November 2015 Issue 719 www.retailbankerinternational.com
SMALLER BANKS STEPPING UP
● ANALYSIS: Challenger Banks ● DISTRIBUTION: Nationwide ● INTERVIEW: Massimo Arrighetti ● FEATURE: Dejardins
RBI 719 November.indd 1 08/12/2015 09:20:21 Your Partner in Banking Transformation
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Axxiome Group Retail Banker International EDITOR’S LETTER
CONTENTS
2 COMMENT: FAIRBANKING No more hype: digital players will not 3 INTERVIEW: SBI UK Sanjiv Chadha tells Douglas Blakey KO the banking establishment about the SBI’s expansion plans in the United Kingdom and the struggles behind it
4 ANALYSIS: CHALLENGER BANKS Patrick Brusnahan writes on the strat- have been fortunate to moderate more What happened: ING Direct was snapped egy employed by TSB following its split than 20 events this year around the up by Scotiabank, albeit it cost C$3bn from Lloyds Banking Group. One notable world from Dubai to Milan, Riyadh ($2.2bn) to do so. method was the lender’s focus on cus- tomer research and service to Casablanca, all across Europe and Any new start-up that causes a material I challenge – in Canada or elsewhere – may 5 FEATURE: DESJARDINS now this month a hugely enjoyable trip to Robin Arnfield reports on Desjardins Toronto. well be snapped up or become a JV part- moves into the digital space and how A report of the debate (on Canadian dig- ner. Witness BBVA, a genuinely world class it is helping the lender grow its market leading digital bank acquiring a one-third share in Canada ital banking as it happens) will run in the December issue of RBI but in the meantime, stake in Atom Bank, at a cost to BBVA of 9 DISTRIBUTION: NATIONWIDE some quick comments. the equivalent of loose change found behind Douglas Blakey writes on Nationwide’s The recent report from McKinsey on the the settee. work with NCR on its distribution efforts, including branch and ATM future of retail banking keeps cropping up The lesson from the Canada debate was refurbishment on the banking events circuit and Toronto that the leading banks there are not compla- 11 GUEST COMMENT: PHIL TOOTELL was no exception. cent and have the funds to fight a protracted Phil Tootell considers banking efforts to It states, inter alia, that retail banks have battle. be innovative in a congested space. Can digitised only about 20% to 40% of the cus- There is also a strong sense that collabora- banks really be change when hindered tomer experience. tion between financial institutions and the by overwhelming legacy systems? Banks are investing too little on digital; it fintech community is feasible. 12 S EVENT : BRANCHES goes on to forecast that up to 40% of retail Dave McKay, CEO of Royal Bank of The RBR Branch Transformation banking revenue and up to 60% of profits Canada, opening the debate, highlighted the Conference threw up some new and intriguing offers to being the branch are at risk over the next decade. scope for fintech firms as potential allies to into the modern age. Alexander Atkins Some digital evangelists go so far as to sug- established banks, rather than threats. reports gest that digital start-ups, challenger banks “It is incredibly motivating and engaging 13 INTERVIEW: MASSIMO ARRIGHETTI and fintech firms will kill off established for our own employees to partner and work Patrick Brusnahan talks with the CEO banks. Uber is held up as an example of a with fintech companies. of SIA about the payments market in successful digital disruptor; some even argue We’ve had enormous success sharing Poland, and Europe in general, about that established banks will go the way of the battle between the old and the new, ideas and building on ideas,” said McKay. between the banks and the start-ups Tower Records or Blockbuster. It was also gratifying to hear a constrictive Anthony Thomson, late of Metro and now debate about the future of bank branches. 14 S EVENT : MENA co-founder of Atom Bank, has been espe- Digital growth is not going to spell the Alexander Atkins writes on two events in the Middle East and North Africa cially apocalyptic in his forecasts about the death of the branch. A significant segment of and how these developing regions are prospects for the established banks. the market will continue to value the branch, changing, particularly when it comes to I would respectfully beg to differ with this despite some of the forecasts of the start-up digital services from banks line. brigade. 17 REPORT: CUSTOMER SERVICE It was a joy to be in Canada – a banking Digital will herald the transformation of What are banks doing with regards to market from whom much of the rest of the the branch, yes. We are witnessing a digital customer service? A new report from Misys expands on the efforts maintained world could learn a thing or two by the by revolution and it is not hype to call it a digi- by the financial sector. Alexander – and hear a rather more sober and I would tal age of banking. Atkins reports suggest realistic forecast of how things will Digital-only players will thrive and lessons 20 GUEST COMMENT: NIMISH SHAH pan out. are being learned from less than successful Legacy systems are still the big barrier Yes, fintechs will disrupt and beating them digital start-ups such as Egg. to banking innovation. Nimish Shah, will cost the banks a lot of money. And established world class players such banking sector lead at Talend, argues The message from Canada however is that as Royal Bank of Canada will continue to banks are not pushovers and are not going to thrive and post record earnings. It is not take the fintech challenge lying down. Canada’s most profitable firm by accident. The Toronto Globe and Mail made the excellent point that Canadian banks have Douglas Blakey been challenged by a digital start up before. [email protected]
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RBI 719 November.indd 1 08/12/2015 09:20:25 COMMENT: FAIRBANKING Retail Banker International
Fairbanking Foundation grows Mark certification scheme encouraging organisations to improve financial well-being The Fairbanking Foundation - the not-for-profit charity dedicated to encouraging banking institutions to improve the financial well-being of their customers - has expanded its Mark certification scheme to now cover products owned by one in three UK adults. Douglas Blakey examines
ight new providers have been Mark scheme to cover products approved: Barclays, Halifax, used by one in three UK adults Bank of Scotland and Capi- highlights the progress being E tal One as well as four credit made. unions Enterprise, Central Liv - “Our research shows that erpool, 1st Alliance Ayrshire and customers’ views of banks are London Capital. affected when they are helped The total of financial products to manage their money. covered by the scheme is now 25 “The existing players need to as the scheme expands to cover improve and the new players loans and credit cards for the first need to prove they are really time. better.” Prior to 2015, the Foundation Archbishop of Canterbury Jus- had approved Marks for prod - tin Welby, a patron of the Foun- ucts from NatWest, RBS, Lloyds, dation, added: “This is a real Saffron Building Society, Secure our research demonstrates. opportunity for the financial Trust Bank and Thinkmoney. “Participation in the Fairbanking Mark services industry to demonstrate its com- scheme can enable institutions to help mitment to the financial well-being of Image improvement improve trust in the banking industry its customers, combining its power with Research for the Foundation however shows based on the proven benefits to custom- responsibility to wider society. the UK’s banking sector is still battling to ers. “We are all acutely aware that we need improve its reputation with nearly two out of “The expansion of our Fairbanking a change of culture within the banking five customers (38%) believing the industry’s sector if we are to avoid some of the image has deteriorated over the past year. Marks awarded in 2015 problems and excesses that led to the Its study found that 13% believe the financial crash of 2008. image of banks has deteriorated signifi - Bank of Scotland – Flexible Loan (5 stars) “As well as developing smart regula - cantly. Barclays – Barclayloan (4 stars) and Barclays tion, we also need financial institutions Bank Account (3 stars) The main issue for these negative cus - to do the right thing - not because of Capital One – Classic Card and Balance Plus Card tomers identified by the research is a lack (4 stars) reward and sanction - but because it of focus on customer needs cited by 24%. Central Liverpool Credit Union – Shares Based is the right thing to do – because it is But there are signs that the mood of Loan and Helping Hand Loan (5 stars) good for customers and for the wider customers is shifting with 25% that ques - Enterprise Credit Union – Loyalty loan (5 stars) common good.” tioned saying they believe the image of 1st Alliance Ayrshire Credit Union – Personal retail banks has improved. Loan (5 stars) How a Fairbanking Mark is granted Nearly one in five (18%) who believe Halifax - Clarity Loan (5 stars) Banking organisations and financial insti- banks’ images have improved say compa - Lloyds - Flexible Loan (5 stars) tutions seeking to gain a Fairbanking nies have become more transparent while London Capital Credit Union – Instant Saver Mark for one of their products must sub- Loan and Saver Loan (5 stars) 38% believe banks are now more focused mit it for full analysis and testing by The NatWest – Clear Rate and Reward credit cards (3 on customer needs. stars) Cash ISA with Savings Goal (5 stars) Fairbanking Foundation. RBS - Clear Rate and Reward credit cards (3 stars) This includes research conducted with a Product coverage Instant Access ISA with Savings Goals (5 star) representative number of customers by an Antony Elliott, chief executive of Fairbank- independent research firm. ing Foundation, said: “Financial institutions Marks awarded pre 2015 This is usually carried out by Ipsos MORI, are improving their products and behaviours the Foundation’s research partner. and we may be reaching a tipping point Lloyds – Classic Account with control (3 stars) This research must confirm that a sig- where the reputation of the sector will recov- NatWest – Instant Saver with Savings Goals (5 nificant percentage of customers using stars) er although clearly there is some distance to the product found it useful in helping RBS – Instant Saver with Savings Goals (5 stars) travel. to improve their financial well-being, Saffron Building Society – Goal Saver (4 stars) “Increased transparency by banks and Secure Trust Bank – Current Account (4 stars) through factors like helping them to an improved focus on customer needs are Think Money – Personal Account (4 stars) manage their money better and to helping to improve banks’ reputations as achieve their savings goals.<
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RBI 719 November.indd 2 08/12/2015 09:20:26 Retail Banker International INTERVIEW: SBI UK
State Bank of India UK in a great place Sanjiv Chadha, regional head of State Bank of India UK, tells Douglas Blakey about the bank’s expansion plans, channel strategy, regulatory challenges and product innovation. Says Chadha, transparency, fair pricing and consistency will remain at the heart of SBI’s growing UK operation
he importance of the UK market to India’s largest lender, State Bank of SBI already serves 12m mobile banking customers India (SBI) has been highlighted in T two very high profile ways during • India has the youngest mobile banking user feature phones, on offer to SBI customers 2015. base in the world according to research and non-customers. The year kicked off with the appoint - from KPMG and UBS. In India, the median ment of an SBI heavyweight to become UK • SBI’s smart phone mobile wallet, SBI age is 30 compared to 32 in the US, 39 in regional head: Sanjiv Chadha moved to the Buddy, was rolled out in August. UK from India where he was global general Italy, Spain and Sweden and 38 in the UK. • Buddy can be used to send money to new manager for retail banking. • The mobile banking adoption rate in India Prior to fulfilling that role, Chadha was and registered customers, book flights, puts Europe into the shade; in India the head of mergers and acquisitions and pri - pay for movies, hotels as well as for shop- rate exceeds 50% compared with 38% in vate equity for SBI’s investment banking ping. arm. UK. In addition to the high profile hire, SBI • SBI already has 23 million internet banking • SBI’s latest mobile banking initiative is the marked 2015 with plans for major invest - customers and 12 million mobile banking launch of a mobile wallet called Batua for ment in its UK operation via an injection customers in India. of around $300m to capitalise a new UK subsidiary. The establishment of a separate UK sub- op a sub-brand sbiINTOUCH to capture market in promoting its safety deposit boxes. sidiary is a regulatory requirement that the the imagination of the youth market by By contrast, the service has been axed by UK bank could have done without; for his part, offering a more modern and digitally inno- banks such as Lloyds, RBS NatWest and HSBC. Chadha has resisted the temptation to criti- vative service. SBI will continue to target retail custom- cise the Bank of England. Lessons learned from the Indian digital ers in the UK of Indian descent but Chadya He told RBI: “We have been in the UK a branch initiative are being incorporated stressed the bank’s success in attracting cus- long time [95 years plus], are committed to into SBI’s UK operations. tomer from all backgrounds. the UK and have had constructive dialogue Chadha said: “We are experimenting “We have growing customer numbers from with the regulators, with good progress with elements of inTOUCH being trans - all backgrounds and the bank is agnostic as being made.” ferred to the UK. We can, for example now regards ethnicity.” SBI will treat the cost of setting up a UK open new accounts inside 15 minutes.” The UK Indian business community sur- subsidiary as an incremental cost, establish Other customer service enhancements vived the financial crisis relatively well and an independent board for the UK and con- include instant loan approval and inter - SBI has benefitted from that. Product inno- tinue with its plans to grow its UK opera - active LCDs mounted on walls designed vation has also boosted the bank’s UK per- tions. to help customers map out their financial formance. It remains, said Chadha, an opportune plans. “The SBI cash ISA has been astonishingly time for the bank to do business in the UK. successful,” adds Chadha. “This is the largest international opera - Rich areas Buy-to-let is another area where S B I tion of SBI. There are 10 retail branches A core competency for SBI in the UK and has outperformed the market. In the first in the UK with plans to open two new an area where the bank punches well above quarter of the year, it accepted buy-to-let branches. its weight is SME lending. It remains, says loan applications from intermediaries. “Fairness and transparency are at the Chadha, a vibrant sector and an area that “We are very competitive on pricing and heart of the bank’s operation and SBI’s continues to offer SBI scope to grow its mar- have an advantage over some of the larger brand value depends on that.” ket share. players by being small enough to be flexible. On channel investment, SBI has thrown Another rich area for SBI to tap into is the All lending decisions are made in the UK. itself energetically into the digital age with provision of safety deposit boxes at all of its “We will not buy market share by offering the launch in India of a network of digital UK outlets. products as a loss leader; SBI pricing will branches with the aim of broadening the Chadha commented: “There is a large remain fair and consistent. That is the heart bank’s appeal to the youth and growing unmet demand here. Each branch has room of what we do. mass affluent segment. for 1,000 safety deposit boxes.” “For most of our customers, we are not The thinking behind the launch of the With the notable exception of Metro Bank, their only bank but by offering excellent ser- digital branches is part of a drive to devel - SBI is very much in the minority in the UK vice we will remain profitable.” <
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RBI 719 November.indd 3 08/12/2015 09:20:26 ANALYSIS: CHALLENGER BANKS Retail Banker International
The challenges behind being a challenger bank
Formerly part of Lloyds Banking Group, TSB Bank was thrown from the Big Four into challenger bank status following a European Commission ruling in 2013. Two years later, the lender accepted a takeover offer from Spain-based Sabadell. What has changed in the bank in the interim? Patrick Brusnahan writes
eadquartered in Edinburgh, TSB that they did not know a huge amount Hurford elaborates: “We have a TSB Bal- launched on 9 September 2013, about.” ance Scorecard that tracks the business’ per- with more than 4.6 million custom- Janet Hurford, senior manager of cus - formance. The Business Executive Commit- ers and over £20bn ($30.1bn) of tomer research and market insights at TSB, tee (BEC) has this as a key agenda item every H adds: “TSB was created to bring more month to discuss. loans and customer deposits. It was formed from all branches of Cheltenham & Glouces- competition to British banking – to be a “The portal provided us with instant access ter and Lloyds TSB Scotland. real challenger to the big banks and to to insight, allowing us to monitor progress In its last results statement, TSB stated that deliver the kind of banking the people of and give our frontline partners direct access its total assets were valued at £28bn on 30 Britain want. to exactly what our customers to have a say. June 2015, a 3% increase from the end of “To achieve this we need to really under- This means our frontline partners have the 2014. stand our customers so it’s essential that we insight they need to improve customer ser- Earlier this year, Sabadell completed a get good quality customer insight to those vice where it happens.” £1.7bn takeover of the bank. What has made responsible for delivering our differentiated it so appealing to investors? service proposition, as well as our key deci- Competition present in the market sion makers and the best way to achieve this While TSB were innovating to disrupt the Addressing the challenges is through an online portal.” market, it was not the only bank to do so. Network Research, an insights company, has Offerings such as the Santander 123 account been working with TSB since its years with Success through research and Halifax’s £100 switching incentive were Lloyds Banking Group on customer experi- Network Research’s role consisted of also changing the market. ence tracking services. research; a lot of research. The core is an When TSB launched its Classic Plus Part of this was a unique web-based solu- ‘enormous’ customer experience tracking account, there was ‘a short period of growth’ tion with allowed every part of the TSB busi- study where it interviews 100,000 custom- but ‘there were some concerns with the ness, particularly the research, to react to ers every year after they have contacted TSB. onboarding process’. The result was that customer trends with speed and veracity. This can range from anything from entering TSB and Network Research began mapping The insights company claims that this a branch or using internet banking. the market. has provided direct support in creating new After this research portion, insight is Makhani says: “Santander and Halifax products for TSB which have not only drawn developed, put on an online portal, and seem to be the most disruptive to TSB’s plaudits, but helped TSB increase its market sent to the workers on the ground level, customer base for different reasons. TSB share and considerably improve customer such as branch managers. This was cru - were losing customers at the same time satisfaction. cial as TSB customers could use Lloyds as acquiring them. We helped them map Santosh Makhani, associate director at Bank branches for a limited time post-split. the market and understand the big threats Network Research, spoke to RBI about Therefore, making the TSB branch experi- in terms of acquisition. Afterwards, they this process. He says: “[Lloyds and TSB] ence better than the one at Lloyds was seen were acquiring more customers than they had been clients of ours for 17 years as a distinct differentiator. were losing and growth was coming in at now. We were on a number of significant Makhani explains: “The challenge was a far greater rate than their market share research programmes for them. When they that consumers didn’t have a great deal of would suggest.” were pushed apart by the taxman, it was expectations because they didn’t know the With regard to the recent takeover by the case that TSB had a very historical lay of the land after the split. We used the Sabadell and whether Network Research brand, without a huge amount of brand insight to tailor the existing experience. will stay on helping TSB, Makhani con- equity, and were forced to come into a We have a number of people to go out and cludes: “I hope so. We’re in an indus- competitive and fast moving marketplace deliver training programmes to people on the try that is primarily people driven from and get moving very quickly. ground to optimise the experience. As part the point of view of sales and business “We had a great relationship with Lloyds of our work, we set remuneration for local development. We pride ourselves on TSB, but only a few from Lloyds went across branch workers based on customer experi- being good and easy to work with. We to TSB, but the guys that went were more ence; hardcore things you would expect from integrate ourselves well within the busi- suited to the challenge of being a challenger a service industry. ness and take up a lot of the operational brand. They pulled together a good team to “Having that closed-loop feedback really slack. address the challenge from a research and helps refine the research approach and TSB’s “We’re also able to challenge them and insight point of view. Clearly, the business approach to training front-office staff and, not be a yes man or patsy, which they at the time had a huge appetite for market ultimately, the customer experience is the value. I very much hope they’d be keen research as they inherited a customer base winner in all this.” to keep working with us.” <
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RBI 719 November.indd 4 08/12/2015 09:20:27 Retail Banker International FEATURE: DESJARDINS
Desjardins plans active role in digital banking revolution Like other major Canadian financial institutions, Quebec-based Desjardins Group is investing in digital platforms to remain competitive in the market. The Canadian financial institution plans to play an active role in the emerging digital world present in the country. Robin Arnfield reports
esjardins (Mouvement des caisses Desjardins in French), an association Desjardins 2014 key facts of savings and credit cooperatives • Over 7 million members D (caisses) located mostly in Quebec, is the largest Canadian cooperative financial • 45,966 employees group and the fifth largest in the world with assets of nearly C$251bn ($146bn). • 360 Desjardins caisses (financial coop- “The digital revolution is rapidly and pro- eratives) in Quebec and Ontario offer- foundly transforming the financial services ing services at 805 outlets industry where new players like PayPal, Goog- le and Lending Club are making their mark,” • 2,225 ATMs in Quebec and Ontario
Monique Leroux, Desjardins’ chair of the Source: Desjardins Group, 31 December 2014 board, president and CEO, told the group’s AGM in March 2015. Digital solutions AccèsD mobile banking platform. “Desjardins is now part of this reality. We Leroux believes Desjardins has a duty to The enhancements include offering online don’t want to be mere observers - we want to develop mobility and proximity solutions to account-opening at Desjardins.com; the Janu- play an active role in this digital revolution. meet the needs of its customers. ary 2014 launch of mobile banking on iPads While remaining what we are - a cooperative “We’ve set clear innovation and investment and Android-based tablets; and Plan Selector, financial group with strong cooperative values priorities to support our members and clients an online tool accessible through AccèsD that - we have chosen to be more innovative.” in this fast-changing world,” she told the automatically suggests the best-value banking “Desjardins is evolving in a highly com- Montreal Board of Trade. plan for members based on their transaction petitive and dynamic business environment,” But Leroux acknowledged that mobile ser- history. Robert Ouellette, Senior Vice President, Tech- vices and new technology can’t replace the Desjardins also offers the Guaranteed nology and Shared Services Centre Executive ‘strong relationship with our members and our Investment Selector providing personalised Division at Desjardins, told RBI. “Technology clients that we intend to build on’. investment recommendations based on how enables us to provide better service experiences “This is what motivated our investment in customers answer a set of questions, and the for our customer base.” new spaces, new types of caisses and new cli- Dynamic Market-Linked Guaranteed Invest- “Desjardins is definitely one of the more inno- ent contact centres,” Leroux said, referring to ment Return Tracker which monitors the per- vative financial institutions in Canada,” said Desjardins’ new service centre at Montreal’s formance of customers’ market-linked guaran- Christie Christelis, president of Canadian con- Marché Central and the three 360d centres teed investments. sultancy Technology Strategies International. it opened for 18-30 year-olds near University In April 2014, Desjardins launched the Hop Addressing the Montreal Board of Trade in campuses in Montreal. ‘n S@ve instant savings tool. According to Ler- September 2015, Leroux said that between In 2014, Desjardin’s mobile channel oux, Hop ‘n S@ve is the only Canadian bank- 2008 and 2015 the number of Desjardins cus- accounted for 11% of total banking transac- ing app allowing customers to save in just one tomers grew by two million to seven million tions, while its online and that the group’s total revenues grew two- channel accounted n DESJARDINS - Key financial data Q315 fold to nearly C$15bn. for 29%, ATMs 10% as at 30 Sep 2015 as at 30 Sep 2014 Leroux told the Globe & Mail that Desjar- and caisses 3%. Assets (C$bn) 250.9 229.4 dins Group is planning a measured expansion “We’re finding that strategy outside its home province. our members use Residential mortgage loans (C$bn) 101.4 97.5 The Canadian newspaper quoted Leroux as ATMs less and less for Consumer, credit card and 21 20.5 saying that that Desjardins, which currently paying bills, as they other personal loans (C$bn) generates about 35% of its top-line revenue now use our mobile Business and government loans (C$bn) 34.9 32.9 from business outside Quebec, aims to increase platform,” a Desjar- Total gross loans (C$bn) 157.4 150.9 that percentage to about 40% over three to five dins spokesperson years. told RBI. Gross impaired loans / gross loans ratio 0.36% 0.34% However, instead of making a major acquisi- During 2014, Tier 1A capital ratio 15.8 15.7 tion, Desjardins plans to widen its relationship Desjardins rede- Tier 1 capital ratio 15.9 15.8 with existing customers by offering them more signed its AccèsD Total capital ratio 17.4 17.9 products while remaining open to opportunis- transactional bank- tic asset purchases, the Globe & Mail said. ing website and Source; Desjardins
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RBI 719 November.indd 5 08/12/2015 09:20:27 FEATURE: DESJARDINS Retail Banker International
click. “We are happy with how popular the new Zag Bank tool has been with young people,” she told the Desjardins’ direct banking subsidiary Zag Desjardins posts growth group’s AGM. “It fits especially well with our Bank competes with President’s Choice Finan- Desjardins posted operating income of financial education mission.” cial as well as with Scotiabank’s Tangerine sub- C$10.48bn ($7.9bn) for the nine months to Hop ’n S@ve enables customers to save sidiary which has nearly two million customers. end September 2015, an increase of 11.1% toward their goals by transferring money into a Scotiabank acquired Tangerine, formerly year-on-year. Surplus earnings before Desjardins High Interest S@vings Account and known as ING Direct Canada, from ING in member dividends increased by 20.8% to create a category such as travel or a specific 2012. President’s Choice Financial is a joint C$1.49bn compared to the corresponding purchase that they want to save for. venture between Canadian retailer Loblaw period a year ago. As of March 2015, the 50,000 plus members Companies Limited and CIBC. Third quarter operating income for the three months to 30 September grew by using Hop ’n S@ve had collectively saved over Customers across Canada can open accounts 7.4% to C$3.43bn from the same period C$34m ($26 million), Leroux said. with Calgary, Alberta-based Zag Bank, except of 2004, primarily due to premiums from Hop ‘n S@ve and InstaBalance, Desjardin’s for residents of Quebec where Zag’s products the acquisition of State Farm’s Canadian instant balance access tool, are available on are not available. By contrast, Tangerine and operations. the iOS and Android platforms as well as for President’s Choice Financial offer accounts Desjardin’s Personal Services and the Apple Watch and the Android Wear smart everywhere in Canada. Business and Institutional Services posted watch. “Zag is designed to meet the needs of Cana- surplus earnings of C$703m, up 10.3% for InstaBalance provides fast access to custom- dians who’re looking for a simple, transpar- the first nine months of 2015. ers’ Desjardins caisse accounts and Desjardins ent and straight-forward banking experience,” Wealth Management and Life and Health credit card and prepaid card account balances David Raju, Zag Bank’s President and CEO, Insurance reported surplus earnings for the first three quarters of 2015 of C$376m, without the need to log-in. told RBI. up by 18.4% while Property and Casualty Hop’n S@ve and Instabalance are among the Zag was originally founded by Alberta- Insurance surplus earnings grew by 19.8% most downloaded apps for the Apple Watch, based Western Financial Group in 2003 as to C$217m. Leroux said. Bank West, a federally regulated virtual bank “We are satisfied with these results, Improvements to AccèsD Mobile, which is accessible through insurance brokers and cus- which show solid growth in our business available on the Android, iOS and Blackberry tomer service agents. Bank West was acquired operations across Canada in spite of intense platforms, include more intuitive navigation, a in 2011 by Desjardins as part of its takeover of competition, thereby demonstrating the single log-on for both AccèsD and Desjardins’ Western Financial Group. relevance of our strategies,” said Monique digital business banking service AccèsD Affair- In 2014, Desjardins relaunched Bank West Leroux, chair of the board, president and es, and the ability for users to reactivate their as Zag Bank and repositioned it as a direct bank, CEO of Desjardins. “Economic conditions remain fragile and password from their mobile device, Desjardins offering a range of financial products through the effects of the digital revolution are says. mobile and online applications and targeting being felt throughout the industry. We Android- and iOS-based app users can also younger consumers. have to stay focused and actively continue check their caisse, credit card and prepaid card “Since Zag’s soft launch in June 2015, we’ve our efforts to position ourselves in this account balances without having to log in. seen a steady increase in client acquisitions and new environment in order to meet the high Desjardins mobile and online banking cus- engagement with our social media properties,” expectations of our members and clients.” tomers can now use the Desjardins My Budget said Raju. tool to manage their budget and review their He continued: “Our marketing programme expenses. has focused on establishing Zag as a recog- since opened two additional 360d branches Desjardins has launched AccèsD Assistant, a nised brand in our home market of Alberta, near the Concordia University and Université context-sensitive help tool which helps online as well as in British Columbia. In 2016, we’ll du Québec à Montréal (UQAM) campuses in and mobile banking customers when they are look to expand awareness of the Zag brand Montreal. in the middle of a transaction such as a bill pay- and its easy-banking solutions in other prov- Desjardins says the 360d branches provide ment or person-to-person transfer and aren’t inces, including Ontario. We’re continually a relaxed, high-tech environment with the lat- sure how to proceed. evaluating our options, but there are no imme- est technology including touchscreens where Desjardins group insurance policyholders diate plans to launch in Quebec. Our team is young people can meet with dedicated advisors can submit claims in 30 seconds or less using focused on establishing Zag Bank as the go-to, who provide guidance on products to meet their a new mobile app called Claim 360o, which is easy banking option in the provinces where we financial requirements. available on the Android- and ioS platforms operate.” The branches include cluster areas specifically and lets them track their mobile claims and In addition to online access via its website, designed for customers’ needs such as financing most recent reimbursements. Zag Bank offers certain deposit products their studies, buying their first car, travelling and Between its launch in March 2014 and through select brokers, Raju says. entering the labour market. They also offer stu- December 2014, Claim 360o was downloaded “We’re pleased with the trend of new Zag dent-focused activities such as lectures, coaching 22,528 times, Leroux said. accounts being opened on a daily basis and are workshops and mentoring from business lead- Desjardins Insurance’s Ajusto program excited that our clients are leveraging a variety ers, teachers and experts in various industries. offers drivers in Quebec and Ontario usage- of channels to manage their accounts,” Raju In June 2015, Desjardins opened a new type based discounts that help them save money by says. “We remain committed to evolving based of branch targeting customers in the 18–50 age incentivising good driving habits. on our clients’ feedback, which will influence group in the Marché Central, a shopping centre The March 2015 launch of the Ajusto mobile the product offering and channels in which we in Montreal which receives 10 million visitors app for smartphones made Desjardins the first service them.” a year. Canadian insurer to offer a 100% mobile tele- In October 2014, Desjardins opened its first When visitors enter the branch, they are greet- matics programme that doesn’t require drivers 360d centre in Montreal for 18-30 year olds ed by an advisor who assists them in accessing to install a device in their car, Leroux said. near the Université de Montréal campus. It has Desjardins’ complete line of products and ser-
6 y November 2015 www.retailbankerinternational.com
RBI 719 November.indd 6 08/12/2015 09:20:28 Retail Banker International FEATURE: DESJARDINS
2014 social media data n TRANSACTIONS BY CHANNEL IN 2014 • 215,000 Desjardins Group and caisse followers on Facebook Mobile services • 1.8 million views on YouTube Online solutions • 15,000 Twitter followers Direct payments • 39,000 LinkedIn followers • 156 Desjardins caisses are on Facebook, ATMs and every month over 1.1 million peo- ple view content on Desjardins’ Face- Caisses book pages. Automated transactions Source: Desjardins Group, 31 December 2014. Phone services vices. The branch includes themed areas offering advice tailored to various common goals and situations, as well as interactive technology tools Source: Desjardins for use by customers. Desjardins says that, because of its location, n SURPLUS EARNINGS BY BUSINESS SEGMENT ( DESJARDINS Q1-Q3 2015) the branch reaches a range of ethnic communi- ties in the area, whose population is 70% made up of immigrants. Most of the branch’s staff are from ethnic communities and they speak Personal Services and approximately a dozen languages altogether. Business and Institutional In December 2015, Desjardins plans to open the Desjardins Innovation Lab at the Complexe Wealth Management and Desjardins office and shopping centre in Mon- Life and Health Insurance treal. Property and Leroux told the group’s AGM that Desjardins’ Casualty Insurance staff and partners will be able to collaborate in the innovation lab’s multidisciplinary environ- Other ment to design prototypes and explore the most advanced technology. In September 2015, Desjardins’ Monetico Source: Desjardins merchant services business launched Monetico Mobile and Monetico Mobile +, two mPOS payment solutions for small businesses, the self- need advanced management features such as ever, it very likely has limited uptake at the employed, seasonal workers and mobile mer- the ability to create quotes and invoices and moment. Also, Desjardins’ mobile payments chants such as plumbers. manage their business expenses. service works with a limited number of smart- Monetico, a joint venture between Desjar- In September 2014, Desjardins became the phones, but this isn’t a problem unique to dins and France’s Crédit Mutuel which was first financial institution in Quebec to launch Desjardins. The lack of NFC-enabled phones established in 2013, competes with Moneris a service enabling mobile payments from cus- is a constraint on the whole Canadian market Solutions, Canada’s largest merchant acquirer. tomers’ Android-based smartphones. Custom- at this stage. Eventually, this problem will dis- Moneris is a joint venture between RBC Royal ers can make payments using their Desjardins appear as every smartphone will have an NFC Bank of Canada and BMO Bank of Montreal. Visa credit card using phones from five Cana- antenna and NFC SIM card. I estimate that at Both Monetico Mobile and Monetico Mobile dian mobile carriers, Bell Mobility, Rogers the end of 2014 there were four million NFC- + comprise a calculator-sized keypad incorpo- Communications, Virgin Mobile Canada, enabled smartphones in Canada, but the figure rating an EMV chip card reader and PIN pad Telus Communications, and Koodo Mobile. is changing fast.” which connects via Bluetooth to an Android- or Like CIBC, TD, Scotiabank and President’s Desjardins says customers wanting to use iOS-based smartphone or tablet loaded with the Choice Financial, Desjardins uses Canadian their smartphones for payments, must apply Monetico Mobile app. trusted service provider EnStream’s mobile for an activated NFC SIM card if their phone Monetico Mobile, which is available free payments hub to load its customers’ card cre- doesn’t contain an NFC SIM card. “The prob- to Desjardins members, is designed for micro- dentials onto their smartphones across a range lem is that only the one percent of customers businesses and mobile self-employed workers, of mobile carriers. who are technology innovators is going to a market which Desjardins sees as having grow- Desjardins says its mobile payments service request an NFC SIM card,” says Christelis. ing demand for mPOS technology. Desjardins’ currently only works with NFC-enabled Sam- “Another challenge is that customers don’t Ouellette told Quebec-based newspaper La sung Galaxy phones, the HTC One M7 and want the hassle of downloading mobile pay- Presse that there is a potential market of 100,000 M8 phones and the BlackBerry Bold 9900. ment apps and their card credentials onto micro-businesses and mobile merchants in Can- “I think Desjardins’ mobile payments offering their smartphone. I’ve found in my research ada. is a good start, because it covers all the major that, if mobile payment apps are preloaded Monetico Mobile + is designed for busi- Canadian mobile networks,” said Technology onto a phone, the consumer uptake is much nesses with higher transaction volumes which Strategies International’s Christelis. “How- bigger.” <
www.retailbankerinternational.com November 2015 y 7
RBI 719 November.indd 7 08/12/2015 09:20:29 Financial Services
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Nationwide transforms branch and digital banking experience for customers As part of Nationwide’s 500 branch refurbishment programme being carried out over the next 5 years, the UK’s largest mutual has partnered with NCR to help transform its branch experience and banking services available on-line, on-mobile and via other digital channels for its members. Douglas Blakey writes
irst came a major core banking project, Nationwide says it will then serious digital banking investment provide the best custom- and now the Nationwide is investing er service and maintain big time in the branch. its reputation as a per- F sonable place to bank in Nationwide has made no secret of its ambitions to achieve a 10% share of the UK today’s digital society. current account market. It has deployed As long ago as 2008, with a then market NCR’s newest and share of around 6%, it has thrown itself most innovative ATM enthusiastically into updating its systems, solutions at flagship innovating digitally and investing in its branches in Swindon branch network. and across London as First up came a five-year core banking part of the branch pro- transformation programme, with the first ject. UK implementation of SAP Transactional “We’ve listened to Banking applications from the SAP for Bank- what customers want. ing suite of solutions. This has led us to focus A new range of current accounts followed on the next generation – the institutions first such new product offer- of online and mobile services to comple- Nash, Director Financial Services at NCR ings in 25 years - as the Society ramped up its ment traditional person to person interac- UK. efforts to become a serious player in the UK tions, creating an ‘always available’ 24/7 “Nationwide has proved itself fearless banking market. banking environment. when it comes to adopting and rolling out In 2008, Nationwide (NBS) told RBI that “Digitally enabled services and simplified technology to provide value to its members it was aiming for a 10% market share by processes will allow our members to choose and help drive its business. The implemen- 2015. when, where and how they wish to engage tation of our latest customer experience That has proved to be wildly optimistic; with us,” said Barnaby Davis, divisional software platform will provide the flexibili- now it talks of achieving a 10% share by director for group retail strategy at Nation- ty for Nationwide to adopt new and emerg- 2020. It is however making among the win- wide. ing technologies across multiple channels in ners of the seven-day account switching ini- “The Society will continue to invest in its the future. The deployment of our state-of- tiative and the 10% target looks achievable. systems and infrastructure with strategic the-art multifunction ATMs is just the latest NBS’ mobile and digital offerings are suppliers, such as NCR, to ensure that our example of innovation at the Society. We assisting the Society to win new customers: members can manage their money wherever look forward to many more in the future.” it has added a net 250,000 current account and however they choose to do so.” According to NCR, the solutions will customers in the six months to end October, Nationwide’s investment in its branch help NBS to reduce total cost of ownership bringing its market share up to 7%. network will include the re-definition of by decreasing its dependence on legacy sys- Evidence of digital banking investment the branch with new layouts to enable more tems and streamlining duplicated processes. paying off is evident from some quick stats: person to person conversations. In addition, the aim is for NBS to reduce mobile banking log-ins up 40% year-on- The design of NCR’s SelfServ 91 ATMs the time and cost to market for new bank- year and mobile payment transactions have - carried out at NCR’s Dundee Centre of ing services as they are delivered across soared 50% year-on-year. Excellence R&D centre - helps enable this, all channels, including the new ATMs, It has also been among the first adopters of as Nationwide employees are better able and enable NBS to provide more value to video teller remote banking, rolled out across to assist customers at the ATM, if the cus- customers via its self-service solutions by its 700 branch network, offering mortgage tomer so wishes. Traditional teller lines, leveraging existing web services via ATM advice. counters and glass screens will be reduced and other self-service solutions. The Society’s latest investment project will so that Nationwide staff are more readily NBS posted pre-tax profits up by one- see £500m ($753m) invested in its branches available to speak to and advise customers third to £802m for the six months to end over the next five years, underlining Nation- on the branch floor. September compared to the corresponding wide’s confidence in the future of the branch “Achieving the right balance and integra- period last year. alongside its commitment to digital channels. tion between digital and physical banking Its gross mortgage lending market share By providing customers with a choice channels is a challenge for most banks and increased by one percentrage point to of how, where and when they can bank, building societies in the UK,” said Rachel 13.2% over the same period. <
www.retailbankerinternational.com November 2015 y 9
RBI 719 November.indd 9 08/12/2015 09:20:30 C
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The innovation hole: How do banks stimulate change? Just about every bank, established or start-up or challenger, says that innovation is at the heart of their operation. Just how fair are such claims and how can lenders, encumbered as they are by their size, culture and regulatory environment – truly be innovative asks Phil Tootell
nnovation. It’s the Holy Grail in bank- interest rates as a result. Letting ideas off of the leash ing isn’t it? The golden egg that every- And for true innovation in banking, many Senior managers from the bank should not one is set on chasing and understand- analysts think media companies might well be influencing it in the slightest. In fact, it ably so. Innovation sets you apart – it enter the fray. Imagine if KYC was mandated often works best if a third party manages I on Google. It would be looking at how it could allows you to deliver products and services the innovation operation. If its people start first, enables you to get ahead of the compe- be used as a platform for wider innovation and thinking “but what about the constraints of tition and keeps your customers interested. how it could improve customer service. Com- our operation” or “what will shareholders And yes, everyone pays lip service and says panies like Google, Apple and Amazon would think?” is the day they begin to compromise they are innovative. But are they really? be responding to regulation in a very different their start-up spirit. The answer is a resounding no. But it’s not They must also be allowed to fail. Brain- for the want of trying. Banks by their nature storming and testing different ideas is an are extremely risk averse – and as a society, important aspect of innovation. that is exactly how we want them to be. Regu- It doesn’t matter if something doesn’t work. lation is there to enforce that risk averse cul- From failure, the best ideas come. But in a ture. 24/7 banking environment, banks can’t afford But being innovative in a regulatory envi- to fail. ronment is a bit like trying to juggle whilst This further enforces the need for separate having your hands tied behind your back. hubs, where ideas are allowed to fully mature Risk aversion and innovation aren’t the most before being implemented into the wider natural bedfellows. organisation. Although this phenomenon has been around Hurdles for innovation for a while, it is still relatively new in banking. Another issue is size. The banks that domi- Back in June, Deutsche Bank announced that nate the global landscape are financial behe- it is setting up innovation hubs to boost tech- moths, with infrastructures to match. Not nology development in London, Berlin and all innovation is tech-related, but much of Silicon Valley. it is. Innovation is about being nimble and Through these hubs they will be starting to responsive. work with start-ups and academics to come The sheer size of banks, the usual complex up with digital ideas that will revolutionise network of systems, software and processes way to the banks. customer products and how the bank operates that underpin them and also their 24/7 avail- So how can banks - encumbered as they are internally. ability is the death knell to any flexibility, cre- by their size, culture and regulatory environ- They are aiming for 500 ideas a year – obvi- ativity and innovation they hope to achieve. ment - be innovative? ously, not all will be taken on board but it Innovation relies on the ability to develop One answer is developing innovation hubs. underlines the point that prolific idea genera- and fail, and banking, with its round the In their essence, these are start-up organisations tion plays a key part in innovative thinking. clock opening hours, just isn’t an environ- that operate independently of the principle It’s a good starting point for banks. They ment that can support that. organisation. shouldn’t worry about creating innovation Leadership is another important factor. They could be created through acquisition (a directly in the organisation - they need to think Innovation tends to require an entrepreneurial fin-tech company, for example) or simply set- about fostering it externally in these hubs, mindset, but many banking executives have ting up a different business, dedicated to inno- populating them with their most entrepreneur- grown up in banks. vative thinking and ideas generation. ial talent and cross pollenating with external They might have operated in that environ- The important thing is that they are liberated experts. ment for 20 or 30 years and its impossible for from the bank’s risk averse culture to act in a They need to be given a free reign to come them to change - they have no other industry free-thinking, entrepreneurial way. up with the ideas, unencumbered by precon- experience to channel. It is vital that the two organisations are sepa- ceptions or market perceptions of what others In terms of innovation, unsurprisingly chal- rate and operate independently, so the culture expect. lenger banks are forging ahead. Take digital of the bank does not contaminate the start up. This is how banks can continue to innovate start up, Atom Bank. Launching this year, the And from an organisational point of view, a and develop. < fact that it is “digital only” means that it will flat, non-hierarchical structure tends to inspire have lower operating costs than traditional more innovative thinking than having layers of Phil Tootell is a founding director at business banks and be able to offer more competitive management. change consultancy Certeco
www.retailbankerinternational.com November 2015 y 11
RBI 719 November.indd 11 08/12/2015 09:20:32 EVENTS: BRANCHES Retail Banker International
Time for a bit of branching out As digitalisation sweeps the banking world, the question of what role the branch will play in the future of the industry, if any, is still being hotly debated. The RBR Branch Transformation Conference offered up a whole host of concepts to spark life into the brick-and-mortar service. Alexander Atkins writes
his year’s conference in London, host- they must evolve. said: “If people are becoming comfortable ed by Retail Banking Research (RBR), He was adamant that the aims of future with assisted self-service in airports or shops, featured speakers and presentations bank branches should be to enable choice, surely they can get comfortable with branch from financial organisations hailing enable automation, enable the consumer self-service.” T and acquire the transaction as early on in from a range of countries around the globe, The result was a piloted new branch for- among them well-known names such as the process as possible. mat in 2013, with the aim to migrate cus - Santander, Banco BIC, Cardtronics, Global But the game changer, as he put it, lay in tomers to multi-vendor ‘smart ATMs’ that Solutions and many more. two areas: assisted self-service transaction would enhance the multi-channel customer and field or remote banker transaction. experience. The ATMs also have built-in The pop-up branch Most importantly was needed the abil - video capability so customers can talk to UniCredit’s answer to the pop-up branch ity to centralise all services and processes out-of-branch specialists. was tested with eleven installations in Aus- under one roof, whilst silos ‘would be the Its branches today don’t offer teller lines tria and Italy, most notably at this year’s death of the financial industry’ and needed but instead present three options: a full ser- Venice Film Festival. Here, the pop-up to go. vice manned kiosk, an assisted self-service branch showed its real potential in two Asked if he thought if branches would smart ATM with video option, and a self- ways: firstly, festival organisers had previ- ever disappear completely, Schwabline service smart ATM, with a ‘drive through’ ously complained that due to a high volume responded: “Never. Some form of branch style smart ATM option also being consid- of people, it was difficult to find or utilise will always be around because the human ered. an ATM, so the pop-up Branch could be interaction can never disappear totally, it manoeuvred into a traffic choked area. may become less frequent but because of One step further Secondly, it achieved a large commercial an inherent need for trust, interaction has But Fifth Third wants to go even more digital. impact with a high lead generation, creat - to exist.” Sullivan continued: “We want customers ing on average 65 new prospects per day. He went on to explain how powerful to have the option to go online at home, With the success of the prototypes, Uni - remote banking could be. “You can have to have a voice chat or a video meeting Credit hope’s that they can expand the someone at the edge of the Andes, in the with the universal banker and to talk to a functions of the pop-up branch to include rainforest, but as long as they have a specialist without even having to go to the non-banking services such as financial edu- mobile, they have an environment in which bank.” cation, urban data generation and commu- they can bank”, said Schwabline. So far, it’s been relatively successful with- nity engagement. Postbank, represented by Ioannis out the need for large scale layoffs, says However, it admits that for the foresee - Serafeimidis, head of retail banking for Sullivan. able future, it won’t be the predominant Postbank in Bulgaria, was showcasing its In between the talks were the booths branch mechanism but that it has the new idea of Retail Lending Centres within showcasing even more equipment and ideas. potential to emerge into a flourishing con- branches. From new money managers and coin sys- cept. As Serfeimidis explained, the idea is to tems to card replacement kiosks, there was So what is it? In a nutshell, seven square create excellence hotspots by pooling the certainly something for everyone. meters of mobile space providing advisory best talent and resources into the branch - The options were numerous and the services, an ATM and two or three staff on es most likely to make the biggest impact. presentations raised some important ideas hand, with the aim of being highly flex - These centres would also be places where about not only what the branch of the ible and mobile, to appear anywhere at any the best senior employees could mentor the future should be, but what it should do, time. best new talent in a ‘real life work experi - how it should look and where its main Klaus Sandbiller, head of real estate ence situation but with a safety net.’ place in the entire industry would be. global projects, who helped with the idea, The only certainty that emerged from the said they had to be innovative and unique Drive-thru banking whole conference was that the traditional with a low cost implementation, be flexible Fifth Third Bank, based in Ohio, show - branch and its traditional functions were and adaptable, easy to handle, sustainable, cased a presentation on how technology no longer feasible with a world where con- and have the ability to attract and engage allowed the bank to engage with their cus - sumers wanted more options when, where customers. tomers differently. and however they liked. Jack Henry and Associates’ speaker, Kevin Sullivan, Managing Director for dis- Just as with every antiquated idea, its Jason Schwabline, senior manager for tribution strategy at Fifth Third, explained heyday has passed. The only question now, global product and strategy, talked about that customers want to interact with banks as the conference pitched, is what route do the branch tools of the future and the ways when, where and however they liked. He we go down next? <
12 y November 2015 www.retailbankerinternational.com
RBI 719 November.indd 12 08/12/2015 09:20:32 Retail Banker International INTERVIEW: MASSIMO ARRIGHETTI
The conflict between new and old in Poland
The struggle for market share between traditional banks and newer challenger brands continues. In SIA’s ‘Accelerating the Payment Transformation’ conference in Poland, Patrick Brusnahan speaks exclusively to its CEO, Massimo Arrighetti, on the developments in this conflict and if it looks like reaching a resolution
osted in Warsaw, the event dis - barriers, the first being the trust of people. traditional monopoly is at risk and the most cussed the growing presence of new If you buy music or games on the internet, threatening people today are Apple and we payments and banking solutions you are fine with that. When it comes to real will see what Amazon and Google will do. in Europe and across the globe. In money and making significant payments or The first attempt by Google was not a suc- H opening an account, you tend to be more cess but that tells you there is a resistance addition, the challenge lying ahead of banks was an ever-present theme. Where will the cautious. from the consumer. There must be a clear key battlefields be for the financial sector in Banks definitely have to learn something advantage in order for a consumer to change. the future? from fintech. Some banks will try to resist. The next step needs to be more secure, more Others will cooperate with or buy a fintech convenient, more something. In that case, RBI: In your opening speech, you mentioned company. This will depend on their opinions you can eventually change the consumer’s how big the subject of payments is becoming regarding in-house or outsourcing. If you behaviour. in Poland, but only 20% are actively using decide to outsource, fintech can be a solution electronic payments. but consider that for large banks, depending Would you say that banks are too regulated or on a small company can be a risk. A small that fintechs are not regulated enough? Massimo Arrighetti: It depends what you company can exist today, but you have to mean by actively using. I guess that the be sure it will exist for the next dozen years. MA: There needs to be more regulation for large majority of people are using electronic Fintech will probably be bought by banks fintechs and definitely less for banks. The payments today, but nevertheless, it may only or the giants of the internet. They are the decision to apply a limit to the interchange is a be once a week. As far as I know, the Polish ones with the habits of buying things. Banks big mistake. The government should not enter market is still very cash-based and so the fact should be very quick or Google or Apple will a marketed arena and fix the price. Prices are that some people have the capability to use buy it. At that point, it becomes a serious fixed by the market. Any time the regulator electronic payments does not mean that they issue for banks because Google, Apple, and fixes the price, it is a mistake. do. This is something that is increasing in Amazon have plenty of money to invest. This Poland and other countries. is a game that will play over the next couple With the internet giants, people like their of years. brands. While banks have consumers’ trust, This is SIA’s first conference here. Are you At the end of the day, I must say that mov- they might not be popular. beginning to put more of an emphasis on ing a customer to new habits takes a long Poland? Is this a market you plan on focussing time. If you look at any big change in terms MA: In my experience, the end user hates the on? of behaviour, it takes ten years, so banks banking system, but has a good relationship have time to react. But they cannot stay look- with his own bank which is quite a strange MA: SIA is based in Italy, but over the last few ing out the window. kind of schizophrenia. This can be for a years, we have started moving. International number of reasons; maybe your bank helped business is increasing. We actually are the only Do banks have a slight advantage in the you buy a house or with a loan. If they don’t, pan-European country in SEPA on behalf of solidarity between them while fintech you go to another bank who will help, so the European Banking Association. The companies’ lack of cohesion may limit them? you hate the first bank but love the second. commercial business is growing and Poland It’s a love/hate relationship with the banking is the best performer in terms of growth. MA: Innovation is made through one single system. By definition, this is a market that SIA is attempt out of thousands. This is part of The user experience of the internet is interested in. We have an office here; people innovation. easier. Banks are complex and old. They are now resident here in Warsaw. In the past, This is more an issue of the rules of the already have a lot of data and they know we followed Poland from Milan and Budapest, game. Banks are subject to a number of rules their customers’ behaviour. If they start to but now we have people that stay here. that the others are not. This sets the base for think in terms of customers’ needs, they unfair competition and risks for consum- can really make a difference. I think that A common statement is that while banks have ers. With a bank, you have some warranties. banks have a chance to compete and win reach and scale, but might lack functionality; Banks are controlled and monitored, but if they change their behaviour versus the new start-ups have the innovation, but not the one of these small companies can do what- market. The monopoly is over and you reach. Who will catch up with whom? ever they, this is a strength, but a weakness need to face the competition. To win the because they a high risk. competition, you have to think more in MA: Who knows? Traditionally, payments We still have people afraid of using their terms of customers their needs and less in have been a banking business and now you card number to buy something online. It’s terms of your own process. You have to be have start-ups entering. There are some not really clear who the winner is today. The ready to change. <
www.retailbankerinternational.com November 2015 y 13
RBI 719 November.indd 13 08/12/2015 09:20:33 MENA’s digital potential starts to bloom Emerging markets in the Middle East and North Africa (MENA), particularly Morocco and Saudi Arabia, are garnering a wealth of attention. With immense amounts of potential in the financial sector, many are looking to see what the region turns to next. As it turns out, it’s digital. Alexander Atkins writes
n two events hosted by Retail Banker Whilst talking in relation to the youth of need. The result is a new generation who International and Infosys, experts came Morocco, he underlined three key factors know what they want, who want it on the together to discuss the future of bank- that banks have to become more involved in move and who want it available 24/7.” ing in the MENA region. if they are to reach this market effectively: He continued that the competition has I mobile usage, social networking and cus- also now expanded beyond banks and if a Moroccan banks prepare to tackle the tomer loyalty. bank cannot fulfil specific needs the custom- digital generation He said: “Banks are not doing enough er can go elsewhere. “There is a tsunami coming in the next five in terms of mobile solutions and social net- Thanalpatti explained: “They want bank- years and we don’t want to miss it,” declared works, especially when young people spend ing services but not necessarily from banks. Driss Maghraoui, Executive Director at Atti- so much time connected to both.” That is the kind of mindset the customer has.” jariwafa Bank, whilst addressing a roundta- He remarked on customer loyalty, explain- Maghraoui went on to talk about some of ble conference in Casablanca in September. ing that the youth market are much more the other key challenges that are faced in the The conference focused on how the rapidly informed by this internet presence and are Moroccan environment, one of which was developing Moroccan retail banking industry demanding more than previous generations the changing pace of life in rapidly growing is facing disruption and what it will take for have. cities and its effect on the future of branches. Moroccan banks to succeed in the digital age. “We need to create more customer loyalty “Because of rapid urbanisation and other Maghraoui’s comments were referring to from this next generation. For example, a lot similar issues, customers will find it increas- one of Morocco’s biggest challenges, and banks play a presence when the youth are in ingly harder and harder to move around, one of the greatest opportunities, in the large their study years. But we do not manage to they won’t have time to go and see their bank youth market that will be emerging in the ensure the bond between the period of edu- because of distance or transport problems,” next five years. cation and the time when they become active he explained. “So does the traditional model “Our country is a young country in terms on the job market. This has to change.” of having more branches in more locations of age population. One Moroccan inhabitant deal with this? I don’t think so.” out of two is under the age of 27, so imagine Changing habits He made clear that it was unsustainable the tsunami which will be upon us in five This was a statement that was corroborated for banks to try to follow the traditional years,” he explained. “Is there serious experi- by the other speaker of the day, Vishwanath path and continue to set up branches in more mentation on the youth? No, because banks Thanalpatti, Market Strategy Director of locations. He said: “It is not by establishing are concentrating on the wealthiest market Infosys, who spoke about how Moroccan branches that we will conquer young people segments and that must change. We must banks can adapt and stay relevant to their between twenty and twenty-five in five years. prepare for the future, today.” customers. This model has had its life, and now we must Morocco is one of the fastest growing, He explained how two of the driving forc- find a new solution.” most competitive markets today, and the es changing the banking industry today were The solution he proposed was to stop over- retail banking sector has recently undergone social media and the internet which were investing in physical networks and to look a series of reforms, mainly focusing on the making the customers more informed. instead to technological networks. “We must improvement of financial institutions, the He said: “Earlier customers would come invest in technology rather than a physical marketing of new products and the mod - to the bank in person to meet the staff and presence and geographical proximity. We ernisation of the banking legal framework. form a relationship but now we have cus - need to progress in a style of digital distribu- Maghraoui’s keynote speech was aimed at tomers who are informed by social networks. tion.” highlighting the key challenges and limita- This means that when they come in to talk His comments on the future of branches tions that the industry faces in Morocco. to the bank, they know full well what they come as global debate continue to revolve
14 y November 2015 www.retailbankerinternational.com
RBI 719 November.indd 14 08/12/2015 09:20:35 Retail Banker International EVENTS: MENA
around the place of the branch in the future of the retail banking industry. Yet Maghraoui was adamant that branches could not disappear. He remarked on branch closures in Europe and made clear that the same could not happen in Morocco. Instead, he explained, those branches must adapt and evolve from the traditional into a new style that will serve both a physical and digital presence. He said: “There will always be branches because there will always be growth but they must evolve into a new form.” A further point that was raised was the growing importance of the role of big data for banks in Morocco. Currently, the data bases in Morocco are inadequate and need to be greatly enhanced, he explained, because they would play a prominent role in reaching customers and of the bank. for Technology Services at Arab National offering them the correct products when they He concluded: “If we think of digital trans- Bank. need them. formation only from the front end, it will “A digital bank should be able to reach “All databases in Moroccan banks are never be enough because we won’t arrive at everyone and everything in the market,” greatly insufficient and therefore suffer the service we find and the processes won’t he declared at a roundtable conference in from an inability to know the customer well, go from end to end. Riyadh in September. The conference focused to segment him and to offer him the right “Often we come up with ideas that will on how Saudi Arabian banks face continued products,” he remarked. “This is a major stop at branch level and internally, the tradi- disruption as the world becomes more digital. constraint and something we must vastly tional system will delay the digital introduc- In his key note speech, Alomran highlight- improve on.” tion. This needs to be tackled by parts of the ed three aspects of banking that would have Thanalpatti further emphasised the impor- bank, including HR and training who will to evolve for Saudi banks to achieve digiti- tance of big data and how useful it will be to play an important role here.” sation: “The three aspects I am concerned the future of banking as he stated: “We have Thanalpatti reiterated many of these points about here are reach, products and analytics. so much digital data with us, so that when and also broke down the major factors driv- “If we are able to provide a dynamic in our we look at our customer statements and their ing change in the financial world including situation where the three aspects are auto- lives, it can help hugely in strategising new big data, mobility, the cloud, blockchain and mated, automated reach with minimum products and banking incentives for them.” the Internet of Things. human participation, automated product The future of multichannel, an issue in He further underlined the importance of fulfilment in terms of processing, and sup- worldwide discussion at the moment, also understanding payment procedures, espe- porting analytics, that is what I view as a featured in the debate. cially in a world with growing competition digital bank.” As the digital banking world extends, from non-bank competitors. However, he admitted there are significant banks are examining options other than He said: “Many of these e-commerce sites challenges along the journey to digitisation. multichannel including channel integration. on the internet have their own payment sys- “The bank office today in Saudi Arabia is This was a sentiment Maghraoui appeared tems. They handle the sales of customers still late in the digitising place,” proclaimed to share as he explained why multichannel who, rather than having to pay in the store, Alomran. “Our key products or processes are initially came around and how it needs to they would prefer to do it online because its still human based.” evolve to meet the customers needs. 24/7 and they can order from the comfort of Going further, he emphasised that there He said: “Recently multichannel issues their home. But when it comes to the pay- are key limitations, due to the current market, have appeared because there has not been ments part, they are paying with a different as to how far Saudi banks could take digitisa- enough development in regards to this.” system like Paypal, and this is the kind of tion, including the outsourcing environment He outlined that one of the major con - markets that banks could engage in more.” of financial services in Saudi Arabia. straints in the development of multichannel The debate in the conference showed that He added: “There is a limit to the efficien- in Morocco lay in regulation and the lack of Moroccan banks face many challenges and cy gains that we can introduce to an organi- an electronic signature system which is key serious limitations. But it also showed that sation without pushing more community to those products and services requiring a by understanding the fast evolving world services outside an organisation. I can’t see signature. He added: “The customer starts of retail banking and making the necessary Saudi banks achieving the efficiency limits something on the internet but then has to go preparations to try to keep pace with that that are claimed by certain digital banks into a branch to sign something- he doesn’t change, they will continue to grow and adapt where, for example, a million customers are want to do that and this kills the purpose of rapidly. served by 300 employees.” the multichannel experience.” A further concern Alomran underlined was A final comment from Maghraoui regard- Saudi banks ready for a digital future the need for more Arabic language research ed the danger of looking at digital transfor- Saudi Arabia’s retail banking industry is and development, in three areas in particular; mation from one end only, elaborating that ready to take on the digital future according sentiment analysis, voice recognition systems, the process needs to encompass every part to Ali Alomran, the deputy general manager and Optical Character Recognition, stressing
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RBI 719 November.indd 15 08/12/2015 09:20:41 EVENTS: MENA Retail Banker International
that much more research was needed in all nels and said: “Every mobile channel will three. have certain features which are common and Alomran was also keen to assert that Saudi very similar to mobile banking with an ATM, banking needs to focus on making back offic- these connectors are application programme es more efficient and less on making other interfaces (APIs) and the business model channels more efficient because the channel exposes those APIs so you no longer need to inefficiency is linked to the back office. be dragged through all these channels for one He said: “We should convert from chan- single item.” nels to improving reach and we should As to the question of the future of Saudi introduce more analytics as the analytics of banks and the future of banking in the region, banking in Saudi Arabia is way behind other the speakers sounded positive and proposed sectors in the country.” how they thought banking was going to change. Alzooaabe believed that payment Attracting a larger number of customers methods would be one of the major changes, The incentives for digitisation, however, are especially with the rise of online banking. large Alomran stated. One incentive he list- in the region’s banking industry, examined the He said: “I think the main difference in five ed was banking inclusion and being able to big questions facing digitisation in the Saudi years for Saudi banking will definitely be in reach the large market separate from the tra- market including pricing differentiation and payment methods. Maybe online banking will ditional client base, stressing the importance its relevance in the Saudi market. “I think it be the only future for the course of banking.” of new means of finding them. will be practised because certain transactions He remarked: “This segment of the market online are cheaper than branch equivalent and Traditional distribution is another incentive for digitalisation, because branch transactions,” claimed Ali. However, the repercussions of the possibil- it requires us to sell simple products for mass- Almohanad Alzooaabe, a partner at Bank ity of a future of only online banking became es. Those customers who have limited device Al Jazeera, agreed with Ali’s opinion: “I think apparent when the issue of branch and ATM capabilities, limited access to data plants, lim- we have to think about the different genera- networks was raised, with the possibility that ited access to bank with and limited education, tion rules. If we see young kids these days, the larger banks would lose the advantage we will reach them in a similar way to reach- they are adapting to technology much faster of having large ATM and branch networks ing the next billion customers of Facebook.” than us and by the time they are our age, eve- if customers could do banking in other ways, The conference also featured a theme rything will be digital. and how this would affect the future of address from Sriranga Sampathkumar, AVP “It means that we have an advantage if we branches and ATMs. and head of Middle East at Infosys Finacle, can teach them how to use financial products But Sampathkumar was adamant: “The who showcased how to make sure the bank with this digital technology and save money, branches will not go and ATMs will not go. branch network was running efficiently and in order to prevent them from weaknesses in Banks like investing in branches because they how to use this infrastructure with digitalisa- the future.” are efficient.” tion. A further issue that arose from the discus- Alomran shared this sentiment when he too Sampathkumar explained the driving forces sion was the future of omnichannel in bank- declared in his keynote speech that branch- behind banking evolution in today’s market, ing. Douglas Blakey, moderating the debate, es would continue to live on. He stated: focusing on mobility, big data, the cloud, brought up the evolving idea that the custom- “Branches may not continue to be as iconic as blockchain, social networks and the Internet er should be given the opportunity to person- they are today. They will stay because we have of Things. He further emphasised the future alise their banking experience depending on ethical and legal obligations to interact with importance of the bitcoin and the bloc chain different uses of technology at different places customers directly through people.” as traditional banking disruptors. and at different times of the day. He continued on what purpose the branch Sampathkumar said: “Many banks want Sampathkumar responded by talking of the future could serve: “Surviving branches to take on bitcoin, many don’t want to, and about the need for a strong business model might end up being community branches ful- there are serious pros and cons in terms of dig- that can manage the various channels. He filling the community’s needs and they could ital security, but if you see the way bloc chain said: “Omnichannel is obviously in the pro- operate as card centres.” is growing today, you can see the market for cess of becoming more like a commodity. He went further with this talking about the bitcoin is growing.” One person may want something exclusive as need for banks to centralise complexity and He further explained that due to these forc- mobile banking, and another customer may distribute simplicity, by having branches do es, the customer has evolved as well: they are come and say I want a very exclusive ATM. less and therefore avoid distributing controls, informed and they know what they want and But if you have a business model that sits in procedures, policies and technology. He con- if they cannot get it from a specific bank, they the heart of the bank, then you can keep on tinued: “If we centralise as much complexity will move to another. adding these channels, ATM, mobile, branch, as possible, than we are keeping a line on all With customers demanding more, he told because the business model remains constant.” of those centrally, which will give us the pric- the conference, banks will have to offer more Alzooaabe talked about channel integration ing advantage too.” versatile products, especially with the growing as the future of omnichannel. “A key would The conference helped to highlight what competition from non-banking competitors. be integrating these channels so that if you challenges Saudi banks face when tackling Furthermore, with the pace of business in start a process in a certain channel and this is digitisation and that they will need to adapt the world getting faster, this new customer disconnected for any reason you can go and rapidly. But the future is positive and the wants their banking on the move, at any time carry on with some other channel.” conference also helped to show that Saudi and in any place, something Saudi banks Sampathkumar responded by explaining banks are aware that the market is changing would have to adapt to. that the business model he was talking about and that they are more than ready to change The panel discussion, featuring key figures has the capability to integrate various chan- with it. <
16 y November 2015 www.retailbankerinternational.com
RBI 719 November.indd 16 08/12/2015 09:20:45 Retail Banker International REPORT: CUSTOMER SERVICE
Banks must view customer service and sales as one
Financial institutions must make attempts to integrate customer service and sales, instead of looking at them separately, according to Efma and Misys. They must aim to achieve actionable analytics, cutting edge digital banking and an accelerated product factory according to the report. Alexander Atkins reports
hile today’s consumers are tech will fail to serve their addressable market. n savvy, constantly connected, Alex Kwiatkowski, the senior strategist for BIGGEST SOURCE FOR CUSTOMER ACQUISITION social and impatient, one in five banking at Misys, stated: “Institutions in all Mobile banking banks perform less than one per parts of the financial services sector must digi- in-app ads W talise. Their very survival depends upon doing Online 3% cent of sales via digital channels whilst 40% comparison sites Other of customer acquisition is still done through so without hesitation or limitation. Put simply, 4% 6% Online banking the branch. Yet, according to the report, as the industry continues its transformational in-app ads 5% banks are aware that customers are looking journey only those firms who digitalise from Branch for services similar to those offered by fast, front to back will make sufficient progress so 41% Advertising digital companies such as Uber, Amazon and as to remain, or become, the market leaders of 20% Google. tomorrow.” Whilst the report found that 25% of banks It also stated that by 2018, millennials will Word of Mouth claimed that customer service was their pri- have the highest spending power of any gen- 21% mary focus and 41% saying that customer eration and that by 2025, three out of four service and sales are equally balanced focus workers will be a millennial, people who, on areas, it also states that 75% of banks believe average, check their smartphones 43 times a Source: Misys and Efma they have not concentrated efforts on improv- day. 33% of these millennials also believe that ing the customer experience. Furthermore, they won’t even need a bank in the next five these 75% believe that they remain solely sales years whilst 53% of consumers believe that Regulation focused. their bank offers nothing different compared Another obstacle given by 11% of banks is However, despite the admission of a lack of to others. regulatory and compliance burdens, and in customer service focus, 48% of banks feel that Therefore, focus should also be on winning many regions, institutions are so focused on the term ‘customer-centricity’ is overused. The new customers, the report continued. Only delivering against legislation that they have two facts mean that whilst banks are express- 12% of banks believe that digital channels are few resources to dedicate to apparently non- ing to the public that they are customer centric, the greatest source of customer acquisition critical technology projects. this is in fact not true. whilst 41% of banks still place the branch as The issue of core systems also revealed that This is more important when considering the best source. 61% of banks believe that core systems are that recent research from McKinsey stated The investigation also found that banks are the biggest technology barrier to optimising that competition from non-traditional finan- forecasting a ground-breaking shift in sales sales performance, along with CRM, risk cial services providers means banks must fight through digital channels. The percentage of management and predictive analytics. Yet as for the customer relationship. banks performing more than 10% of sales via Vincent Bastid, CEO of Efma, stated: “Core digital channels is expected to jump from 13% banking technology is critical to connecting More digital needed to 75% in three years. A third of those asked the front, middle and back office in a way that The investigation also found a lack of digital believed that by 2018, only one-quarter of transforms banks into truly customer-focused, sales in banks today. 87% of banks perform sales will come through traditional channels. profitable sales operation.” less than 10% of sales through digital chan- In terms of the use of technology, many The report also highlighted the impact of nels. Yet the report listed the various benefits banks believe in the power of smart watches technology issues that sales teams face. 18% and opportunities of digital banking such as and wearables. of banks rated slow time to market with new reduced transaction costs, paperless banking, 82% of bank executives believe smart products as the biggest issue. secure customer communications channels watches will enable financial transactions Beyond that, 11% listed product personali- and more integrated services. in the future. At the moment, however, only sation as a large problem, stating that they are There was also a finding that only a minor- 3% of banks use smart watches but 37% state frustrated by an inability to create customer ity of banks have embarked on what the report that they are hoping to launch wearables in driven personal products. The solution, the referred to as ‘second generation’ digital bank- the next 18 months. report believed, is to improve CRM and pre- ing. This stage of digital banking incorporates An important point was the ability of banks dictive analytics performances. a greater level of interaction and customer to make these applications visible to staff Banks must close the gap between sales and engagement, yet banks are experiencing short- across all channels so as to avoid frustrated customer experience priorities by adopting comings in reaching it. customers who may have to repeat applica- digital-first core systems and infrastructure. Only 21% of banks that believe they are tion processes. To do this, banks must allow Furthermore, they must move away from ‘first solely focused on customer service perform for interoperability between channels. generation’ banking, which are transactional more than one in ten sales through digital However, 26% of banks say that technol- in nature, towards ‘second-generation’ digital channels. Whilst branches are still important, ogy is their biggest challenge to customer- banking which can deliver relevant products banks who fail to invest in a digital strategy driven sales, whilst 39% state that it is cultural. and services across all channels. <
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RBI 719 November.indd 17 08/12/2015 09:20:45 NEWS: DIGEST Retail Banker International
STRATEGY The businesses have been cle stack along with our industry Source Bank will be the surviving Standard Chartered offloaded to a consortium com- leading enterprise cloud infra- entity. hires new CEO for prising Värde Partners, KKR and structure.” Cheviot stockholders will have Islamic banking Deutsche Bank. the right to receive either 0.6916 business The completion of the latest M&A shares of MainSource common deal will release about $1.7bn of Swedbank gets go stock or $15.00 in cash for each Standard Chartered has hired capital. ahead to acquire share of Cheviot common stock Rehan Shaikh as new chief exec- Commenting on the sale, GE owned. utive of its global Islamic bank- Capital chairman and CEO Danske Bank’s Latvia The transaction has already ing business, Standard Chartered Keith Sherin said: “We are retail operations secured the green light from the Saadiq, replacing Sohail Akbar. pleased to complete the sale of Swedish lender Swedbank has boards of both companies. It is Shaikh joined Standard Char- our consumer lending business received the green light from the scheduled to close in the second tered from Dubai Islamic Bank, in A&NZ. Combined with the Competition Council to acquire or third quarter of 2016, subject where he worked as senior vice recently announced agreement Danske Bank’s Latvia retail to regulatory approval and Che- president and business head, pri- to sell our commercial lending banking business. viot stockholders’ approval. vate sector & transaction banking. business in A&NZ, this is a big The deal has also secured the Commenting on the deal, Shaikh, who has over 30 years step in the complete exit of GE nod of the Finance and Capital MainSource Financial Group of banking and management Capital from the region.” Market Commission of Latvia. president and CEO Archie experience, previously worked The sale is part of GE’s strat- The deal to sell Danske Bank’s Brown, Jr. said: “We are very for StanChart in Pakistan from egy to simplify operations retail banking businesses in Lith- pleased to announce this merger. 1998 to 2007 and also held a through the sale of most of its uania and Latvia to Swedbank It will significantly expand our number of roles including head, GE Capital assets and instead was agreed to in September this market presence in greater Cin- corporate banking and head, cli- focus on its industrial businesses. year. cinnati, an area where we have ent relationships. Under this plan, GE will retain The transaction, which is now already been focusing, and it Standard Chartered Bank the financing verticals that relate subject to approval by Lithuani- presents an opportunity to pru- regional CEO, Africa and Mid- to GE’s industrial businesses. an supervisory institutions, cov- dently continue our growth as an dle East Sunil Kaushal said: ers bank accounts, loans, depos- organisation. “Rehan’s in-depth knowledge of DIGITAL its, payment cards and securities “As a result of the merger, our footprint markets and cor- Infosys partners with of retail customers. MainSource will increase its porate banking experience will Oracle to offer Finacle The takeover of operations is market share position in the Cin- be invaluable in building our projected to impact about 7,000 cinnati MSA from 18th to 10th. Islamic Banking proposition as on Oracle Cloud Danske Bank retail customers MainSource, like Cheviot, is the Bank positions for future Infosys Finacle, part of in Latvia and 120,000 in Lithu- deeply committed to the commu- growth.” EdgeVerve Systems, a prod - ania, leading to the migration nities it serves. We look forward Shaikh said: “I look forward uct subsidiary of Infosys, has of €116m ($122m) of customer to extending our philosophy of to working with the teams in launched Finacle as a managed loans in Latvia and €525m in community banking to Cheviot supporting the financing and service on Oracle Cloud. Lithuania. customers.” investment needs of our clients The offering will enable banks globally.” globally to run enterprise-class M&S DISTRIBUTION banking applications such as MainSource Financial StanChart plans to axe M&A payments and core banking on Group to buy Cheviot 100 jobs in UAE GE wraps up sale of premise or in an external envi- Financial for $107.4m Australia and New ronment. British banking giant Standard Infosys said Finacle becomes MainSource Financial Group Chartered has unveiled its plans Zealand consumer one of the first comprehensive has agreed to acquire all of the to slash 100 jobs from its UAE finance divisions banking platforms to be avail- common stock of Cheviot Finan- operations as part of a global General Electric (GE) has com- able as a managed service on cial in a cash and stock deal overhaul designed to cut costs. pleted the sale of its consumer Oracle Compute Cloud. worth about $107.4m. Earlier this month, the bank finance operations in Australia Users of the new service will Cincinnati-based Cheviot announced plans to lay off and New Zealand in a deal also have a choice of no-main- Financial is the parent of Che- 15,000 employees in order to worth about $4.3bn. tenance cloud infrastructure, viot Savings Bank, operating reap savings of $2.9bn by 2018. which can be utilised for infre- with 12 branches across greater The bank has not yet disclosed quent activities including devel- Cincinnati, Ohio. a breakdown of the redundan- opment, testing, as well as train- Cheviot Financial man - cies in its UAE division, but ing, Infosys added. aged about $576.6m in assets, according to media reports, the Oracle president for product $365.1m in loans, $459.9m in move will affect the bank’s retail development Thomas Kurian deposits and $96.9m in total unit in the country. said: “Infosys Finacle and Ora- equity as of 30 September 2015. The UAE job losses follow cle have been working together As per the agreed terms of the Standard Chartered’s recent for over a decade now. With the merger deal, Cheviot Savings announcement to trim 1,000 Oracle and Infosys Finacle offer- Bank will merge with and into employees in South Korea, by ings, banks across the globe can MainSource Financial subsidiary the end of the year. take advantage of the latest Fina- MainSource Bank, where Main- In addition, the bank said that
18 y November 2015 www.retailbankerinternational.com
RBI 719 November.indd 18 08/12/2015 09:20:46 Retail Banker International NEWS: DIGEST
it will accept applications for quick and easy access to bank- subject to shareholder and regu- an important step as we con - an early retirement programme ing services. Through our Self- latory approvals and other cus- tinue to execute on our plan from its employees who have Serv ATMs, consumers will have tomary closing conditions. to sell most of the assets of GE served the bank for over 10 fast, reliable access to their bank Following completion of the Capital.” years. accounts and businesses will be transaction, Capital Bank plans The latest sale forms part of able to make deposits even after to recruit existing Community- GE’s strategy to simplify opera- M&A their branch has closed.” One board members Bob Reid tions through the sale of most of Israel’s Discount Bank In addition, services teams and Scott Kauffman to the Capi- its GE Capital assets and instead to sell Swiss subsidiary from NCR will offer first and tal Bank board of directors. concentrate on its industrial second-line maintenance for the Capital Bank chairman and businesses. Israeli lender Israel Discount Banamex ATMs. CEO Gene Taylor said: “This As part of this strategy, GE Bank has agreed to offload its Banamex channel strat - combination creates a high-pow- will retain the financing verti- Swiss operations- IDB Swiss egy manager Chris Vrey added: ered Carolinas franchise while cals that relate to GE’s industrial Bank- to Hyposwiss Private “Our work with NCR represents meeting the financial expecta- businesses. Bank Geneva for CHF10.9m our largest full-function ATM tions of our shareholders. ($10.6m). deployment in our history, and “CommunityOne brings us STRATEGY Discount Bank will not make it was critical we work with a skilled employees, a complemen- BBVA to buy 29.5% any profit on the transaction, the company known for its innova- tary branch network, and high- stake in UK digital bank Israeli bank said in a statement. tion and experience. quality loan and deposit rela - The sale of the Swiss business “Our customers are already tionships, and the transaction Atom forms part of the bank’s strategy able to take advantage of cash improves Capital Bank’s returns. Spanish banking group BBVA to shift focus on its international deposit features. We’ve been We applaud the excellent work has agreed to acquire a 29.5% operations in the US. pleased with speed and quality of CommunityOne’s leadership stake in British digital-only bank Discount Bank started imple- of NCR’s service and installation in turning around one of the Atom for £45m ($67m). menting the strategy in August teams to help us deliver this new Carolina’s oldest franchises, and Atom, slated to launch in early 2014, with various bids submit- experience to our customers.” we welcome CommunityOne 2016, was the first mobile-only ted for the Swiss subsidiary in employees to the Capital Bank bank to have secured a licence July 2015. M&A team.” from UK’s Prudential Regulation Under this strategy, the bank Capital Bank Authority in June. has also completed the sale of Financial to snap STRATEGY Subject to regulatory approv- Discount Bank Latin America up CommunityOne GE to divest UK home als, the investment will make operations, a subsidiary of IDB loan portfolio BBVA a strategic shareholder New York, as well as has com- Bancorp for $350m and partner in the digital bank. pleted the process of closing its Capital Bank Financial has General Electric (GE) has agreed The move will help BBVA London division. agreed to acquire Community- to sell a $5.9bn worth of first secure two seats on Atom’s One Bancorp in a cash and stock lien mortgage loan portfolio board as well as allow the Span- DISTRIBUTION deal worth about $350m. from its UK home lending busi- ish lender to participate in future Banamex selects NCR CommunityOne, a $2.4bn ness to an investment consorti- funding rounds. as intelligent deposit community bank, currently um comprising Blackstone, TPG Commenting on the alliance, operates with 45 branches across Special Situations Partners, and BBVA chairman and chief exec- ATM provider central, southern and western CarVal Investors. utive Francisco Gonzalez said: Banamex, a Mexico-based FI, North Carolina, as well as loan The deal substantially com- “BBVA believes the digital market has selected NCR as its intelli- production offices in Raleigh pletes the exit of the company’s in the UK offers excellent growth gent deposit ATM provider. and Winston-Salem, North UK home lending business that opportunities and that digital The partnership will see the Carolina and Charleston, South is valued at $13bn, GE said in a banks that put the customer first Mexican lender expanding its Carolina. statement. are the future. BBVA’s invest - ATM network with NCR deposit As per the agreed deal terms, The company has not yet ment in Atom backs those beliefs technology. Capital Bank will purchase revealed any other terms of the in one move.” NCR has already deployed CommunityOne by merger, deal, which is scheduled to close Atom chairman Anthony over 1,500 Banamex-brand- where Capital Bank will be the in December 2015. Thomson added: “In the 18 ed ATMs across Mexico that surviving entity. GE Capital chairman and months since the founding team includes 750 intelligent deposit CommunityOne sharehold- CEO Keith Sherin said: “This came together, Atom has now units offering coin, cash as well ers can opt to secure $14.25 per transaction represents the sale raised over £135m. as check deposit function. share in cash or 0.43 of a share of almost all our remaining UK “This is a wonderful endorse- The new SelfServ ATMs will of Capital Bank Class A com - mortgage business, which suc- ment from investors to the com- be installed in the bank’s current mon stock, with the total con- cessfully provided financing for pelling business case that the branches, and various digital sideration comprising 85% stock UK home owners. team has put together, and is a branches. The installation pro- and 15% cash. “We began this year with powerful signal to the regulators cess is scheduled to be completed The deal has already received around $13bn of ENI and when and most importantly for UK by December. the go-ahead from the board of this transaction closes, we will consumers. Now with BBVA as NCR Mexico area sales leader directors of both companies. have approximately $0.4 bil - our strategic partner we really Fernando Suárez added: “Con- Scheduled to close in the first lion of ENI remaining in our do feel that the sky is the limit sumers and businesses alike want quarter of 2016, the deal is now UK mortgage business. This is www.retailbankerinternational.com November 2015 y 19 RBI 719 November.indd 19 08/12/2015 09:20:47 GUEST COMMENT: NIMISH SHAH Retail Banker International Legacy is still the barrier to innovation Editor: Douglas Blakey Nimish Shah, banking sector lead at Talend Tel: +44 (0)20 7406 6523 Email: [email protected] Senior Reporter: Anna Milne utdated legacy IT systems are a major stay ahead of the pack and perhaps unsurprisingly, Tel: +44 (0)20 7406 6701 stumbling block for traditional UK high big data plays a key role in that. More than three- Email: [email protected] street banks as they look to fight back quarters (76%) of banking professionals agreed Reporter: Patrick Brusnahan against their often more agile rivals, that the industry has a clear understanding of the Tel: +44 (0)20 7406 6526 O benefits of big data, and more than half (51%) see Email: [email protected] widely known as ‘challenger banks’, who unhin- dered by complex, unwieldy IT infrastructures are it as a way to innovate faster and more effectively Asia Editorial: Xiou Ann Lim Email: [email protected] typically better positioned to innovate. against industry rivals. Equally, nearly a third Group Publisher: Ameet Phadnis In a recent survey by Talend, nearly half of the (32%) believe that big data can help counteract Tel: +44 (0)207 406 6561 banking industry professionals that were polled economic pressures facing the banking indus- Email: [email protected] made reference to the limits of legacy systems try and a total of 41% see customer demand Sub-editor: Tom Langfield as the number one IT challenge facing the sec- for access to new products as a key factor. Big Director of Events: Ray Giddings tor, with 43% also citing it as the main barrier to data is also increasingly seen as a game changer Tel: +44 (0) 203 096 2585 realising the benefits of big data analytics. by banks in helping them to address a regulatory Email: [email protected] Often too, it’s the bank’s existing infrastructure environment that has become increasingly oner- Head of Subscriptions: Sharon Howley Tel: +44 (0)20 7406 6536 that holds them back from making optimum use ous over time since the crash of 2008. According Email: [email protected] of their most valuable asset: their data. 56% of to the survey, 57% of respondents see industry Sales Executive: Adele Hutchins respondents blamed legacy systems for the lack of regulations and legislation as the number one area Tel: +44 (0) 203 096 2575 data integration while 45% claimed that the qual- where big data can ease pressure. Email: [email protected] ity of their data was preventing ‘real-time insights This is all positive but banks still face that famil- Customer Services: for the business,’ and a total of 63% of business iar gap between the vision and reality. There’s a Tel: +44 (0)20 3096 2636 or +44 (0)20 3096 2622 Email: [email protected] leaders in all are concerned about the impact of divide between the growing understanding of big For more information on Timetric, visit our legacy systems restrictions. data and real world implementations. Business websiteat www.timetric.com. As a subscriber, Major banks are never going to replace the leaders typically have a positive outlook with you are automatically entitled to online access systems that form the backbone of their business. 75% claiming their organisation is well advanced to Retail Banker International. For more information, please telephone +44 (0)20 7406 That’s far too risky an option – so data quality in their big data initiatives but just 30% of junior 6536 or email [email protected]. and data integration should be their top priorities. managers and professionals make the same claim, com Extracting insight from key data is crucial to probably because they are the ones trying to turn London Office retain customers in a world where the industry is big data promises into reality. 5th Floor, increasingly pushing to make it easier to change. So what’s continuing to hold uptake levels Farringdon Place, 20 Farringdon Road, Recent years have seen the establishment of the back? The survey highlighted the integration of London, EC1M 3AP Current Account Switch Service (CASS) specifi- multi-channel data (referenced by 34% of the Asia Office cally set up to make the process more straightfor- sample); managing the data explosion (33%) and 1 Finlayson Green, #09-01 ward, together with an ongoing push by the Com- gaining actionable insight from customer data Singapore 049246 petition and Markets Authority (CMA) to make (25%) as critical areas of concern. The ongoing Tel: +65 6383 4688 Fax: +65 6383 5433 it easier for customers to take charge of their shortage of expert resource is another key issue, a Email: [email protected] accounts. Adding to the uncertainty for the big problem exacerbated by the complexity of the big Financial News Publishing Ltd, 2012 banks, we are living in a world where challenger data environment. Registered in the UK No 6931627 organisations are achieving ever greater successes. As data science has evolved, the technology Unauthorised photocopying is illegal. The contents Indeed, a KPMG report, “The game changers required has become increasingly advanced and of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system - Challenger Banking Results May 2015” high- the pool of engineers capable of using it in com- or transmitted by any form or means, electronic, lighted just how far those challenger organisa- mercial applications – or even understanding mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For tions had progressed over the 12 months prior to it – has not grown accordingly. Today, 28% of information on additional copies or syndicatedonline publication. “The last year has been an important respondents see their lack of in-house skills as a access to this newsletter, please contact Customer Services. one for the Challenger sector,” according to the major barrier to big data adoption. The truth is report. “Five banks have listed on the London there are few staff with big data skills on the mar- Stock Exchange, raising over £350m ($527m) of ket and so those with the knowledge are extor- new capital to fund growth and strengthen bal- tionately expensive. ance sheets. Over the same period, lending assets To start seeing genuine value from big data for these banks increased by 16% compared to a projects, banks must start to embrace technol- decline of 2.1% for the Big Five [HSBC, Lloyds, ogy platforms that simplify the process, reduce Barclays, RBS and Santander.]” the need for complex coding and, of course, that DID YOU KNOW? It’s a stark reminder of how successfully these integrate with legacy systems and place graphi- Your subscription to this newsletter entitles you to access its five-year online archive. Go to www. ‘new kinds on the block’ have been in laying down cal tools into the hands of users outside the IT retailbankerinternational.com the gauntlet, so how can the traditional players department. Only by so doing will banks begin fight back? to excel in their big data applications and ensure The good news is there are clear signals that the that 2015/2016 is the timeframe when big data banks know what they need and want to do to projects start to show real returns. < 20 y November 2015 www.retailbankerinternational.com RBI 719 November.indd 20 08/12/2015 09:20:47 Multichannel digital solutions for fi nancial services providers To fi nd out more about us please visit: www.intelligentenvironments.com Intelligent Environments is an international provider of innovative mobile and online solutions for fi nancial services providers. Our mission is to enable our clients to always stay close to their own customers. We do this through Interact®, our single software platform, which enables secure customer acquisition, engagement, transactions and servicing across any mobile and online channel and device. Today these are predominantly focused on smartphones, PCs and tablets. However Interact® will support other devices, if and when they become mainstream. We provide a more viable option to internally developed technology, enabling our clients with a fast route to market whilst providing the expertise to manage the complexity of multiple channels, devices and operating systems. Interact® is a continuously evolving technology that ensures our clients keep pace with the fast moving digital landscape. We are immensely proud of our achievements, in relation to our innovation, our thought leadership, our industrywide recognition, our demonstrable product differentiation, the diversity of our client base, and the calibre of our partners. For many years we have been the digital heart of a diverse range of fi nancial services providers including Atom Bank, Generali Wealth Management, HRG, Ikano Retail Finance, Lloyds Banking Group and Think Money Group. 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