March 2017 Issue 735 www.retailbankerinternational.com

PEPPER HEATS UP ISRAELI BANKING MARKET

● DISTRIBUTION: BCR ● RESEARCH: Inclusion ● DIGITAL: EQ Bank ● TECHNOLOGY: Lending

RBI 735.indd 1 22/02/2017 15:50:29 Multichannel digital solutions for fi nancial services providers

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IE RBI final design.indd 1 05/05/2016 10:36:41 Retail Banker International COMMENT: EDITOR’S LETTER

CONTENTS W&G: the never ending UK 2 RESEARCH: INCLUSION Black victims of fraud are more than twice as likely to be denied a refund by banking embarrassment UK banks as white customers. Patrick Brusnahan investigates

3 DIGITAL: BANCO DO BRASIL Banco do Brasil has launched a digital- o I got it wrong - no excuses. In a several thousand staff and agency employees only account to enable it to respond piece for The New Statesman website worked on W&G. to the advent of neo-banks. Robin in June 2013 – I dared to advise the The end result of the W&G project - like- Arnfield takes a closer look doyen of City headhunters, Anna ly to be confirmed on 23 February when the 4 TECHNOLOGY: LENDING S bank releases its full year earnings – it is RBS Mann, co-founder of blue-chip consultancy RBC has teamed up with D+H to MWM, to go for Ross McEwan as the new so that means its annual reporting of a loss implement Barometer. RBC’s Mike Dobbins and D+H’s Duncan Hannay CEO of Royal Bank of Scotland. probably of about £6bn – is a fail. speak to Douglas Blakey He was then a 20-1 outsider with Ladbro- McEwan has had a tough four years – as

5 STRATEGY: BANK LEUMI kes and head of RBS’ retail unit. one of the first banking writers to call for Bank Leumi is gearing up to launch To my shame, I did not back him at 20-1 him to get the top job at RBS, it seems harsh Pepper, Israel’s first standalone digital- or at 8-1 when the article appeared. to be one of the first to suggest his time may only bank. Offering current and savings I did not back him at all in fact – but the be drawing to a close. accounts, lending products and a P2P payments app, Pepper is targeted at UK government did duly appoint McEwan I would not however object if our sister millennials. Robin Arnfield reports and he seemed a good bet to continue the title The New Statesman quietly removed my

8 DIGITAL: EQ BANK Herculean job of turning around RBS. 2013 piece suggesting why McEwan was the Canada’s EQ Bank was inundated with Fast forward four years and the time has right man for the job. applications when it launched its high- come to question if the £10m ($12.4m) or interest Savings Plus Account in January so, give or take the odd million pocketed by 2017 RBI Global Awards Sponsored by 2016. Can it maintain the momentum? Robin Arnfield reports McEwan since his appointment, is merited. Fiserv – Get Your Nominations In I’m out of words to describe the Williams The Retail Banker International Global 10 DISTRIBUTION: BCR & Glyn saga - in a 2014 editorial I called it a Awards, now in their 32nd year, celebrate Banca Comercial Român (BCR), Romania’s biggest bank in terms of asset soap opera; in 2015 an expensive shambles; the best in global retail banking, with win- value, client base, savings and lending, and last year, I described it as an embarrass- ners to be announced at the Awards Dinner has overhauled its branches for a new ing mismanagement. at The Waldorf Astoria, London on 11 May digital age. Patrick Brusnahan writes At McEwan’s first RBS AGM as CEO, 2017. 12 RESEARCH: FAIR BANKING what passes as RBS investors these days, Joe These prestigious awards, sponsored by Banking is starting to put financial Public, were told that the 308 RBS branded Fiserv, are highly regarded within the indus- well-being at the heart of its products, according to the 2017 Fairbanking branches in England and Wales and the six try as a mark of high performance, and rep- Ratings Report. Douglas Blakey reports NatWest branches in Scotland would be sold resent an exceptional level of achievement. off to form Williams & Glyn by the end of The event will feature awards for high 13 SECURITY: HOOYU 2016. achieving retail banks, augmented by indi- Some are not fully on board with the idea of digital banking; HooYu has Since then, the bank has burned through a vidual awards for Retail Banker of the Year released a study into the reasons. few hundred million in consultants’ fees. At and Rising Star Retail Banker of the year. Patrick Brusnahan reports times when back home in Edinburgh I heard To nominate or find out more informa- 14 GUEST COMMENT: CYBER ADAPT that the cost-income ratio of W&G started tion about the awards, please visit the RBI The scale of the Tesco Bank hack shook with a 9; that there were major problems Awards website: http://www.retailbankerin- the industry to its core. Cyber adAPT’s with risk functions and technology. ternational.com/event/retail-banking-confer- Kirsten Bay looks at what happens next, and what vulnerabilities were exposed I was told by one RBS staffer that RBS did ence-awards-london-2017. not have the change capability needed – that 15 GUEST COMMENT: SAXO BANK seemed odd as I happened to know that a Nominations are open until 17 March. Next-generation digitised banking services have the ability to penetrate Change Management Consultancy had put the customer experience to deeper in some of its brightest people to RBS to levels than before. Chris Truce reports work on the project. Douglas Blakey 20 GUEST COMMENT: FISERV Over 100 W&G contracts were issued; [email protected] Connected devices have the potential to revolutionise banking. Appropriateness, security and customer experience are paramount, says Fiserv’s Scott Hess

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RBI 735.indd 1 22/02/2017 15:50:34 RESEARCH: INCLUSION Retail Banker International

Is British banking institutionally racist? Recent research has shown that black victims of fraud are more than twice as likely to be denied a refund by their bank as white customers in the UK. Is this a blip or a sign of a greater problem? Patrick Brusnahan investigates trends that may suggest that banking is not as inclusive as it claims

ccording to Cambridge University, except in cases of fraudulent claims or gross subject to higher interest rates than white more than a fifth of complaints negligence. and Indian-owned enterprises.” in the UK about not getting their The survey of 1,300 complainants revealed An inquiry was launched and the subse- money back are from ethnic minori- that black customers are more likely to not quent report, Ethnic Minority Businesses A and Access to Finance, stated: “From our ties, even though they make up around only get their money back. Only 3% of the popu- 10% of the population. lation is black but more than 6% of com - review, there is no academic evidence of The research comes from a survey released plainants were from this group. White cus- racial discrimination by banks. by the Financial Ombudsman. It also ties tomers were most likely to get a refund. “However, ethnic minority businesses dis- into over 2,000 cases reported over 25 years Also suggested by the survey was that eth- proportionately face challenges which make to the security research group at Cambridge nic minorities are less likely to be refunded access to finance more difficult.” University. at some banks than at others. Non-white While claims of intentional racism within In addition, more than 10,000 customers customers made up a third of complainants the banking sector have been put to one side, have complained to the ombudsman about from HSBC, but 19% at Nationwide. unintentional racism is a different matter. not getting their money back. According In a statement, the British Bankers’ Asso- Banks tend to focus more attention on cli- to the rules, victims should be reimbursed ciation said: “This data is not a representa- ents with higher incomes as they are more tive or credible sample of complaints upheld profitable for the institution. This could, in n SHARE OF THE POPULATION IN HOUSEHOLDS by ethnicity. It is therefore inaccurate to draw turn, lead to institutional bias against ethnic BELOW 60% OF MEDIAN INCOME AFTER wider conclusions from it. minority customers. DEDUCTING HOUSEHOLD COSTS, 1994–2009 “Banks don’t base their decisions on the The UK’s Department of Work and Pen- ethnic origin of their customers and the sions found that 60% of black and Asian 60% The additional rate for ethnic minorities The rate for white people industry is always seeking to improve how households have no savings at all, compared 50% it prevents fraud and supports the victims of to 33% of white households. In addition, the fraud.” UK’s Wealth and Assets Survey stated that

40% This pattern does not only apply to fraud the average white household had £221,000 reimbursement, but also to borrowing. ($275, 388) in assets, black Caribbean Nick Clegg, former deputy prime minister, households had £76,000, Bangladeshi house- 30% once addressed the issue saying: “We know holds £21,000 and black African households that 35% of individuals from black African £15,000. 20% origin say they want to start a business, but According to Poverty.org.uk, close to 40% only 6% actually do. Are they having prob- of people from ethnic minorities are in income 10% lems accessing the loans they need? poverty – twice the rate of white people. This “Past evidence shows that firms owned by can range as high as 65% for Bangladeshis 0% individuals of black African origin have been and 55% for Pakistanis. four times more likely than so-called white As a result of this monetary divide, bank-

1996/97 1997/98 1994/95 1995/96 1998/99 1999/00 2006/07 2007/08 2000/01 2001/02 2002/03 2005/06 2008/09 2003/04 2004/05 firms to be denied loans outright, and that ers may, unintentionally, ignore the needs of Bangladeshi, Pakistani, black Caribbean and ethnic customers due to the higher profits to Source: Timetric black African-owned businesses have been be made with other customer groups.<

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RBI 735.indd 2 22/02/2017 15:50:40 Retail Banker International DIGITAL: BANCO DO BRASIL

Banco do Brasil responds to neo-banks with digital-only account Banco do Brasil has launched a digital-only account as part of its digital transformation initiative. Among other objectives, the new account will enable the bank to reduce its customer service costs and to respond to the advent of the neo-banks taking the market by storm. Robin Arnfield takes a closer look

n November 2016, Banco do Brasil zil, Chile, Colombia, Costa Rica, Mexico, (BB) announced its Conta Fácil (Easy and Peru. “One of those scenarios presented Account), a totally digital current the possibility of all financial products being I account which can only be opened and digitised end-to-end,” says Mazzini. operated via smartphone and requires no “The main conclusions were that customer paper documentation. relationships will be very different. Digitisa- It aims to open 1.8 million Conta Fácil tion will have a large impact on the business accounts by the end of 2017, targeting con- models of banks. Some 47% of participants sumers who currently do not have active said they believe that the competition will accounts with the bank. come from new entrants, while 27% iden- Conta Fácil comes with a debit card tified incumbents. Almost 60% believe that branded by Elo, Brazil’s domestic card the scenario needs to be addressed imme- scheme, and consumers have the option of diately and that they are in fact entering a fee-free account or a fee-charging account into this late; the rest believe it needs to be with greater functionality. addressed within the next three years.” BB says over 3.6 million consumers open “It’s no surprise to see Banco do Brasil try- new accounts each year at its branches, and “Innovative banks are able to offer rock- ing to facilitate account opening as part of a that its objective is to migrate over 50% of bottom fees because they don’t have expen- digital strategy,” says Mazzini. “It’s also an these customers to digital account opening. sive overheads to maintain and traditional obvious cost-reduction initiative, as Banco It looks to cut around BRL750m ($221m) competitors will be forced to follow suit.” do Brasil has the potential to move 3.6 mil- in annual costs by increasing its investment “Banco do Brasil has the advantage of its lion account openings to a lower-cost chan- in digital channels and by selectively closing massive distribution power, as well as a more nel. Conta Fácil is a first step in that direction. branches. complete product portfolio,” says Guilherme “I expect that in the future most types of Branch transactions have been declining, Lima, founder of Brazilian consultancy bank account will be digitally opened.” and as of November 2016, 9.4 million cli- Ponto Futuro Consultoria Estratégica. The online channel was responsible for ents were using its mobile app, carrying out “As a comparison, Banco do Brasil began 54% of total Brazilian banking transac - a billion banking transactions a month, or with a broad media campaign for Conta tions in 2015, according to Febraban,” says 40% of its total transactions. Fácil, while Neon is still in beta mode, lim- Mazzini. In addition, 27% of its total transac - ited to 5,000 accounts, having launched in “Mobile alone grew from 4.7 billion trans- tions were carried out via the internet as of July 2016. Conta Fácil already allows the actions in 2014 to 11.2 billion in 2015. Peo- November 2016. By December 2017, BB sale of small-ticket insurance and saving ple are using online channels already so if expects to have 15 million mobile app users. products. banks can continue to move customers away “The question is how well will Banco from their branches it will have a transform- Neo-banks do Brasil manage the customer interface ative affect. But it’s hard to imagine incum- “It’s no surprise that Banco do Brasil is going and operational challenges compared to a bent banks without any physical presence. in this direction,” says Lindsay Lehr, senior small market entrant. Banco do Brasil has “It’s more likely that they will continue to director at US-based consultancy Americas the financial resources and brand equity to focus on transforming their channel experi- Market Intelligence. “Online-only banks are invest in learning to operate in this new for- ence, including rethinking the functionality mushrooming in Brazil, especially NuBank.” mat, which in time will be commonplace.” of a branch so it informs part of a digital NuBank has launched a no-fee credit card experience.” that can only be managed via a mobile app, Brazilian fintech sector In June 2016, BB opened the Laboratório which has proved very popular. It recently “Brazil continues to lead the Latin Ameri - Avançado Banco do Brasil innovation lab in secured $80m in investment from Russian can region in terms of digital,” says Juan Silicon Valley. The purpose is to learn about venture capitalist Yuri Milner, after receiv- Mazzini, senior analyst of financial services and disseminate digital culture within its ing funds from Peter Thiel’s Founders Fund, at Celent. “It has the largest fintech ecosys- organisation, identify opportunities for the QED Investors, Sequoia Capital and Tiger tem in the region with at least 219 Brazilian bank, and work with early-stage fintech Global Management in 2015 and 2016. startups across a range of sectors” according startups whose technologies could be of use. “NuBank has targeted a market with lots to Finnovista’s latest fintech radar. In a press release, BB said it plans to incu- of untapped demand – millennials and first- In early 2016, Celent led a scenario analy- bate four fintech projects in the lab during time bank users who have no interest in ever sis workshop with representatives of finan- 2017, with a further 12 being incubated at stepping foot in a bank branch,” says Lehr. cial institutions operating in Argentina, Bra- its offices in Brazil.<

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RBI 735.indd 3 22/02/2017 15:50:45 TECHNOLOGY: LENDING Retail Banker International

RBC goes live with D+H’s lending simulation tool Barometer Royal Bank of Canada has teamed up with leading financial technology provider D+H to implement Barometer, a first-in-class solution crafted to set a new standard in lending oversight. RBC’s Mike Dobbins and D+H’s Duncan Hannay discuss the Barometer solution with Douglas Blakey

hen RBC discusses optimising commercial business unit, with plans to its already-prudent risk culture, expand the Barometer roll out to other func- the rest of the industry needs to tions and regions later this year. take note. RBC has worked with The tool also allows RBC an efficient and W repeatable process for assessing workforce Toronto-headquartered financial technology provider D+H for many a year on many knowledge across its lending operation a project, but the Barometer pro- using a library of real-world busi- ject deserves special attention. ness scenarios. Barometer, in a nutshell, is Says Dobbins: “We wanted lending simulation, the first something more real-time. of its kind, designed to Managers can assign cases enable lenders to optimise to loan officers to test their the capability of their knowledge of certain regu- ❙❙Duncan Hannay, D+H back-end underwriters in lations and internal policies. the prevailing risk appetite and ever-chang- order to improve the qual- After analysing the results, ing regulations. ity of the lender. RBC is able to target train - Duncan Hannay, president, global lending ❙❙ Mike Dobbins, head of strat- Mike Dobbins, RBC ing on areas where it is needed solutions at D+H, tells RBI that Barometer is egy and corporate development at most, ensuring that all employees a configurable, software-as-a-service, single RBC, tells RBI that RBC began work- are equally knowledgeable on the lead- -instance, multi-tenant product built on the ing with D+H in 2015 to develop a tool spe- ing regulations and policies of the day.” Microsoft Azure platform. cifically designed to provide insight into how He adds that the bank had a successful, The use of Barometer, says Hannay, well employees understand and apply regula- longstanding relationship with D+H: “They empowers the bank to pinpoint and address tions and the bank’s policies. have been great partners along the way.” inconsistencies in decision-making. The use of Barometer also creates another At the risk of stating the obvious, consist- Adds Hannay: “Use of a library of real- opportunity to continuously improve the ent, accurate decision-making is essential world scenarios to measure understand - RBC customer experience through improved if banks are to improve loan quality, grow ing generates the insight needed to make assessment and training across lending oper- revenue and mitigate risk. That is easier said informed decisions on where to deploy ations. than done – it is often said that even leading resources to improve loan quality, increase This is no small-scale pilot – already 500 retail banks find it complex, expensive and profitability and reduce risk.” RBC loan adjudicators are using Barometer time-consuming to ensure their employees “The service also provides more security within the bank’s Canadian personal and are up to speed with current bank strategy, than other solutions – the Azure cloud grants more flexibility and scalability to the finan- cial institution,” says Hannay. Barometer highlights Bankers can log in to the service to access a • Barometer is a configurable solution to help figured to a financial institution’s unique multitude of real-world scenarios, kept con- institutions highlight knowledge gaps and policies; sistently updated by D+H, which can then pinpoint inconsistencies in decision-making be configured by the financial institution so individually and in aggregate, so training and • Managers decide what to test, and gain a training is specified and focused on the rel- resources can be targeted at the areas in which detailed view into both individual and team evant areas. they are most needed; performance; Dobbins concludes: “We are the first bank to go live commercially with Barometer. It • Users can log in securely from any browser to really does have a lot of feature functionality access a library of relevant real-world scenari- • Managers can access detailed reporting and and is a very intuitive piece of software. os, which are regularly updated by D+H; analytics on employee performance, and “Users can customise the software and it has a very user friendly, nice feel to it. We • Barometer is commercially available with two • Barometer provides compliance and risk officers will continue to expand this to other parts proprietary content modules. Adjudication with a historical repository of evidence, trend- of the business, and its use will continue to and front line/mobile sales have a growing ing results from activities designed to reduce evolve in manual, non-systems-based deci- library of content modules built on existing risk exposure and calibrate employee decision sion-making. and emerging regulations, and can be con - -making. < “We are very, very happy with the results to date.”<

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RBI 735.indd 4 22/02/2017 15:50:49 Retail Banker International STRATEGY: BANK LEUMI

Bank Leumi readies Israeli digital-only launch with global ambitions

Bank Leumi is gearing up to launch Pepper, Israel’s first standalone digital-only bank. Currently at beta stage, the bank will launch to the general public later this year. Pepper, which will offer current and savings accounts, lending products and a P2P payments app, is targeted at millennials. Robin Arnfield reports

e decided to set up a new venture validation with target customers, Pepper is “In order to truly disrupt banking, we need- that will be completely separate designed to provide a personal, proactive bank- ed to create a different organisation,” Bar- from our core business, even if ing experience, with products and services built David says. “As innovation was the topic, the significant thing is that we for the mobile-obsessed generation.” culture was our first concern. We are a bank W that is full of people with passion for technol- are competing with ourselves,” Bank Leumi Bar-David says Pepper is the first mobile- CEO Rakefet Russak-Aminoach told the FT only bank in Israel, and that it is focused on ogy, design and, of course, banking. Innovations conference in November 2016. challenging the status quo in banking. “We set up our startup in July 2015 with Israeli newspaper Globes reported:“I “Pepper will allow everything to be done eight people, and grew to over 150 within absolutely believe that the fact that Pepper entirely through mobile devices – account- six months. Thousands of ideas were thrown is being established in Israel – the start-up opening, customer service, money manage- into the air, and most of them ended up in nation – will help distinguish us, and that ment, savings, loans, and payments,” she the trash can. At the end, we came up with ultimately we can also make Pepper into a tells RBI. Pepper. Pepper is a bank that speaks in native global company.” “Millennials are known to be more digital- digital language and is 100% mobile, full ly active, specifically via mobile. In a recent of content and insights to help customers Fee-free study we conducted, we learned that millen- optimise their money.” Pepper says it will enable its customers nials check their bank accounts at least once to fully manage their banking via smart - a week, and that over 40% use digital bank- Design thinking phones, and that it has no ongoing chequeing ing services. Also, most users surveyed said The bank worked with Denmark-based account-management fees, as all basic bank- their banking app is more useful than their Designit to develop its products and cus - ing transactions are free. It will only charge credit card app.” tomer service experience using what it terms for ‘exceptional’ items, which it defines as “Financial institutions today are facing ‘design thinking’ methodologies. The process ‘special activities and services that you most rapid and irreversible changes across tech- involved interviewing consumers about their likely won’t use very often’. nology, consumer behaviour and the econo- needs and behaviours related to money. “Most traditional banks use digital chan- my,” Bar-David continues. “The industry is To make Pepper more attractive to millen- nels as an extension of their existing services,” suffering from a heavy lack of trust. There’s nials, the bank partnered with Israeli digital Pepper’s CEO Lilach Bar-David tells RBI. a demand from consumers for a Google- or authoring software vendor Playbuzz to pro- “They basically take their existing banking Facebook-like simplicity in their banking vide personalised, interactive content, includ- products and try to fit them into smaller experience. ing polls and quizzes for its banking app. screens. However, Pepper was designed for “This has led to a banking products revo- “If we can produce clear content that will the needs and lifestyles of millennials. lution – a new breed of technology-driven make people understand their credit and “Applying a user-centred approach that and consumer-centric financial institution- payment options, and provide them with includes on-going co-creation, ideation and challenger banks. alternatives, we can create a banking experi-

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RBI 735.indd 5 22/02/2017 15:50:50 STRATEGY: BANK LEUMI Retail Banker International

ence that people will like and want to return lyst Aurélie L'Hostis. Leumi and Temenos agreement with 695 staff to take early retire- to,” Bar-David said in a news release. are working with Deloitte and Israeli IT ment on 30 December 2016, as well as a “Content will be at the helm of our com- firm Matrix on the deployment of T24 and branch merger program. munication with users. The goal is to be rele- Temenos Connect. During the next five years, an additional vant – both with our content and in the form According to Let’s Meet Pepper, Bank- 640 employees are expected to retire from of presentation, which is similar to ing Services of the Future by Hickry Leumi within the framework of normal how users consume content today.” Meirav and Revital Cohen, respec- retirement, the bank says. “Banks suffer from a relatively tively partner and manager at “Israel is globally renowned for its entrepre- negative image due to the nature Deloitte’s FSI Solutions/Technol- neurial, innovative startup scene leveraging of the industry and the associated ogy Advisory Services, Leumi’s the country’s unique advantages such as red tape,” Yael Shafrir, Playbuzz’s major challenge in the new digital small size, high mobile engagement, avail- GM Middle East, Eastern Europe banking era was to become agile ability of talent in areas such as Big Data, and Africa, tells RBI. “They also enough to support a quick reaction machine learning, and cybersecurity, an find it hard to connect with their audi- to market opportunities. unparalleled R&D budget, and a buoyant ence on a personal level. One of the main “Since [Leumi’s] legacy core system lacks venture capital scene,” says Zink. goals in our collaboration with Pepper was the ability to integrate changes within a short “Fintechs have been growing in this envi- to create a more meaningful, positive user timeframe and at reasonable cost, it was ronment, however more with an eye to the experience through personalised content, decided not to use Leumi’s mainframe but international market than the domestic mar- which will in turn be translated into a more to implement Temenos’s T24 solution,” the ket. The Israeli banking system, on the other positive view of the brand overall. Deloitte consultants wrote. “Regulation was hand, is dominated by large banks with little “Imagine customers using Pepper’s app on one of the project’s main concerns. room for challengers to penetrate the market, the day they receive their salary, and engag- “The complex and increasing Israeli regula- due to regulatory constraints. ing with a piece of content in the Pepper tion requirements have defined a major gap “While digital banking has been a key pri- app that provides the top 10 ways to plan a between T24’s off-the-shelf capabilities and ority for Israeli financial institutions, the budget. This is a friendly approach to a seri- the required solution for Pepper services and state of the industry doesn’t differ much ous topic, and will be presented in an inter- architecture. Since our goal was to maintain from other markets with conservative regula- active format that encourages social sharing. as minimum developments as possible, this tors,” Zink continues. “Although almost all “By integrating Playbuzz’s content technol- challenge was even more complex.” transactions can be done digitally, the regula- ogy, Pepper is able to study users’ content Deloitte provided guidance to Temenos in tions still mandate that consumers come to preferences based on interactions with pre- complying with Israeli regulatory require- a branch for high-value transactions or for vious items, and create a more personalised ments, Meirav and Cohen wrote. opening an account – mandating some form content experience moving forward,” Shafrir “Temenos has made great strides and of physical presence. continues. investments to support the digital transfor- “In January 2016, the central Bank of Israel “In addition to the high relevancy level, mation of its customers,” Tom Zink, asso- (BoI) published new online banking policies the interactive formats add a gamification ciate research director of IDC Financial allowing existing customers to open bank element, making the content-consumption Insights EMEA, tells RBI. accounts online or change their bank, with- process more enjoyable, and increasing key “This strategy has been a key prior - out the need to come to a branch. engagement key performance indicators ity for the last few years, and ties together “While there have been attempts to liberal- including dwell time and completion rates. Temenos’s more recent focus on customer ise the financial sector, the reforms have been “Our experience in working with finan- experience, omnichannel capability, action- moderated by mandates from the BoI, such cial services brands shows a strong need for able data analytics, and a fintech collabora- as minimum capital requirements and licens- engaging content in this environment,” Shaf- tion platform with its world-class core bank- ing requirements restricting smaller platform rir adds. “American Express and Halifax ing system. Temenos has enabled a number and service providers’ market access,” Zink have created interactive content campaigns of traditional banks to launch a digital- or explains. with Playbuzz, successfully reached their mobile-only offshoot.” “Currently, the BoI is in the process of lib- target audience, and created a well-targeted, eralising the credit sector, forcing large banks meaningful dialogue.” Digital division to divest their credit card companies, allow- In June 2015, Leumi established a digital ing access to new acquirers and potentially Temenos division which is overseeing the develop - allowing credit card companies to apply for In August 2015, Swiss banking software ven- ment and launch of Pepper. The digital full banking licenses. This could result in the dor Temenos signed a multi-year agreement division is also responsible for the bank’s first ‘new’ banks in decades. As today all to supply Leumi with a new core banking Leumi Card credit card subsidiary, as well credit providers are backed by large finan- system based on the Temenos T24 platform as for Leumi’s marketing department, busi- cial groups, it is no surprise that Pepper is and the Temenos Connect digital channel ness development department, and Big built on the back of Leumi to take its digital software. In the first phase of the contract, Data activities. transformation to a new level.” Temenos has provided Pepper with T24 As of January 2016, over 60% of Bank and with Temenos Connect, and the soft- Leumi’s customers used digital channels to Small market ware will gradually be rolled out across all carry out their banking operations, with “The Israeli financial sector is a relatively Leumi’s business lines, replacing an ageing approximately 52% processed through small, local market consisting of a small legacy core system. digital channels, the bank said in an investor number of major Israeli banks, insurance “It’s great news that Leumi is building statement. companies and institutional investors,” says its digital bank Pepper on a new technol - Leumi’s digital banking plans are part of Zink. “These are often perceived by the pub- ogy stack,” says Forrester Research ana - its efforts to reduce costs, which include an lic as slow-moving and conservative.

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RBI 735.indd 6 22/02/2017 15:50:50 Retail Banker International STRATEGY: BANK LEUMI

“Banks have understood the potential of “It’s interesting to speculate on whether, in of most banks’ customer base, but over time cost savings from digital transformation, and the long term, a fee-free approach with digi- they will become a significant part of a retail the sector is moving towards a level where tal-only touchpoints and relying on analytics bank’s customer base and offering. almost all transactions can be handled digi- for the personalisation of customer service “It sounds like Pepper will be capturing a tally. Banks have partnered with fintechs will be more profitable for Leumi than a lot of data on its customers so it can offer to stay on top of the digital transformation traditional approach which has to cover the them lending products via their mobile process, launching new products and chan- cost of the branch network and employees,” phones,” says Greer. “This is unique and isn’t nels such as virtual branches, contactless Freeborn continues. being done by many other digital banks, with payments, robo-advisory services, and social “But the fee-free regime suggests that the exception of innovators such as Poland’s media analytics – but nothing we haven’t Leumi will encourage its own customers to mBank. But what we’ve seen is that very few seen in other markets.” move over to the digital-only model. digital-only banks are profitable yet.” “Large Israeli banks are also collaborat- “In any case, Leumi is positioning itself for International retail banking consultant ing with Israeli fintechs to test cybersecurity, the generation of bank customers who are David Cavell warns that the limited size data analytics and mobile applications, and most comfortable in a digital setting. Bear- of the Israeli domestic market may restrict are partnering with startup funds such as Ele- ing in mind that the infrastructure will be the Pepper’s growth, citing the example of imag- vator Fund and Microsoft Ventures. This is a same as for Leumi, the product set is also inBank, the digital-only bank launched by massive change for the Israeli banks, which likely to be similar, at least initially.” Spain’s CaixaBank in early 2016. traditionally developed most of their infra- “CaixaBank has 3.1 million millennial cus- structure and apps in-house,” adds Zink. Sandbox tomers aged 18-35, and this represents 30% “Their mindset is changing towards an “For a variety of reasons, banks globally will of its customer base,” says Cavell. “Also, understanding that banks need to open up consider the idea of offering a digital subsidi- Spain has a population of around 48 million, from business, cost-efficiency and innovation ary that gives them a sandbox,” says Stephen compared to Israel’s eight million. In a mar- viewpoints. So it’s no surprise that applica- Greer, banking analyst with US-based Celent. ket like Spain that offers large enough scale, tion programming interfaces are also on top “The digital subsidiary is able to free itself it makes sense for a large, well-resourced and of the Israeli banks’ agenda.” from its parent’s legacy technology while technologically proficient bank like Caixa- Lawrence Freeborn, research manager, offering a digital proposition that lets it enjoy bank to create a standalone proposition. European banking at IDC Financial Insights better use of data. “The new sub-brand, imaginBank, will EMEA, notes:“It’s interesting that Pepper “The digital bank also has a more flexible pull customers who weren’t previously with isn’t planning to charge any fees; Leumi, operating model and greater modularity, so CaixaBank, while existing customers who Hapoalim and other Israeli banks charge it can experiment with more modern and weren’t engaging with digital banking may for a long list of common tasks. So, for the advanced products and services,” adds Greer. migrate to the standalone bank as they find domestic Israeli market, a fee-free approach “Most banks that create standalone digital its premise attractive. could help Pepper get off the ground. propositions are using them as a potential “The reality is that setting up Pepper may “Pepper is at an advantage compared to long-term strategy for millennial customer cost a large amount of money as Leumi has independent challenger banks across Europe acquisition or to move existing mobile-first had to use external vendors, and Pepper may in that it has the backing of Leumi and so can customers to a digital proposition. Mobile- not be financially viable due to lack of scale afford to compete in this way.” first customers are still only a small portion in the Israeli market.” < Designit part of Pepper from day one The entire product-service experience of Pepper was can always reach out to real bankers and service developed using ‘design thinking’ methodologies. representatives if they need help. Insights like these, guided Designit as it worked to design The Designit team was part of Pepper from day one, Pepper’s products and services. Every Pepper working closely together to ensure a human-centred product, service, feature, and experience was approach that puts customers first at every step of developed this way. the journey. There was the added aim of wanting to challenge As a global strategic design firm specialising in the status quo of branding design. As a brand built digital and business transformation, Designit’s from a digital product, Pepper’s design is based on a experienced, multidisciplinary team of strategists, unique RGB colour palette that cannot be duplicated designers and technologists from around the world for print, meaning it is purely digital. – the US, Spain, Denmark, France, the UK, Colombia, Norway – led the innovation process. While most banks use single, solid colours for their brands, Pepper uses a range of vibrant colours and a Designit worked closely with Pepper’s product, rich visual language, that makes it stand out in the marketing and development teams to define and banking design scene and deliver on its promise to design an entirely new banking experience. ❙❙Pepper in beta testing, Bank Leumi provide an innovative range of products, services, Designit also engaged with consumers to discuss and experiences. their financial needs, to see how they manage their it into a savings account. Many people consider The detailed design work is also reflected in money, and understand what bothers them about making a smart purchasing decision, using a Pepper’s typography. Its font is custom-made, banking services today. Designit learned about their discount or a coupon as great way for saving money simple, and bold to reflect Pepper’s direct tone lifestyle, and how today’s banking solutions do not and making the most of it. and style. The goal is to design an experience that help them achieve their goals. It also learned that even though many consumers not only provides solutions to customers’ financial During the process, the Designit team learned that prefer to use digital channels for banking services, needs, but is also easy, fun, and similar to other saving money does not necessarily mean depositing it is also helpful and reassuring to know that they digital products and services. <

www.retailbankerinternational.com March 2017 y 7

RBI 735.indd 7 22/02/2017 15:50:51 DIGITAL: EQ BANK Retail Banker International

Canada’s EQ Bank proves to be a hit with digital-only savers Canadian digital-only bank EQ Bank was inundated with applications when it launched its high-interest Savings Plus Account in January 2016. Can it maintain its momentum, or will its lack of credit products adversly affect sign-up volumes? Robin Arnfield reports on this new offering

Q Bank is the mobile-only offshoot identity. Then you can link your account EQ Bank was set up by Dickinson, who of its Toronto, Canada-based parent at another financial institution to your EQ was previously MD, online and mobile Equitable Bank, which has C$17bn account and transfer funds electronically Banking Canada at BMO Bank of Montreal. E ($12.96bn) in assets under manage- between the two accounts.” “I joined Equitable Bank in October 2013 to ment and offers mortgages and set up its digital operation EQ Bank from savings products through a net- “The first thing we Initial target exceeded scratch,” says Dickinson. work of brokers across Canada. needed – and luckily “EQ Bank beat its first- At launch, EQ Bank offered this was in place year target by around Single product a savings rate of 3%, but it has 160% in its first three Currently, EQ Bank does not offer joint since cut this rate to 2%, which is before I even got months,” says Stephen accounts, and its only product is the Savings still higher than other Canadian here – was the right Greer, banking analyst Plus Account. EQ Bank says on its website banks offer for instant-access management team with US-based Celent. that it plans to offer joint accounts and Tax- savings accounts. As of January “In fact, it had to start a free Savings Accounts (TFSAs). 2017, EQ Bank had received and board oversight” wait list for new custom- “We can offer any kind of savings product,” over C$1bn in deposits and had Dan Dickinson, VP digital banking, EQ Bank ers. I think EQ Bank’s says Dickinson. “Our roadmap includes 27,000 customers. popularity is a combina- Registered Retirement Savings Plans, Guar- Customers open their accounts totally digi- tion of its high interest rate and also the fact anteed Interest Certificates, and TFSAs, as tally, although they have to send a cheque for that, unlike the US, there are not a lot of our customers are asking for these. It’s about their initial deposit to EQ Bank. other direct banks in Canada. prioritising what we do next – it’s not just “You can take a photo of this initial cheque Currently EQ Bank’s three main Canadian new products but also more functionality for on your phone and send the image to us,” direct bank rivals are Zag Bank, a subsidiary the products we already offer. For example, says Dan Dickinson , EQ Bank’s vice-pres- of Quebec-based Desjardins; PC Financial, we offer the ability to have pre-authorised ident of digital banking. which is provided by CIBC and Canadian transactions on your account such as having “The cheque, which can be for C$1, is just to retailer Loblaw Companies; and Scotia - your salary deposited directly and reoccur- prove that another bank has validated your bank’s Tangerine subsidiary. ring bill payments.”

n RETURN ON EQUITY 2011-2015 (%), CANADA n COST INCOME, CANADA – EFFICIENCY RATIOS n ASSETS GROWTH, EQUITABLE BANK – ASSETS – EQUITABLE BANK VS PEERS EQUITABLE BANK VS PEERS 2015 (%) UNDER MANAGEMENT 2006–2015, (C$BN)

Canadian bank average 100 20 20 Equitable bank

80 15 15 60

10 10 40

5 20 5

0 0 RBC NBC CIBC 0 Bank Tornoto Bank of 2006 2008 2010 2012 2014 2015 EquitableCanadian Scotiabank Laurentian Dominioon Montereal 2011 2012 2013 2014 2015 Western Bank

Source: Equitable Bank Source: Equitable Bank Source: Equitable Bank

8 y March 2017 www.retailbankerinternational.com

RBI 735.indd 8 22/02/2017 15:51:09 Retail Banker International DIGITAL: EQ BANK

“The Savings Plus Account is a hybrid sav- n EQUITABLE BANK – TOTAL CUSTOMER TARGETS n EQUITABLE BANK – BALANCE TARGETS VS ings and chequeing account with no monthly VS ACTUAL, LAUNCH TO END SEPTEMBER ACTUAL, LAUNCH TO END SEPTEMBER (C$M), bank charges,” says Dickinson. (THOUSANDS), 2016 2016 “It lets customers carry out as many bank- ing transactions as they want for free, such as deposits, bill payments and electronic 30,000 1.0bn fund transfers. Most other Canadian banks 25,000 either charge a fee for these transactions or 800m don’t offer them on their high-interest sav- 20,000 ings accounts. We think that our customers 600m find the concept of a hybrid chequeing and 15,000

savings account attractive. The concept of 400m separate chequeing and savings accounts is 10,000 really out-dated.” 200m EQ Bank customers can make up to five 5,000 free Interac e-Transfers a month. Interac 0 e-Transfer is the person-to-person email 0 payment service offered by Canadian debit Target Actual Target Actual scheme Interac. According to Dickinson, most customers do not exceed five Interac Source: Equitable Bank Source: Equitable Bank E-Transfers a month. special regulatory requirements. “We plan to “We used Deloitte Digital to help us cus- Cards approach the Quebec market in due course,” tomise the front-end user interface based on Currently EQ Bank does not offer ATM, says Dickinson. Temenos software,” Dickinson tells RBI. debit or credit cards. “We’re considering “We realise that right now we’re not the “We didn’t want our customer interface to offering customers the ability to make pay- primary bank for our customers,” says Dick- be the same as all the other banks’ mobile ments direct from their EQ accounts by tap- inson. “We’re a secondary savings bank for and online platforms. We started out mobile- ping their phones at a POS terminal and them. Unlike other Canadian direct banks, first, so this informed our design thinking, accessing a mobile wallet – either our own we don’t play promotional games with our whereas the big banks started with online or a wallet provided by someone like Apple interest rate. Our rivals will offer a higher and then moved to mobile. Pay or Samsung Pay,” says Dickinson. rate, but only for new customers or for new “Our user interface is designed for mobile- “We’re not planning to offer plastic cards deposits by their existing customers. We first users with a small screen, and uses dif- if we can help it, since virtually all our cli- have the same interest rate no matter what ferentiated font sizes and highlights the key ents use mobile banking. As our clients are the balance is on your account.” pieces that clients need.” so mobile-centric, we would like to Celent’s Greer says that while EQ offer mobile payments. Cana- “At a Bank’s initial adoption figures Other digital-only start-ups dian consumer behaviour is smaller bank have been impressive, the “There is more interest in mobile-only banks changing, and in downtown it’s easy to know bank needs to offer a wider in Canada now, as people have seen our suc- Toronto or Vancouver a lot who needs to be in on a product set. “They need cess when we launched and realise there is an of people pay in stores by to be able to offer loans opportunity to take advantage of consumers’ tapping their phones or decision. Decisions don’t to complete the financial mobile adoption,” says Dickinson. contactless cards. need half a dozen meetings management experience “I think we will see more mobile bank “However, it remains to and sign-offs and and generate a revenue launches here. The Big Six will likely offer be seen whether we can stream,” he says. digital-only banks in the non-Canadian mar- offer payments without plas- pointless paperwork” “We currently have no kets where they operate – they would do that tic cards. ATM access is diffi- Dan Dickinson, VP digital banking, plans to offer credit products first before launching digital-only banks in EQ Bank cult if you don’t offer cards. Most through EQ Bank,” an EQ Bank Canada.” Canadian ATMs include an NFC spokesperson tells RBI. Dickinson notes that consumers can keep antenna, but they haven’t been switched on Currently, EQ Bank customers interested accounts with a Big Six bank, but have at yet.” in mortgages and home equity lines of credit least one banking product with a non-Big Six have to click a link on the EQ Bank website bank. “It’s good for Canadian consumers if Demographics that refers them to Equitable Bank. there are digital-only banks competing with “We didn’t really go after millennials,” says the Big Six banks,” he says. Dickinson. “It was more psychographics Temenos In August 2016, Canadian broadcaster than demographics. We go after mobile-first EQ Bank used Swiss banking software ven- CBC reported that Ontario-based Merid- consumers primarily and have attracted a dor Temenos’s T24 platform for its core ian Credit Union plans to obtain a licence broad range of ages. People who are com- banking system, as well as Temenos analytics for a Canada-wide bank. The CBC said fortable with using technology to take con- and digital channels software. According to Meridian’s new bank, which is not expected trol of their finances range across all age Temenos, being able to examine and analyse to begin operations until 2018, will initially groups. We find our customers are clustered customer data is critical for EQ Bank. offer only digital channels. in large urban centres.” “We’re putting data at the heart of every- However, Meridian reportedly plans to EQ Bank is available across Canada with thing we do,” the white paper quoted Dick- selectively build a few branches for the new the exception of Quebec, where there are inson. bank in the years following its launch. <

www.retailbankerinternational.com March 2017 y 9

RBI 735.indd 9 22/02/2017 15:51:12 DISTRIBUTION: BCR Retail Banker International

BCR brings the digital touch to Romania’s branches

Banca Comerciala Româna (BCR), a member of the Erste Group, is Romania’s biggest bank in terms of asset value, client base, savings and lending. However, it has struggled to match consumers’ developing digital needs. As a result, BCR has overhauled its branches for a new technological age. Patrick Brusnahan writes

s of June 2016, BCR had 511 customers, as technology is the tool that “We aimed towards a double goal: to con- branches in Romania. That is a lot responds to the growing need of staying solidate our relationship with existing cus- of space to develop, but BCR real- connected, always being available, flexibility tomers and to increase our portfolio with ised something needed to be done. and promptitude,” states Mihailescu. new active, transactional customers.” A Since launch, these services have seen var- Speaking to RBI, Irina Mihailescu, head of retail channels evolution at BCR, says: “The ied amounts of success. While the average The way forward rapid evolution of technology number of transactions per month Redeveloping a branch network is no and its increasing adoption on the interactive tables is easy or quick feat. From concept to public rate brought significant 90, the amount of busi- launch, the process took BCR close to eight changes into the ness reservations at months. This included aligning timelines behaviour of the the Hub is 15, and with stakeholders, providers and software people: They so far there have developers. now want eve- only been eight “The first steps towards building the con- rything fast, video-banking cept of the digital branch was to select the simple and calls a month. most suitable unit from our network that convenient. While was meant to undergo a radical change in For both some cus - design and customer flow,” Mihailescu says. new and tomers hap- “The branch had to be easily reached by existing pily switched people used to technology, open to digital, clients, it from face- and willing to change their financial inter- is highly to-face inter- action behaviour. A central unit, located in important action in a a crowded crossroads, right in the heart of to innovate branch to more Bucharest, was the perfect choice.” and perpetually digital offerings, An ambitious project such as this comes reshape the cus- Mihailescu notes with its own share of challenges. Adapting tomer experience, that some customers to new technology is only the beginning. A to meet their evolving were more reluctant. bank would need to reshape the entire cus- ❙❙The old-style branch needs and expectations.” She explains: “The digital tomer experience around the new technology, Developments included inter- branch was designed as a gateway rather than just bolting it on. active tables for services, ID scanners for between the physical and digital worlds. Additionally, staff need to be trained on authentication – which save more than 80% “We brought technology and integrated it how to use the new offering and on how to of operational time according to BCR, a in every touch point of the customer journey pass that knowledge onto the customer in a Business Hub, and video banking booths. so that those that still prefer branches as a reassuring way. “We built the concept on the premise of main channel for banking would get used to “We realised that equipping the branches embedding technology into the lives of our digital in a seamless way. with devices and going through a facelift

10 y March 2017 www.retailbankerinternational.com

RBI 735.indd 10 22/02/2017 15:51:15 Retail Banker International DISTRIBUTION: BCR

However, with the market constantly raving about how digital is the future, is such a large-scale investment in physical channels a good idea? Globally, branch closures are a common occurrence. Since the beginning of the year alone numerous banks, including Wells Fargo, HSBC and Sabadell, have announced branch closures. Is this too little too late? Mihailescu says: “As customers can han- dle a major part of their banking business through other channels, the need to visit branches regularly is decreasing. However, the branches still play an important role in customer relationships.” She continues that the key is to ensure that the services are up to the standards required. If the new services do not function immedi- ately, the likelihood is that the customer may never use them again. However, new offerings cannot simply match up to previous experiences. They not only need to be easier and quicker, but ❙❙The in-branch video wall also more memorable and convenient. “We consider ourselves more than just a is not sufficient in offering a user-friendly Keeping ahead bank, but a real partner for our customers experience to our customers,” Mihailescu BCR wants to retain its position as the lead- and society,” Mihailescu adds. explains. ing bank in Romania, and this new branch “Of course, the market has shifted to digital “Sometimes we are confronted with weak concept is part of that. across the world, but we put real value on financial education or reticence to technol- “Our stake is to maintain our number customer satisfaction and customer relation- ogy from our customers, which needs to be one position on the Romanian market, and ships. addressed in a different manner. Our aim is for this we need to constantly set a higher “While transactional banking migrates to to be more than a big bank in Romania, but standard for everything that impacts our cus- online and self-service, our branches will be a partner for our society, an important driver tomers: the range of products and services, an integral part of a new social interchange, for financial inclusion and education in our customer experience and customer journey,” improving the quality of services. community. states Mihailescu. “Customers will be better informed about “Therefore, we planned to promote and “The branch network is an important fac- competitive products, increasingly comfort- educate both customers and staff to adapt to tor in terms of the way we are perceived. The able using the different distribution channels evolving technology, by organising workshops launch of our digital branch created a buzz available, as a response for their expectations and dedicated sessions focused on financial in the market, setting a new benchmark in in terms of the level of responsiveness, advice, education. All staff are being trained to become terms of in-branch customer service and and service they receive from us,” Mihailescu ambassadors of digital channels.” experience.” concludes. < BCR’s new branch features

• The video wall, a large-scale digital display, side opening hours an advisor from a central allows customers to watch useful tips and contact centre is able to provide general or tricks on using banking services, and be made personalised information about products and aware of announcements and current promo- services, or offer guidance on the branch’s tions and special offers; functionalities via a video link. The advisor can also share information and perform demon- • A digital information display enables all man- strations. The service will be extended to other datory announcements to be displayed on a channels of interaction, so customers can digital screen; access it by mobile phone or home computer;

❙❙The new-look Experience branch • Free access to Wi-Fi installed in branches ena- • The Business Hub is an innovative meeting • Printed materials such as leaflets or brochures bles visitors to either navigate the internet or -room concept, fully equipped with technology, were replaced with an interactive table, where download and use BCR apps; devices and protocol items which can be used all product information is available to either by customers to meet business partners. Sev- browse on the spot or send home via email. • Video assistance is a new and exciting service eral branches have unused areas that will be Customers can also access loan and savings currently available only in digital branches, transformed into a dedicated space, increasing simulator tools, or play games; allowing extended advisory programmes. Out- the range of non-financial benefits offered. <

www.retailbankerinternational.com March 2017 y 11

RBI 735.indd 11 22/02/2017 15:51:18 RESEARCH: FAIR BANKING Retail Banker International

The fintech effect: Are UK banks finally buying in to the benefits of boosting financial well-being?

For the first time since the global financial crisis, the banking sector is showing signs of putting the financial well-being of customers at the heart of its products, according to the2017 Fairbanking Ratings Report. Douglas Blakey takes a look at the findings and reports back on the sector’s efforts

intech innovators have set a new stand- send a reminder that customers are near the financial well-being of their customers. In ard in focusing on customer control their credit limits; 2008, banking could have been compared to and experience in their products, and • No analysed credit card has a function a cocktail bar, pushing drinks at customers now the established banks are starting that easily shows how long it will take who’d already had enough. F “Since then, fintech has managed to bring to follow suit. someone to pay off their debts, and After previous reports by UK charity the • Only one credit card analysed allows many in the sector to focus on the needs of Fairbanking Foundation identified low levels customers to set a budget for different customers. It’s time now for all providers to of customer focus, over the last three years it spending categories. join the party and use the momentum behind has recorded an increase of 57% in its rat- Capital One is the highest-rated provider this positive change for the good of their cus- ings of current and savings accounts prod- in this area, with a four-star rating, following tomers. ucts that now include more features that put assessment and certification in 2015. RBS/ “In the meantime, the Fairbanking Mark customers in control of their money. NatWest also has a product with many new will continue to guide people to those finan- Overall, fintech challengers achieved the features, and has been granted a three-star cial products that are best designed to active- best ratings in three of the eight product cat- Fairbanking Mark following assessment. ly help their financial control and, ultimately, egories: U Account was crowned as the top In the regular savings product category their well-being.” current account with no overdraft, Squirrel Squirrel has taken over from RBS/NatWest Alex Letts, CEO of U, tells RBI: “Fairness won top regular savings account and Osper as the provider of the highest-potential-rated in banking is largely down to transparency in topped children’s savings account. product. Barclays launched many new fea- pricing. The fact that those struggling finan- But established banks also ranked highly tures at the end of 2016, and its account cially subsidise wealthier customers to get by introducing new fintech features to their has the potential for a five-star Fairbanking truly free banking is undemocratic. products, such as Clydesdale Bank’s B cur- Mark. “This report recognises we are giving peo- rent account, and Barclays. New products analysed for the first time ple an opportunity to improve their financial • The boom in tech disruption has shown by the Fairbanking Foundation included well-being. U’s transparently priced account, Don’t have online account details? bigger financial institutions the oppor- student current accounts, children’s savings where you pay for what you use, can become tunities to be seized by increasing cus- accounts and mortgages. The Fairbanking a flagship for a new type banking in the UK,” tomer control of finances. Features such Foundation found that there are serious pit- he adds. You and your associates may be entitled to online as spending and savings trackers, bal- falls in many of these products, especially Overall, the report is upbeat, and Elliott ance reminders and critical-level alerts, when it comes to student overdrafts and says that a tipping point has been reached login credentials. The benefits of full online are increasingly being embraced; mortgages available to first-time buyers. in the provision of retail banking services: access are as follows: • Almost all current accounts analysed All are particularly important for less afflu- “A combination of financial technology, regu- now alert customers when the balance ent customers – and all have the potential for lation, competition and insight from behav- is near the overdraft limit; significant improvement. ioural economics means that customers now • Timely daily news updates • Almost half of analysed savings The report finds that many children’s sav- have the right to expect better products and accounts now let customers set their ings accounts do not make the most of the services. That applies as much to less sophis- • Access the latest analysis individual savings goals; extensive technology available on the mar- ticated or less affluent customers as it does to • Monthly editions sent directly to your inbox • 45% of analysed current accounts can ket to support features that encourage saving those who are wealthier or better informed. tag expenditure according to category – habits from a young age. “Fortunately, there are signs that this mes- • News alerts direct to your inbox eating out, petrol or groceries; For the moment, established product pro- sage is now being taken seriously.” • Customers can set their own budgets viders are lagging behind new fintech-based He concludes: “This is an exciting • Comments from key industry influencers and leaders for different categories with more than entrants like Osper and goHenry. It is par- time. Although there have been significant a third of analysed accounts; ticularly disappointing, says the report, that improvements in the quality of the financial • Search for specific, relevant content • Despite the many improvements, pro- the transition from a children’s account to an products on offer, with more on the way, • Access the archive gress amongst credit card issuers has adult account is still not treated as an educa- there is still much to do. slowed in the last three years, due in tional opportunity by providers. “More innovation to assist those that part to the fact that many providers are Antony Elliott, chief executive of the Fair- are not so technologically savvy is needed, not embracing the technology available banking Foundation tells RBI: “The evi- interlinked with overcoming some custom- To create or activate your account please contact: as readily as the rest of the industry; dence shows a dramatic shift in the way that ers concerns about the security of online • 40% of analysed credit cards do not providers, large and small, are focussing on accounts.”< [email protected] 12 y March 2017 www.retailbankerinternational.com www. www.privatebankerinternational.com

RBI 735.indd 12 22/02/2017 15:51:36 Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 Retail Banker International SECURITY: HOOYU

What stops customers from opening accounts online?

While the variety of digital options for opening a bank account, whether online or mobile, seems to expand by the week, consumers are still not fully on board. Why? Patrick Brusnahan looks at a new study by HooYu

n its Online Banking Benchmarking tablets in its bricks-and-mortar locations. Compared to previously acquired data, Report, HooYu asked five UK banks This allowed customers to open accounts Banks B and D had significantly decreased about their online account-opening digitally without waiting to see a member of the time taken to open an account online. I success rates. staff. This accounted for 70% of its “new to This was attributed to: The largest rise in online account opening bank” current account demand. • A shorter form attempts was recorded by Bank E – all the The most popular channel for digital • Fewer pages in the application, result- banks in the report were anonymous – which originations was either a desktop or laptop. ing in fewer data packets having to be saw a 50% growth in volume from the previ- Applications over smartphones and mobile sent between the customer and the bank ous year, although this can be put down to tablets did record rise, in attempts, however. meaning pages loaded faster starting from a low base rate. No bank was able to state whether Android • Better UI including more drop downs Bank B, one of the big four, was able to or iOS devices were driving more of the and fewer free text fields deliver a sizeable growth in online account- growth. Bank A said: “On average, this reduced opening attempts of 23.1%. time spent opening an account from 45 min- Bank A was not able to give precise data How long does it take? utes dealing with a colleague in branch, to for the previous year, but stated that it was The average time taken to open account 10 minutes.” “double the equivalent number from this time across the five banks was 14 minutes and 24 Across all banks, the average completion last year”. seconds. rate for online applications was 53%, mean- However, the bank stated that its increased Banks A, B and C beat this average, with ing nearly one in two applications do not see online account-opening volume was driven Bank D just missing the cut. Bank E had a completion, and as a result, metrics such as through in-branch innovation by installing much longer journey time. cost per acquisition are being inflated.<

Don’t have online account details?

You and your associates may be entitled to online login credentials. The benefits of full online access are as follows:

• Timely daily news updates • Access the latest analysis • Monthly editions sent directly to your inbox • News alerts direct to your inbox • Comments from key industry influencers and leaders • Search for specific, relevant content • Access the archive

To create or activate your account please contact: [email protected]

www. www.privatebankerinternational.com

RBI 735.indd 13 22/02/2017 16:56:42

Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 GUEST COMMENT: CYBER ADAPT Retail Banker International

Is the Tesco Bank hack the wake-up call to make mobile security a priority? The scale of the Tesco bank hack was unprecedented and shook the industry to its core. Kirsten Bay, president and CEO at Cyber adAPT, looks at what happens next, what vulnerabilities have been exposed, and what lessons the industry can take away from the incident and its effect on consumer attitudes

he recent Tesco Bank hack has left the retail banking world reeling, search- ing for answers and more effective T ways to secure networks against future attacks. It has been revealed weaknesses in the bank’s mobile applications left the door open for cybercriminals to brute-force their way in and take more than £2.5m of custom- ers’ money. Worse still, the bank had been warned by several security experts of this weakness prior to the attack.

How Tesco got it so wrong It was the largest ever cyberattacks on a UK bank. One of the most significant things about the Tesco hack was that customer accounts were penetrated forcefully without any cre- dentials, which has not happened before. ❙❙Kirsten Bay, president and CEO, Cyber adAPT Cybercriminals broke into Tesco Bank’s com- morning and finding your bank account is Platform firewalls can easily be misconfig- puter system and stole £2.5m from the current completely empty. ured, creating backdoors for hackers to find accounts of 9,000 customers. Tesco had a responsibility to protect its vulnerabilities and exploit them. The more The result was the scenario many people customers and, by not doing so, has created complex the network, the greater the likeli- are most afraid of, that of waking up one an erosion of trust. hood they will make it in undetected. What has tarnished consumer trust is the The expert’s view revelation of vulnerabilities that penetration The edgeless perimeter Mobile platforms must be treated as an extension testers had warned Tesco of several times Risks are now increasingly extending beyond of the network prior to the hack. the perimeter to the individual user via social Securing devices and the traffic they create needs While we now know Tesco was aware of engineering. We have already seen compro- to be treated in the same way you would treat the cracks in its security perimeter, it is clear mised chip sets, backdoors in operating sys- devices within the traditional network perimeter. that it either was not aware of the poten - tems, and rogue apps placing malware on the Just like locking your doors every time you leave tial scale of the attack, or it simply was not device. the house, you would never set up a network equipped to deal with a cyberattack on this The greatest element of concern in 2017 is without a firewall – but firewalls are no longer level. how expanded attack vectors allow for lat- enough to protect the ‘edgeless perimeter’. In a moment of malicious compromise, eral movement, with the bad guys looking to What happened to Tesco could happen to any Tesco should have had the appropriate detec- utilise mobile platforms as a means of gain- company, of any size, in any sector tion and remediation protocols in place to ing access to the core of the network. Financial services are accustomed to being in their stop the hackers before they could remove While the Tesco Bank breach will elevate own seemingly secure bubble. Now, however, that actual money from customer accounts. security further towards being thought of as bubble has well and truly burst. Devices connected a high-ticket item, many are left questioning to each other via not only mobile networks but Keeping pace with multiple threat vectors how the industry will act together to resolve the Internet of Things have expanded the risk of With the increasing number of connected the issue. all customer devices becoming compromised or devices for cybercriminals to exploit, there Like the Heartland breach in the US in attacked. are more threat vectors than ever for compa- 2015, the company thought it was fully com- The financial services industry has a great nies to protect. pliant and was still compromised, resulting responsibility to safeguard people’s money, It has never been so easy for cybercriminals in a year-long rehabilitation campaign. and it is heavily regulated because of this. It is to obtain confidential information. With the Instead, we should be asking what the imperative, therefore, that it goes further than just basic blocking and tackling of threats within proliferation of mobile devices, social media industry is doing wrong. The industry at the firewall to encompass the new attack vectors and social engineering, there are now a mil- large has not embraced the notion of hyper- associated with the myriad connected devices.< lion and one ways to reach an individual and connectivity, which means users and clients gain the keys to the kingdom. alike are all individual vectors of threat. <

14 y March 2017 www.retailbankerinternational.com

RBI 735.indd 14 22/02/2017 15:51:43 Retail Banker International GUEST COMMENT: SAXO BANK

Financial services is about Triple-R KYC: Really, Really, Really Know Your Clients

The next generation of digitisation in finance will propel the industry into the knowledge economy. More specifically, financial services can look forward to using a more contextual knowledge and understanding of their clients. Chris Truce, director of platform development at Saxo Bank, looks at the KYC process

ow much time do your customers How might this translate to digitised continue to push the boundaries, explor- typically spend on your website? financial services? ing the opportunities of digitisation to bet- And what are you doing to encour- Self-evidently, by really really really getting ter understand and fulfil clients’ needs and age them to engage more frequently, to know your clients, you are better placed desires. H Big data analytics and artificial intelli - invest more time with your brand and use to serve them. more of your services? Even if you’ve created If you know your client has a particu - gence programmes that have been honed in a dynamic, customisable user-interface, you lar interest or need, you can act on this by consumer-facing sectors and are becoming can still do more to service their needs in this ensuring it is reflected on your customisable increasingly available to banks, enabling next wave of digitisation in financial services. user-interface (not just, ‘Hello customer’, but, them to match more accurately their mar- Consider a client’s total aggregate time. ‘Welcome back customer, can I provide you keting messages to customers’ fast-changing Perhaps, if you’re lucky, that client will with some information on..?’). priorities, thereby increasing interaction lev- spend just a fraction of their total time on More importantly you can also draw the els and, ideally, transaction volumes. your digital channels. Thus the key is for you customer back to your user interface by Converting client interests into financial to make optimal use of the time that client ensuring contextually relevant content (that transactions is the ultimate goal; generating spends outside of your digital channels. you are probably already producing) is high- tangible value from the knowledge economy. A 2015 report by Ofcom, the UK commu- lighted in your online marketing presence on But not only that, these same programmes nications regulator, found that the amount other sites and targeted specifically to behav- can also aid in the development of more of time Brits spend online had doubled in the ioural activities of the individual client. This engaging and accurate methods of evaluat- previous decade, largely thanks to increasing is increasingly possible thanks to the next ing a client’s knowledge, experience, appro- use of smart phones and tablets. generation of fintechs bringing these con- priateness, and investment risk tolerances This will rise further as the quality and sumer industry best-practices in behavioural to better equip these firms at presenting the range of available services continues to surge. analytics and machine learning to financial right investment opportunities, thus aiding in Thus it is important for any business which services firms. the sustainability of the entire industry. has growth ambitions to ensure it is open to Similarly, a client might visit an investor opportunities to better understand and meet platform to research some stocks for poten- What is required? their needs, thereby increasing customer loy- tial purchase, perhaps placing them on a In many cases, these tools can be accessed in alty and ensuring sustainable profitability. personal watchlist, before going off to other the same fashion as the complementary ser- Online retail giants such as Amazon are sites to do further research. If the client takes vices that banks are already using to redefine already well-advanced in this respect, hav- the investment advisor’s cookie with him, the their value proposition in the digital age of ing pioneered algorithmic recommendation firm will be able to track the browsing data APIs and open collaboration. engines based on machine learning that is collected before the client returns to the plat- The additional opportunities they offer for able to accurately endorse future purchases form to make the purchase. enhanced customer satisfaction and custom- with a high potential of interest to its users, Following on, the firm can use the pur- er ‘stickiness’ make it even more imperative based on a combination of navigation behav- chasing data alongside behavioural data and for banks to have a highly flexible and easily iour and purchasing activity both on the indi- other information to add further context to integrated technology infrastructure. In some vidual and aggregated level. known investment interests and preferences, respects, this amounts to building a digital The difference now is that this capability thus building a more accurate picture of feedback loop. is no longer confined to Amazon’s own site potential future stock purchases. By augmenting your information about or apps. In addition, the investment platform clients’ needs and behaviours, you are better When an Amazon customer accepts cook- may be able to post appropriately targeted placed to attract customers to your digital ies on its site, the firm is then able to collect advice, either from its own resources, or channels on a more regular basis and to con- data which when combined with its existing partner firms or other third parties. This can tinually evolve the user-experience you offer information on the user’s Amazon site navi- not only improve the tailored user experi- across your various platforms – all facilitated gation and purchasing preferences, can make ence but from a compliance and regulatory by an underlying infrastructure that permits even more accurate predictions. point-of-view this has the potential to drive you to mix, match and revise the services you Moreover, Amazon has the ability to place a more suitable investment environment for offer in response to data driven modelling of highly targeted content on other sites fre- consumers. consumer demands. quently visited by the user, for example pro- Many banks are beginning to embrace In Field of Dreams, Kevin Costner’s man- moting books or other products available digital transformation, but the full potential tra was ‘If you build it, they will come’. In on Amazon that fit the customer’s current of such investments will not be realised if today’s digital economy, banks do not have interests. banks and other financial services firms don’t to leave it to chance.<

www.retailbankerinternational.com March 2017 y 15

RBI 735.indd 15 22/02/2017 15:51:48 NEWS: DIGEST Retail Banker International

MOBILE REGULATION M&A Citigroup adds credit card- Capgemini unveils PSD2- FB Financial to take over scanning feature to mobile app compliant banking solution Clayton Bank and American City Bank for $284.2m Capgemini has unveiled a new open banking solution to help banks and payment service providers (PSPs) provide services compli- ant with the EU’s Revised Payment Service Directive (PSD2) regulations. The vendor said its new platform, the PSD2 Open Banking Solution, will reduce compliance costs by speeding up strategy definition, readiness assessment, and imple- mentation capabilities. The platform, hosted on Amazon’s Web Services cloud, offers an open application programming interface to support the new PSD2 requirements, and allows banks and PSPs to easily exchange data. The platform also offers smart tokens that combine tokenisation and public-key cryp- tography, and facilitates centralised, real- time monitoring of all platform components US banking giant Citigroup has incorporat- and transactions. ed credit card-scanning functionality into its Capgemini’s head of global banking and Citi Mobile App. capital markets, Anirban Bose, said: “There It will allow US Citi credit cardholders to is an opportunity for banks to turn the PSD2 scan cards using a mobile device’s in-built regulatory compliance investment into a camera, after which the card account num- catalyst for accelerated digital innovation ber will populate within the registration. by differentiating their businesses and leap- Once a card is scanned, holders input their frogging the constraints of legacy technology. card-verification number, date of birth, and “Through our new open-bank solution we the last four digits of their Social Security aim to be industry leaders and first movers, number to activate their card. reducing compliance costs while not com- Alice Milligan, chief customer and digital promising convenience.”< experience officer for Citi Global Cards and Consumer Services, said: “With more cus- DISTRIBUTION tomer logins now occurring through our app UniCredit agrees 3,900 job cuts than through a browser, we continue to find with Italian trade unions creative solutions to make their lives simpler and easier. Italian banking group UniCredit has negoti- By enabling the ability to scan their cards ated an agreement with Italian trade unions rather than input 16 digits on a mobile key- to axe 3,900 local jobs as part of a business board, it further streamlines the credit card- plan by new CEO Jean Pierre Mustier to Tennessee-based FB Financial, the parent of activation process.”< strengthen the bank’s capital. FirstBank, has agreed to acquire Clayton Overall, the bank is set to cut 14,000 jobs Bank and Trust and American City Bank DISTRIBUTION by 2019 as part of the strategy, which was (collectively Clayton Banks) in a deal worth announced in last December. $284.2m. Neo-bank Moven launches in UK The bank also announced plans to launch Knoxville-based Clayton Bank has 13 Moven, a US-based mobile banking venture, a €13bn ($13.8bn) rights issue to shed bad branches in Tennessee and manages $887m has expanded into Europe by launching its loans from the bank’s balance sheet. in assets; Tullahoma-based American City app in the UK. Layoffs in Italy will be conducted on a Bank has five branches in Tennessee and The digital money management service voluntary basis; however, the bank has also oversees $308m in assets. Both banks are can be downloaded on the iOS and Android committed to hiring 1,300 people over the subsidiaries of Clayton HC, owned by Jim platforms and linked to users’ bank accounts. next three years. Clayton. This allows the app to monitor and track “With the agreement defined today, the FB Financial president and CEO Chris users’ spending habits. negotiations with the Trade Unions in Italy, Holmes said: “This strategic transaction Moven founder and CEO Brett King said Germany and Austria have been completed will significantly expand our footprint in the company plans to expand its operations in a positive and socially responsible manner. key metropolitan markets and enhance our across other regions in Europe. Moven has “On the basis of these agreements, the community markets in Tennessee. previously struck partnerships with Cana- implementation of the strategic actions has “We expect the addition of the Clayton dian lender TD Bank and WestPac in New been agreed and targets confirmed,” the Banks to be immediately accretive to our Zealand.< banking group said.< earnings per share in 2017.”<

16 y March 2017 www.retailbankerinternational.com

RBI 735.indd 16 22/02/2017 15:52:09 Retail Banker International NEWS: DIGEST

STRATEGY RESEARCH STRATEGY Citigroup to exit US mortgage- Consumers’ faith in banks’ HSBC to close 117 branches and servicing business security levels misplaced shed 380 jobs

Consumers’ views regarding levels of secu- rity in the financial services sector strongly contradict those of industry insiders, accord- ing to research by Capgemini. The study of 7,600 consumers and over 180 senior data privacy and security profes- sionals from banking and insurance firms in eight countries revealed that banks and insurers had significantly higher levels of consumer trust regarding their systems’ cybersecurity (83%) compared to other Citigroup is set to exit its US mortgage- industries. In contrast, only one in five bank- UK banking group HSBC is set to close 117 servicing business by the end of 2018, and ing executives were found to be highly confi- branches and shed 380 jobs in the UK in will instead focus on originations to improve dent in their ability to detect a breach. 2017 in response to the increasing adoption returns on capital and reduce costs. Three-quarters of consumers said they of digital banking. The New York-based lender said it would would switch provider in instances of a data The closures will lead to the loss of 380 sell mortgage servicing rights on 780,000 breach, while over a quarter of those opting jobs, 204 IT roles in the UK and 176 in- Fannie Mae and Freddie Mac loans of non- to remain said they would be cautious about branch posts. The move will reduced the Citibank retail customers with outstanding further investments. bank’s volume of UK branches to 625 by balances of $97bn to New Residential Mort- However, the majority of consumers were the end of the year. gage (NRZ). The transaction is expected to found to disbelieve the idea of their own HSBC head of retail banking and wealth close during the first half of 2017, subject to bank being breached, when in reality one management for the UK and Europe Franc- regulatory approval. in four financial institutions have reported esca McDonagh said: “More than 90% of Any remaining Citi-owned loans and other a breach. our interactions with customers are through mortgage-servicing rights not sold to NRZ Capgemini global cybersecurity COO digital channels. will be transferred to loan-servicing provider Mike Turner said: “Consumers implic - “The decision to close these branches Cenlar FSB in 2018. itly trust banks with their money and data, ensures a more sustainable branch network CitiMortgage president and CEO CD but this faith is rooted in a mistaken belief for the future as we continue to invest in Davies said: “We have made progress trans- their provider is 100% secure. While banks our digital platforms. We will have fewer forming our business to deliver a sustainable are evolving to combat the sophisticated but better branches, with more empowered annuity of growth. cybercriminals, public understanding of the front-line colleagues using a greater range of “CitiMortgage remains a critical part of threats and challenges remains low.”< technology to support our customers’ needs.” serving our customers, deepening relation- Union Unite described the move as a dark ships with existing and prospective retail DIGITAL day for hundreds of HSBC staff. “Without bank clients and driving growth in our core BNP Paribas to invest $3.18bn doubt, customer service in financial services markets. We will continue to originate loans in digital transformation will suffer if our high streets are left without for current and new clients.”< branches,” Unite said.<

STRATEGY DISTRIBUTION Fosun raises stake in Diebold Nixdorf sets up direct Portuguese lender BCP to 24% presence in Myanmar Chinese conglomerate Fosun has increased French banking major BNP Paribas has Diebold Nixdorf, the entity formed follow- its stake in Portuguese lender Banco Comer- announced plans to invest €3bn ($3.18bn) ing the recently concluded acquisition of cial Portugues (BCP) to 23.92% as a result in digital initiatives over the next three years. German ATM manufacturer Wincor Nix- of the lender's €1.33bn ($1.41bn) rights The bank said that the investment will be dorf by American rival Diebold, has opened issue. used to streamline end-to-end processes, devel- an office in Yangon, Myanmar. “The board is pleased to announce that op mutual platforms, adapt information sys- The company had been operating in the Chiado (Luxembourg) – an indirect wholly- tems, better use data, and reinforce data stor- country through third-party business partners, owned subsidiary – holds approximately age, protection and analysis capacities. offering self-service technology to local banks. 23.92% of BCP’s share capital. The total “In all the divisions, the group will imple- Diebold Nixdorf senior vice-president and consideration under the Rights Issue Sub- ment an ambitious transformation pro - MD of Asia-Pacific Neil Emerson said: “By scription valued €374m,” Fosun said in a gramme that aims to implement a new cus- establishing a local office it will help us build statement. tomer experience, accelerate digital transfor- a closer relationship with our customers and Fosun acquired an initial stake of 16.7% mation and improve operating efficiency,” serve them better.” in the Portuguese bank last November for the French lender said. The company also intends to help retail- a total consideration of €174.6m. The con- The bank expects the digitisation pro - ers looking to expand into Myanmar with glomerate also announced plans to raise its gramme to generate €3.4bn in savings its automation, omni-channel and lifecycle stake in BCP to up to 30%. < between 2017 and 2019.< management solutions.<

www.retailbankerinternational.com March 2017 y 17

RBI 735.indd 17 22/02/2017 15:52:19 NEWS: DIGEST Retail Banker International

M&A RESEARCH PRODUCTS Bryn Mawr Bank to buy Royal Chinese bank brands most Octopus partners UK challenger Bancshares of Pennsylvania for valued in world banks for new savings account $127.7m Octopus Labs, the innovation and product Pennsylvania-based Bryn Mawr Bank, par- development arm of Octopus Investments, ent of the Bryn Mawr Trust Company, has has teamed up with a number of UK chal- agreed to acquire local rival Royal Banc- lenger banks to offer a tech-enabled savings shares of Pennsylvania, parent of Royal account, Octopus Cash, which will offer cus- Bank America, in a deal worth $127.7m. tomers interest rates of nearly twice the high Bryn Mawr said the deal will add $602m street average. in loans and $630m in deposits to its port- Octopus Cash offers customers who folio and help it expand into new markets in deposit £50,000 ($62,270) or more into New Jersey and Berks County, Pennsylvania. a one-year fixed-term account an interest The deal is expected to be concluded in rate of over 1%, as against the average high the third quarter of 2017, subject to regu- street savings rate of 0.55%. latory and shareholder approval. Royal The product will use technology to spread president and CEO Kevin Tylus will join the larger deposits across three challenger banks. senior management team of Bryn Mawr as Up to £255,000 of the money deposited will part of the deal. be protected by the Financial Services Com- Bryn Mawr Bank president and CEO pensation Scheme. Frank Leto said: “The acquisition of Royal The combined brand value of Chinese banks Octopus Cash director Sam Handfield- Bank is a logical choice for Bryn Mawr has overtaken that of US banks, driven in Jones said: “The UK’s savers have £145bn Trust. part by economic patriotism, according to a squirreled away in fixed-term deposits. “With its strong lending team and prime report by valuation and strategy consultancy However, faced with the hassle of switching, branch locations, Royal Bank provides Brand Finance. fewer than one in 10 of us choose to move BMT with its first location in Center City China’s Industrial and Commercial Bank it at the end of the term. In today’s times of Philadelphia, as well as a foothold in the of China (ICBC) topped the list with its low interest rates and rising inflation, find- state of New Jersey.< brand value surging 32% year on year to ing an easy way to get the best rate has never $47.8bn. The brand value of China Con- been more important.”< DIGITAL struction Bank grew by 17%, while that of NBAD partners with Ripple to Bank of China grew by 13%. M&A offer blockchain payments The growth of Chinese banks, in particu- First Busey to take over First lar ICBC, came at the expense of Wells Fargo Community for $235.8m that lost its place as one of the world’s most valuable banking brands following a fake accounts scandal. The brand value of the US bank dipped 6% to $41.6bn. The study stated that another factor driving growth in China was accelerating Chinese for- eign merger and acquisition activity. National Bank of Abu Dhabi (NBAD) has In Canada, most major banks registered Illinois-based First Busey, the parent of partnered with blockchain payment compa- growth in brand value, led by RBC which Busey Bank, has agreed to acquire local rival ny Ripple to launch real time, cross-border recorded a brand value growth of 28% to First Community Financial Partners, the par- payments based on blockchain technology. $12.7bn. TD, Scotiabank, Bank of Montreal, ent of First Community Financial Bank, in a NBAD said Ripple’s Distributed Financial CIBC and Desjardins also recorded double- transaction valued at $235.8m. Technology fits within the bank’s existing digit growths. First Community has nine branches and infrastructure and offers transaction immu- European banks HSBC, BNP Paribas, manages more than $1.26bn in assets. tability. Deutsche Bank and Intesa Sanpaolo all reg- First Community president and CEO Roy The bank added that the solution will istered declines in brand value. Deutsche Thygesen will take over at Busey Bank as offer customers end-to-end visibility of the Bank had the sharpest decline, with its value executive vice-president and market presi- transaction process, and facilitate instant slumping 41% to $4.9bn. dent for Northern Illinois following the com- and cost-effective fund transfers to benefi- In Russia, Sberbank was the country’s pletion of the deal in mid-2017. ciary accounts. most valuable banking brand, with its value First Community Financial Bank is expect- NBAD MD and head of global transac- surging 33% to $9.1bn. ed to be integrated into Busey Bank follow- tion banking Vineet Varma said: “We’re Qatar National Bank ranked as the Mid- ing the merger of the holding companies. always exploring new ways to enhance our dle East and Africa’s most valuable bank First Busey president and CEO Van Duke- customers’ experience. brand, recording a growth of 56% in brand man said: “This business combination is con- “With blockchain, we hope that we could value to reach $3.82bn. sistent with our strategy of expanding into address the needs of our customers and drive Itaú ranked as the most valuable banking markets with both population and commer- forward more efficient and flexible service. brand in Latin America with a brand value cial density in the Midwest through disciplined Embracing blockchain is a step in the right of $6.9bn, nearly double compared to the partnerships with companies who have similar direction.”< previous year. < operating and cultural philosophies.” <

18 y March 2017 www.retailbankerinternational.com

RBI 735.indd 18 22/02/2017 15:52:30 Retail Banker International NEWS: DIGEST

DIGITAL STRATEGY REGULATION Emirates NBD launches new ABN Amro to axe 60% of senior Deutsche Bank fined $630m digital banking service management roles over money-laundering claims

Emirates NBD has launched a new digital Deutsche Bank has agreed to pay $630m to bank, Liv., aimed at millennial customers. US and UK authorities to settle allegations Users will be able to open accounts of engaging in a money-laundering scheme instantly using a smartphone by scanning to move money out of Russia, and of expos- an Emirates ID card. ing the UK financial system to the risks of The new offering includes a range of fea- financial crime. tures that will display a curated daily feed New York’s Department of Financial Servic- of events and selected deals, as well as offer es (DFS) alleged that the bank had engaged in insights on users’ transactional history and a scheme that involved clients buying stock in spending patterns. Moscow with rubles, and soon afterwards sell- Emirates NBD’s senior executive vice- ing them through the bank’s London branch. president and group head of retail banking The regulator added that this is mirrored and wealth management, Suvo Sarkar, said: in trades that occurred between the bank’s “Liv. offers customers a unique experience Moscow, London and New York offices, that will allow them to access the finest life- laundering $10bn out of Russia. The bank style opportunities while enabling them to agreed to pay $425m in fines to the DFS and better manage their finances.” has appointed an independent monitor for The beta version of the app will be made its New York branch. available to selected customers on the Superintendent Vullo said: “This Rus - Android platform, and later on iOS. < Dutch banking giant ABN Amro plans to sian mirror-trading scheme occurred while shed 60 of its 100 senior management roles the bank was on clear notice of serious and DISTRIBUTION as part of a management restructure. widespread compliance issues dating back a Under the new structure, the remaining decade. TSB to trim branch network 40 senior management positions will have a “The offsetting trades here lacked eco - UK-based lender TSB has announced plans stronger involvement in the leadership of the nomic purpose and could have been used to to close 29 branches in response to the bank, and the composition of these execu- facilitate money laundering or enable other increasing adoption of digital banking. tives will be reviewed annually. illicit conduct, and today’s action sends a Of the branches to be closed, 17 are locat- The bank will now have a new manage- clear message that DFS will not tolerate such ed in Scotland and most will close in June. ment board including heads of retail, com- conduct.” The bank, spun out of Lloyds and current- mercial, corporate and institutional, as well The UK’s Financial Conduct Authority ly owned by Spanish lender Sabadell, said as private banking. fined the bank £163m ($202.8m) for failing the closures will not lead to any redundan- ABN Amro CEO Kees van Dijkhuizen to maintain an adequate anti-money laun- cies; affected staff will be offered alternative said: “In recent years, the bank‘s total dering (AML) control framework between roles at other branches. staff has decreased significantly, but the 2012 and 2015. The fine is the largest ever “Whilst we continue to focus on upgrad- size of senior management has remained imposed for AML control failings, the UK ing the branches that people use most, some unchanged. watchdog said. locations are very quiet, serving fewer than “The structure and composition of the The settlement comes shortly after the 200 people a week” the company said. management level below the executive bank reached a $7.2bn agreement with the The lender is currently in the process of committee will be reviewed and reduced in US Department of Justice earlier this month implementing a £250m ($311m) digital size, with a stronger emphasis on strategic over the issuance and underwriting of resi- transformation programme. < involvement.” < dential mortgage-backed securities.<

Director of Events: Ray Giddings London Office Tel: +44 (0)20 3096 2585 71-73 Carter Lane Email: [email protected] London EC4V 5EQ Editor: Douglas Blakey Head of Subscriptions: Sharon Howley Tel: +44 (0)20 7406 6523 Tel: +44 (0)20 3096 2636 Asia Office Email: [email protected] Email: [email protected] 1 Finlayson Green, #09-01 Deputy Editor: Anna Milne Sales Executive: Alex Aubrey Singapore 049246 Tel: +44 (0)20 7406 6701 Tel: +44 (0)20 3096 2602 Tel: +65 6383 4688 Email: [email protected] Email: [email protected] Fax: +65 6383 5433 Did you know? Email: [email protected] Reporter: Patrick Brusnahan Customer Services: Your subscription to this newsletter entitles you to Tel: +44 (0)20 7406 6526 Tel: +44 (0)20 3096 2636 or +44 (0)20 3096 Financial News Publishing Ltd, 2012 access its five-year online archive. Email: [email protected] 2622 Registered in the UK No 6931627 Go to www.retailbankerinternational.com Email: [email protected] Unauthorised photocopying is illegal. The contents Patrick Fogarty, Nick Midgley Sub-editors: of this publication, either in whole or part, may not For more information on Verdict, visit our be reproduced, stored in a data retrieval system website at www.verdict.co.uk. As a subscriber, or transmitted by any form or means, electronic, you are automatically entitled to online access mechanical, photocopying, recording or otherwise, to Retail Banker International. without the prior permission of the publishers. For more information, please telephone +44 For information on additional copies or syndicated (0)20 7406 6536 or email customer.services@ online access to this newsletter, please contact verdict.co.uk Customer Services.

www.retailbankerinternational.com March 2017 y 19

RBI 735.indd 19 22/02/2017 15:52:40 Retail Banker International GUEST COMMENT: SCOTT HESS Navigating the delivery of financial services via the Internet of Things

Connected devices have the potential to revolutionise the way we live, administrate and bank. Will we be paying bills via our fridge in the future? Appropriateness, security and customer experience are paramount says Scott Hess, vice-president of user experience, consulting and innovation at Fiserv

he Internet of Things (IoT) is with account, which already has multiple layers of us to stay. With the number of con- security in place, via the car. nected devices expected to outnumber But what about payments that are initi- T humans on the planet by four to one ated from a connected device outside of an by 2025, it is inevitable that new forms of existing payment application, such as online interaction will become part of daily life. banking? The IoT – an ever-growing network of If your refrigerator recognises that you are devices that can collect and exchange data out of milk and automatically orders more, – is much more than connected cars and that payment also must be secured. In cases smart thermostats. It offers an opportunity such as these the security of the payment can- for financial institutions to fold a whole not reside exclusively with the device itself range of activities, from payments to finan- – there must be additional security layers, cial management, into customers’ lives in likely in the cloud. new ways. The projected explosion of connected The financial services industry has a signif- devices should prompt players across the IoT icant opportunity to capitalise on the height- ecosystem to come together to create robust ened opportunities for customer engagement security standards. offered by the IoT by evaluating which con- The automotive sector has been an early nected devices are right for the delivery of mover in implementing standards-based financial information and capabilities, and ❙❙Scott Hess, Fiserv security for embedded devices. A multi-chan- ensuring the security of interactions. For financial institutions looking to extend nel, multi-device approach and thinking in existing capabilities to different devices in terms of layered security are important con- Delivering the right customer experience the IoT, the approach is the same as would siderations for financial services in this new As with any new service paradigm, it is be used when evaluating the capabilities of world. important to understand what capabilities delivery on a smartphone versus a desktop. are practical and exactly how they can be Start with these questions: What types of The integration of financial services delivered. As new connected devices emerge, capability are practical for this device? How By testing technology and gauging consumer we can evaluate how customers interact with will consumers want to access services from demand through research and focus groups, them and if they are suitable for conducting it? financial institutions and their technology financial tasks. providers can supply customers with rel - When driving in their connected car, cus- Multiple layers and shared standards evant content through the right device, while tomers may want to check their balance and Security must also evolve in line with the IoT ensuring that customers are able to access initiate a bill payment. At home, they may revolution. The balancing act between cus- information securely to provide an all-round want Amazon Alexa to provide proactive tomer convenience and security will get ever positive consumer experience. nudges to help them stay within a budget or more precarious as consumers demand new It is essential they keep the experience remind them to save for a major purchase. ways to interact with their money. Therefore, secure, contextual and as relevant to the con- The end user must be at the heart of any a multi-layered approach to security is vital. sumer as possible. Understanding what each new service experience that financial institu- Nowhere is this more crucial than in pay- customer needs, how they want information tions develop for the IoT. In an age of infor- ments. Referencing a prior example – if a delivered, and how to do so securely are the mation overload, irrelevant information will customer wants to check their bank balance first steps in providing customers with the at best be ignored, and at worst prompt cus- and pay a bill from their connected car, they best possible experience, one that fits seam- tomers to look elsewhere. could do so by accessing their online banking lessly into their everyday lives.<

20 y March 2017 www.retailbankerinternational.com

RBI 735.indd 20 22/02/2017 15:52:45 Retail Banking Conference & Awards: London 2017 11th May 2017 • Waldorf Hilton, London

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

Top industry movers and shakers will meet to debate the importance of new strategies, business practices and partnerships in the industry. We invite you to become an active voice in this discussion to shape the future of retail banking. For more details please contact Victoria Pennell on [email protected] or call +44 (0) 20 3096 2634.

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