fully embracing a digital-first approach as part of IT infrastructure are often held responsible embracing the challenge and opening up to the culture of the organisation are essential. for holding back banks’ innovation efforts and change while others are still tinkering around The best place to start is to align the crippling their agility. the edges. transformation programme to the bank’s It is risky replacing these systems, and But standing still is not an option. Open overall vision for the future. If everyone change cannot be achieved quickly, but digital Banking is bringing new opportunities for all, understands the transformation the bank is transformation is a long-term project. It and allowing challenger banks, fintechs and seeking to achieve long term, and buys into must be a constant evolution of a business’

20 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 20 22/05/2019 12:36:51 industry insight | finastra

organisational, operational and technological of large banks have caught on – investing in foundations, and requires careful planning. innovation labs, collaborating with fintechs Technology leaders need to set out a clear and others from outside the organisation. The path and bring everyone with them in use of APIs and cloud platforms is crucial in understanding the roadmap to success. changing the way banks develop new systems A bank and the systems it needs to operate and bring innovation into the institution. effectively can be broken down into three Standardised and tested APIs can be used to areas: link core systems to the outside world and a • Systems of record: These are the new generation of developers that can help back-office core systems. Software here banks innovate from the outside in. is typically developed using a linear, Banks can also learn from the ‘big tech’ or ‘waterfall’ approach. It is okay for firms. We are seeing an uptick in banks hiring developments and changes to these talent from technology firms, and big tech systems to move at a slower speed; firms hiring bankers as the two industries start • Systems of differentiation:These include to converge. Banks are starting to think more decision-making, pricing, analytics and like technology companies, and big tech firms risk management tools in the middle are offering services in areas like payments office. These will need updating more and lending. often to accommodate changing business 5. Environment for success practices or customer requirements, and Eli Rosner, Finastra • Systems of innovation: These are the Finally, it is essential that banks create the customer-facing apps and must be developers, data scientists, quality-assurance right environment for success. This includes updated frequently. It is here that banks testing and compliance experts, with each creating both a technology and cultural have not been innovating fast enough, team dedicated to delivering a particular environment that encourages innovation and and it is crucial to move more quickly – service. This enables more agile development, experimentation. taking on an agile delivery methodology, so customer-facing software can be delivered A platform-based approach that collaborating and innovating from the in sprints on a continuous basis. incorporates a testing environment and outside in. Education is key. Making the business allows for fast feedback is crucial. That way, case for setting up cross-functional teams is a development teams can quickly assess whether Any companies launched in the last five radical change, and it is only natural that staff a particular feature is meeting or falling short to seven years will already have a culture will have questions about how the changes of customer requirements. in place that thinks in terms of agile and affect the way they work. It is also important Moving away from a monolithic approach scrum. A change in mindset is needed to consider reskilling: teaching business to software development and breaking by the established banks – helping them people about coding, and technical people it down into the delivery of individual understand how others work and how to about the business so they can work more microservices means that if one service deliver innovation – particularly in regard to effectively. does not perform as expected, the team can systems of innovation that impact customer learn and move on, with no need for any experience. 4. Collaboration and ‘outside-in’ recriminations. thinking A continuous delivery model is one of the 3. Cross-functional teams As well as cross-functional teams within the biggest mindset changes. It means no longer Another key step in driving cultural change bank, it is also healthy to open up the bank thinking about upgrading an entire system, is to reorganise the way people work together to new talent, ditching the ‘not invented here’ recognising that today’s platforms are made and interact across the business. approach. up of multiple constituent parts that are loosely coupled – so one part can be upgraded without affecting the rest. The advantage of Executed in the right way, digital this approach is that improvements can be delivered quickly – and feedback collected on transformation will deliver huge apps soon after a requirement is identified. Executed in the right way, digital improvements in efficiency and flexibility transformation will deliver huge improvements in efficiency and flexibility – eliminating bottlenecks and streamlining In a traditional bank structure, teams There is a growing realisation that banks processes. But it cannot be achieved without exist in functional silos, with business staff cannot own everything any more. It is first addressing organisational culture. operating separately from technology experts. essential to put in place a technology and Getting that ingredient right and engaging To make the business more responsive, it is partner ecosystem to support the business and and empowering staff to support the ongoing essential to break down these silos and bring allow it to capitalise on new innovation fast. transformation of the business – in a way different roles together within new cross- The advent of Open Banking means that delights customers – is fundamental to functional teams, including business experts, banks no longer ‘own the customer’. A lot success. <

www.retailbankerinternational.com | 21

RBI 761 May 2019.indd 21 22/05/2019 12:36:52 News | Digest

may news

UK payday loan complaints rocket to five-year high Complaints about payday loans in the UK have soared to a five-year high. Consumers have made more than 388,000 complaints this year, up 14% on the year before. The Financial Ombudsman Service (FOS) stated that, in total, it had dealt with almost 1.7 million phone calls, emails and let- ters, many of which concerned worries about debt. On banking and borrowing alone, total complaints reached 149,933. As fraudulent attacks become more sophis- ticated, banks must raise the bar in order to properly protect customers’ money. One of the fastest-growing types of fraud is author- ised push payment, where people unwittingly even 10 payday loans; despite this, lenders ceptable: in too many cases, customers have follow a fraudster’s instructions to make a continue to offer more. been left to struggle with unsustainable debt.” transaction themselves. Chief ombudsman and FOS chief executive Wayman added: “Looking at short-term The FOS’ report said: “We’ve reminded Caroline Wayman stated: “These are big lending in particular, the proportion of banks of their existing obligations to ensure numbers. One of the trends behind them is complaints we upheld – around six in every that victims of fraud are treated fairly, as we’ve the rise in complaints about consumer credit 10 – shows diligent lenders have been the found that they haven’t always got this right.” products and services – which grew by a fur- exception. Although more victims of fraud are now ther 89%, following last year’s 40% increase. “At the end of a volatile year that saw having their money returned than last year, When PPI is excluded, they represented one lenders collapse as a consequence of past there remains work to do. The report high- in every three new cases we received this year. unfairness, it’s vital that those remaining don’t lighted that some consumers struggle with What we’ve seen in this sector has been unac- allow history to repeat itself.” < OCBC rolls out instant approval for retail banking products proprietary real-time digital KYC and credit said: “With a mobile device in almost assessment systems. every Singaporean’s hand, digitally savvy In June 2018, OCBC was the first local customers expect banking products and bank to allow customers to instantly open services to be instantly and immediately and use a new account. Since then, digital accessible. applications and instant approvals of “This is a natural progression of our OCBC 360 accounts have grown threefold. pursuit of the new digital; that is, to Notably, one in three OCBC 360 accounts provide instant, embedded and frictionless is now acquired digitally. access to all our products and services Customers receive discounts and for the convenience of customers. rewards immediately when making This enables them to start a banking purchases or contactless payments after relationship with us seamlessly and applying for an OCBC card. Physical credit instantly. cards are delivered and received on the “I expect one in every two OCBC Bank day of application. customers to be onboarded digitally by OCBC Bank has introduced instant The OCBC ExtraCash personal loan, 2020, so this service launch is a significant approval for credit and debit cards, once approved, is instantly released to milestone in our digitalisation journey.” personal loans, bank accounts and the account nominated by the customer. Tan added: “We will be extending our lines of credit. The facility applies to all Similarly, the OCBC EasiCredit personal instant digital application and approval to Singaporeans and permanent residents, line of credit, once approved, can be secured lending products such as home including non-OCBC customers. immediately drawn on. and car loans. Thus, customers do not have OCBC instant approval uses Singapore’s Dennis Tan, OCBC Bank’s head of to wait to own their dream home or drive MyInfo data repository and the bank’s consumer financial services – Singapore, away in their dream car.” <

22 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 22 22/05/2019 12:36:57 News | digest

Brits wary of new tech, despite high demand UK consumers are optimistic about having new technology in banking available to them, but they are not necessarily adopting it as quickly as it is becoming available. This is a key finding of ING’s New Technologies 2019 international survey. The report also found that nearly a third (30%) of Brits say their bank is over-ambi- tious. In particular, banks are introducing services on different devices that consum- ers say they neither need nor want. At the same time, over two-thirds (69%) expect their bank to deliver the latest technology to them, and over a third (34%) say that since they started using devices to manage money, their financial goals are clearer. For example, 67% of respondents recommended improvements to their devices to manage their money on the go say they view their account balance more spending habits from robo-advisers. and across different platforms. frequently, while 32% say they take less Some 70% of respondents said they “Yet while a large majority agree that risk with their money and 41% say they maintain use of their local bank branch; the latest financial technologies should be now think about money more this is, in most cases, in addition to using available, we see some hesitance around The conflicting views on expectation technology to access banking services. adoption. Concerns about security, privacy versus adoption may be due, in part, to a In terms of financial data-sharing inno- and maintaining control of finances appear lack of trust in technology. There may also vations such PSD2, consumer awareness to be key barriers.” be concerns over the security of interact- is relatively low, with 52% of Brits saying Exton added: “Over time, and if new ing with online tools. they are not aware that in some countries, digital approaches are shown to be reliable, Just over half of UK consumers (52%) if consent is given, financial providers can useful and socially accepted, it is possible rate facial recognition as a secure tool, says access information held by other compa- that the uptake of services such as auto- ING, while 22% believe voice recognition nies such as banks. Similarly, 64% say they matically generated advice for budgeting is not secure. This indicates a gap between would not be happy to use this, and only and even investing could be rapid. the services provided and accepted among 23% say it would be useful, signifying that “That was the experience with the consumers. more can be done to alert consumers to uptake of mobile banking. Consumers want Furthermore, 62% of respondents were the potential benefits. banks to stay in the lead by developing not comfortable with a computer pro- Jessica Exton, behavioural scientist at new ways to help them manage their mon- gramme making investment decisions on ING, commented: “Many people are now ey. This is despite any reluctance to accept their behalf, and 41% say no to receiving mobile bankers. They are using multiple them immediately.” < Four new virtual banking licences granted in Hong Kong The Hong Kong Monetary Authority World Development. Insight Fintech is is now working closely with the eight (HKMA) has announced that it has granted a joint venture between smartphone virtual bank licensees to prepare for the four banking licences to virtual banks. manufacturer Xiaomi, which holds 90% of launch of their business operations in The licences have been granted the business, and independent investment accordance with their plans. to Ant SME Services (Hong Kong), bank AMTD Group. “The launch of virtual banks in Hong Infinium, Insight Fintech HK and Ping An Ant SME Services is a unit of Alibaba Kong, which is a key component of the OneConnect Company, and take effect in company Ant Financial, while PingAn One Smart Banking Initiatives, will certainly Hong Kong immediately. Connect is an arm of Chinese insurance facilitate financial innovation, enhanced All the licensees have familiar backers. giant PingAn. customer experience and financial Infinium is a joint venture between According to the virtual banks’ business inclusion.” Tencent, Industrial and Commercial Bank plans, all four plan to launch operations The HKMA will monitor the virtual of China (Asia) – a unit of Chinese banking within six to nine months, taking the banks and their operations after they have giant ICBC, Hong Kong Exchanges and number of licensed banks in Hong Kong to opened for business, as well as assessing Clearing – the operator of the Hong 160 and virtual banks to eight. customer reaction and the banks’ impact Kong stock exchange, private equity HKMA chief executive Norman Chan on the wider sector. The authority expects firm Hillhouse Capital, and Adrian said: “We are pleased to grant four more a comprehensive analysis within a year of Cheng, executive vice-chair of New virtual banking licences today. The HKMA the first virtual bank’s launch. <

www.retailbankerinternational.com | 23

RBI 761 May 2019.indd 23 22/05/2019 12:36:59 News | Digest

CIBC unveils new SME banking platform said: “Business owners are faced with simultaneously managing every facet of their business. “We are introducing a valuable business intelligence tool to help clients manage their banking, accounting and payroll in one place, saving them time so that they can focus on achieving their growth ambitions. “SmartBanking is the latest way we are innovating for business owners to make their lives easier.” CIBC SmartBanking aims to provide business owners with sharp financial insights, helping them make real-time business decisions. The collaboration brings together information from cloud accounting software companies Intuit Canada and Xero, and payroll software company Ceridian. The platform is currently available online and exclusively for iPad users, to download free of charge with no monthly access fee. CIBC SmartBanking is now live, integrating CIBC and cloud accounting platforms. For Martin Fecko, country manager at Intuit banking, accounting and payroll into a companies, this reduces the amount of Canada, added: “By combining CIBC’s single platform for SMEs. manual data entry and improves overall powerful banking capabilities with critical SmartBanking aims to boost operational accuracy. insights from QuickBooks, small businesses efficiency for CIBC’s business clients Furthermore, through a single interface, can make smarter and faster decisions though collaborations with Intuit Canada, business owners can see their complete about the financial health of their business. Xero and Ceridian. It also claims that the financial dashboard, including upcoming “With 64% of Canadian small businesses integrated services will enable increased payroll details, pending invoices and admitting to struggles with cash flow for scalability for business owners. Users of receivables. Day-to-day banking tasks are their business, this collaboration with the platform will have a comprehensive also covered, with the platform optimised CIBC demonstrates how companies can view of their company’s finances, including to improve cash-flow management and come together for the financial benefit of accounting and payroll insights. general banking functions. Canadian small businesses, saving them CIBC SmartBanking for Business uses Andrew Turnbull, senior vice- time and finding innovative ways to tip the secure, two-way data integration between president of business banking at CIBC, odds in their favour.” < UK BCR: Nationwide, Investec, Co-op Bank bag £80m Nationwide, Investec and Co-op Bank In the fund’s Pool B, Nationwide Building BCR chair Godfrey Cromwell said: “Pool have been announced as the Innovation Society is to receive an award of £50m, B is the second group of grants from the Fund Pool B winners in the latest Banking with £15m each for Investec and Coop Capability and Innovation Fund. It aims Competition Remedies (BCR) funds Bank. Specifically, Pool B aims to promote to increase competition with the overall allocation. competition in the SME sector through purpose of improving financial products The BCR fund was set up to help the modernisation of business current and services available to SMEs. increase competition in SME lending account offerings and the promotion of In Pool A, Metro Bank, Starling and with cash from Royal Bank of Scotland, new business current accounts or ancillary ClearBank were the first round winners. which is freeing up a fund worth a total product propositions for SMEs. BCR awarded Metro Bank £120m, Starling of £775m ($988m), as part of its last Nationwide, Investec and Co-op £100m and ClearBank £60m in February. remaining penalty dating back to its £45bn Bank are providing BCR with public Thirteen applications from 10 applicants UK government bailout in 2008. The commitments stating what each will deliver for Pool B funds were submitted in fund is made up of £350m to incentivise with the funds. Progress against each February. switching and another £425m to boost successful applicant’s public commitments BCR will make further awards in the business banking deals. The BCR board is will be published on a quarterly basis on second half of the year relating to Pools C overseeing the £775m giveaway. the BCR website. and D. <

24 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 24 22/05/2019 12:37:02 News | digest

CYBG network inches down by another 17 branches 6 million customers with total lending of around £70bn ($89.2m). Virgin Money is shuttering six stores, reducing its network to 70 units. The CYBG branch network is completed by three outlets under the B brand in London, Birmingham and Manchester. In 1981, when RBI published its first issue, the CYBG branch network totalled 570 out- lets. This comprised 376 Clydesdale and 194 Yorkshire branches. At the time of the Virgin Money acquisi- tion, CYBG said it would dump the Clydes- dale and Yorkshire brands. CYBG intends to rebrand all its operations under the Virgin Money brand over the next two to three years. The Scottish brand dates back to the for- mation of Clydesdale in 1838. The brand was retained when the business was acquired by Midland Bank in 1920. Likewise, when Mid- land sold the Clydesdale to National Australia Bank in 1989, the brand survived. The Yorkshire Bank brand dates back to 1859, while digital sub-brand B was launched as recently as February 2016. CYBG’s third B-works concept store, located in Manchester, debuted in January this year. The bank’s aim is that B does not look like a bank, feel like a bank or sound like a bank. The outlet represents a prime example of what The B ‘phygital’ branch concept is termed by many a ‘phygital’ experience – a The CYBG branch network is to reduce to the end of 2012, Clydesdale operated 152 store featuring the latest technology that lets 219 outlets, with 17 more branches closing branches in Scotland; in England, Yorkshire the branch bridge the physical and digital across its three brands. ended 2012 with 178 units. worlds. The overall aim is to craft a seamless Clydesdale Bank is axing five branches in Clydesdale’s rival Scotland-based brands and integrated phygital experience. Scotland, reducing its branch estate north of RBS and Bank of Scotland are also rightsizing The Manchester store offers space for con- the border from 67 to 62. Branches in Ar- their branch estates. Royal Bank of Scotland sumers and SMEs to learn, work, bank and broath, Brora, Largs, St Andrews and Glasgow has reduced its Scottish branch network from exercise, and features a range of free in-house Shettleston will close in August. 193 to 91 in the past three years. The pace facilities. Examples include flexible co-work- Sister brand Yorkshire Bank is closing six of closure at Bank of Scotland is slower. It ing spaces featuring meeting rooms, hot outlets in the north of England, reducing the has axed 50 Scottish outlets since the end of desks, long-term desks, training programmes Yorkshire network to 84 branches. 2016, reducing its network to 190 outlets. and an open event zone. Moreover, the store More than one-half of the CYBG branch CYBG acquired Virgin Money last year. includes a showcase area for the B Works network has closed in the past six years. At That deal doubled CYBG in size, serving Partner programme. < BBVA abandons plans for Atom Bank takeover Atom is launching a £50m (63.8m) In March 2018, led by BBVA, its largest which it aims to follow up with a £175m fundraising bid after BBVA pulled back shareholder, Atom raised a further £153m capital injection as part of an IPO in 2022. from a full Atom Bank takeover, according in equity, bringing the total capital raised Atom has registered steady if to reports from Sky. Initial reports suggest to date to almost £400m. BBVA increased unspectacular growth in an increasingly that BBVA’s decision relates to Brexit its holding to almost 40%. crowded market. The 2018 Atom Bank uncertainty. Atom was founded in 2014 and annual report disclosed total retail BBVA, which holds a stake of nearly 40% launched in 2016, offering savings, deposits of £1.4bn. Loans to SMEs and in Atom, is opting not to exercise an option business loans and residential mortgage homeowners total £1.2bn. to acquire the remaining shares. The products. It has postponed plans to launch In fiscal 2018, Atom Bank reported a loss option to launch a full Atom Bank takeover a current account product, and is now before tax of £53m (2017: £42m). Total expired at the end of April. reportedly targeting £50m of new equity, assets grew to £2.0bn (2017: £649m). <

www.retailbankerinternational.com | 25

RBI 761 May 2019.indd 25 22/05/2019 12:37:03 industry insight | azimo

AI and machine learning platforms enable banks to accurately assess whether purchases contextual engagement are spikes or more long-lasting trends. Communication is also a focal point for contextualisation. It is all about understanding how customers bank and and how it boosts spend, and mirroring this when personalising offers or products. Ensure you use the channels they prefer – there is no point sending an offer by post to someone who banking loyalty always banks on an app. For our Greek bank client Alpha Bank, its new loyalty programme application, Bonus It is no secret that building personal relationships is a key app, has become an important contextual engagement tool, rewarding customers for ingredient of loyalty. However, research by Collinson has everyday spending. Based on customer found that just one in three consumers feel their bank purchasing behaviour, preferences, spend and treats them as an individual and not just an anonymous geo-location, the bank serves relevant, real- time offers and rewards from its ecosystem of customer. Steve Grout, loyalty director at Collinson, writes 4,000 retail partners. Bonus app brings the programme into ustomers are growing numb to when they can contextually engage to the hands of the customer and provides brand communications, given the genuinely add value. personalised content, online redemptions, Cvolume of marketing they receive. But with limited opportunities to transaction history details and all the Consumers expect a personalised, engage directly, using the power of digital necessary information about the programme contextual experience. This means is vital. With the right mix of contextual in this way, covering key customer requests communicating the right message, at the engagement opportunities – advice, content, and improving customer experience. right time, at the right place and on the right trends or insight – customer interactions Since launching Bonus, Alpha Bank has channel – whether that is information about increase tremendously, especially given the enjoyed an impressive 15% increase in market the customer’s account, payment reminders, prominence of mobile devices in daily lives. share. With 1.5 million redemptions made in special offers or anything in between. Travel is rich territory. If a customer 2018, the rewards app places the bank front purchases plane tickets or logs into a mobile and centre of the customer’s mind every time NO CONTEXT WITHOUT DATA app abroad, a bank could up-sell travel they spend, boosting engagement and loyalty insurance or offer access to an airport lounge to the bank. Data is the cornerstone of contextual for their return journey. engagement, and banks have the tools to Contextual engagement can be even FINAL THOUGHTS obtain granular detail about customers on more proactive. Customers’ purchases or how and when they are spending. They can bank interactions provide clues about life While currently only skin deep, contextual even find out what items they are buying – stages, presenting opportunities for long- engagement will soon become the norm. not just basket spend. With this information, term engagement. For example, a customer Offers and experiences need to be rich, banks can make strategic judgements on buying baby products could be open to individualised and founded in data. how to best engage with customers and offer a conversation about alternative financial Consumers do not want an afterthought: highly personalised and relevant experiences. services, such as life insurance, to meet the instead, pre-emptive hyper-contextual There is still work to be done, though. needs of their evolving personal situation. engagement is the way forward. Our research revealed that less than a quarter Alternatively, if a customer starts to combine Done well, the potential for contextual (23%) of consumers felt they receive a bank accounts with another person, they engagement to boost interaction and loyalty customer experience from their bank that is could be in a long-term relationship and open with your customers is extremely high; remain personalised to their interests and preferences. to a new range of products and services aimed mindful, however, of the fine line between Rather than relying solely on their own at couples, such as mortgages. intelligent use of data and being intrusive, data, banks can augment it by partnering It is an effective – but often delicate – and make sure to target your customers at a with organisations and acquiring second-party line to walk. Banks must be careful not to life stage as opposed to an individual event. data, or by purchasing it from third parties. stereotype and erode customer trust in the The key is to ensure you are providing When third-party data is applied with first- or process. Buying baby products does not genuine value in your communications second-party data, a more robust picture of necessarily mean someone became a parent and offers, that help to meet customers’ customers and preferences emerges, providing recently: they may simply be a gift. Again, heightened needs. With enough data and yet more information to make a strategic data is key. By aggregating different data insight, and an interesting collection of decision and provide a highly relevant offer. sources and recognising consistent patterns, appealing rewards and benefits, the blueprint With a deep understanding of what makes you will understand more about your for contextual engagement to win over your customers tick, banks can identify moments customer and interpret clues more accurately. customers’ loyalty will become clear. <

26 | May 2019 | Retail Banker International

RBI 761 May 2019.indd 26 22/05/2019 12:37:03

HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.

Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy

Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

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