WORLD RETAIL BANKING REPORT 2015 Contents
3 Preface
5 Chapter 1: Stagnating Customer Experience and Deteriorating Profitable Customer Behaviors
6 Overall Customer Experience Levels Stagnated, but Extreme Ends of Positive and Negative Experiences Increased 9 Growth of Low-Cost Channels Fails to Displace Branch Usage 12 Customer Behaviors Impacting Banks’ Profitability
17 Chapter 2: Competitive Threats Disrupting the Banking Landscape 18 Growing Competition across Products and Lifecycle Stages 22 Threat from FinTech Firms As They Gain Customers’ Trust
25 Chapter 3: Lagging Middle- and Back-Office Investments Drag Down Customer Experience 26 Need to Bring the Focus Back to Middle- and Back-Offices 28 The Way Forward
30 Conclusion
31 Appendix
33 Methodology
34 About Us
35 Acknowledgements Preface
Retail banking customers today have more choices than ever before in terms of where, when, and how they bank—making it critical for financial institutions to present options that appeal directly to their customers’ desires and expectations. Now in its 12th year, the 2015 World Retail Banking Report (WRBR), published by Capgemini and Efma, offers detailed insight into the specific types of experiences customers are seeking when they engage with their banks, making it an invaluable resource for developing strategies to combat an ever-widening array of competitors.
Drawing on one of the industry’s largest customer experience surveys—including responses from over 16,000 customers across 32 countries, as well as in-depth executive interviews—the 2015 WRBR sheds light on critical performance metrics for the industry, such as the likelihood of customers to leave their bank or purchase additional products. Our survey, now in its fifth year, also uncovers surprising detail on the types of customers who are attracted to different channels, and the specific types of services that draw them to one channel over another. The unprecedented level of detail offered regarding customer preferences and behaviors—by product, channel, geography, and lifecycle stage—is intended to enable banks to decode customer preferences on the way to delivering highly improved experiences.
This year’s report also draws attention to the pressing problem of the middle- and back-office— two areas of the bank that have not kept pace with the digital transformation occurring in the front-office. Plagued by under-investment, the middle- and back-offices are falling short of the high level of support found in the more advanced front-offices, creating a disjointed customer experience and impeding the industry’s ability to attract, retain, and delight customers. Moving forward, banks must put greater focus on transforming their middle- and back-offices, along with their front-end interfaces, to create truly enhanced experiences for the customer.
We hope you’ll find our latest report useful in helping you understand the many factors that go into providing an enriched experience throughout the customer lifecycle. Through this multi- dimensional look at customer experience, we expect banks will be better prepared to develop their own plans for achieving higher levels of positive customer experience, putting them in place to compete against both traditional and new players in the banking arena.
Jean Lassignardie Patrick Desmarès Global Head of Sales and Marketing Secretary General Global Financial Services Efma Capgemini 4 2015 World Retail Banking Report products. additional buying and referrals byproviding revenues improve or costs save either them help can that behaviors customer elicit to failing are Banks experiences. negative or positive of ends extreme the to shifting declined, banks their Globally, the percentage of customers having a neutral experience from Behaviors Customer Profitable Deteriorating and Experience Customer Stagnating years. two past over (CEI) Index Experience Customer of stagnation to leading expectations and desires customers’ of short falling are services enhanced provide to efforts Bank’s within the next six months. six next the within to likelihood bank leave their increased reported world the around Customers to their banks. to their someone refer or products additional unlikely to were who buy of customers percentage the in increase asignificant was there banks, the for Alarmingly time. first the for Asia-Pacific that having region level the regional highest of negative surpassing experience, to led countries European Western among experience rate of negative high The experience increases of more than 10 percentage points. points. 10 than of more percentage increases experience negative posted Europe; five of levels Western them in were experience customer negative in increases highest the with ten of countries the Eight experience by a slight margin. margin. by aslight experience level to of positive overall have highest the continued it though decreased, levels experience customer positive which in region only the was America North banks’ digital capabilities. Ys Gen have expectations of high the reflecting ages, of other customers than levels experience lower customer registered Ycustomers Gen regions, all Across Russia, Turkey, and Czech Republic, registered the largest increase in CEI. in Turkey, increase Russia, largest the registered Republic, Czech and in CEI gains by large fueled Europe, Central America. followed by North & Africa, to 2013 East Middle in CEI compared in occurred decreases regional largest The 72.7 2015. in 73.5 2013 in from points of (0.8) to percentage drop amarginal CEI witnessed The
2015 World Retail Banking Report
CHAPTER 1 5 6 2015 World Retail Banking Report
Overall Customer Experience Levels Stagnated, but Extreme Ends of Positive and Negative Experiences Increased
Retail banks around the globe witnessed stagnation Voice of the Customer Survey of more than 16,000 in their ability to improve the customer experience. respondents across 32 countries in six geographies. These Capgemini’s CEI,1 now in its fifth year, found retail customers provided input on their experiences across 80 banks’ average customer experiences slightly drop from different retail banking touch points spanning the full 72.9 in 2014 to 72.7 in 2015 (see Figure 1). The CEI’s range of products, lifecycles and channels. stagnation reflects the influence of a wave of more agile competition, combined with banking touch points that Unlike more basic measures of customer satisfaction, continue to lag customers’ heightened expectations. the CEI identifies the factors most important to customers and tracks satisfaction specifically along those Since 2011, Capgemini has tracked customer sentiment dimensions. The resulting data offers a granular, multi- toward banks globally, using an exhaustive measure that dimensional view of customer experience that is aligned tracks physical interactions between banks and their to customer values. By grouping these experiences into customers, and how those interactions match up against positive, negative, and neutral categories, and tracking customer perceptions and expectations. This year’s CEI them over time, the CEI offers insight into how the was calculated based on results from a comprehensive global customer experience is improving or deteriorating.
Figure 1: Customer Experience Index, by Country, 2015
Central Europe Czech Republic (77.5) North America Poland (73.6) Canada (78.9) Russia (75.8) U.S. (76.6) Turkey (76.1) Middle East & Africa Saudi Arabia (67.9) South Africa (76.7) UAE (64.7)
Western Europe Latin America Austria (76.2) Netherlands (73.4) Argentina (76.8) Belgium (69.2) Norway (68.1) Asia-Pacific Brazil (71.1) Denmark (69.5) Portugal (73.6) Australia (76.4) Mexico (76.4) Finland (74.5) Spain (73.7) China (69.7) France (69.6) Sweden (69.3) Hong Kong (65.8) Germany (70.8) Switzerland (73.7) India (70.9) Italy (72.6) U.K. (73.9) Japan (61.9) Legend: Singapore (71.4)
Increase in CEI from 2013 Decrease in CEI from 2013
Country boundaries on diagram are approximate and representative only Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services
1 Please refer to the Methodology section on Page 33 for more details CHAPTER 1 7
While the overall CEI experienced a modest decline The large drop by the UAE helped mark Middle East & in 2015, a handful of countries registered significant Africa as the region with the biggest decrease in overall change. Banks in Spain and Russia had the greatest CEI, with a drop of 4.0 points. North America followed success in improving CEI over the past two years, with with a decrease of 2.6 points. Within North America, each expanding by 4.8 points. Turkey followed with an both Canada, the top country on the CEI scale, and the increase of 3.9 points, while Czech Republic and Mexico U.S., ranked fifth, experienced decreases in overall CEI each had an increase of 3.5 points. of 1.8 and 2.9, respectively (see Figure 2).
The positive outcomes for Russia, Turkey, and Czech Continuing the trend from last year’s report (2014 World Republic helped propel Central Europe to the largest Retail Banking Report), within every region, Gen Y gain in overall CEI. Central Europe’s expansion of customers were found to have lower customer experience 2.8 points compared to 2013 was twice as high as the levels compared to those in other age groups. For increase of 1.4 points in Latin America, the only other example, the CEI for North American Gen Ys was 72.2, region to register a gain. Within Central Europe, compared to 80.1 for customers of other ages within the Poland was the only country that did not register an region (see Figure 3). Similarly, Latin American Gen Ys increase along the CEI. had a CEI of 70.8, compared to 77.2 for all other Latin Americans. At the other end of the spectrum were four countries that experienced large drops in 2015 along the CEI The more subdued customer experience levels for Gen Y scale compared to 2013. United Arab Emirates led likely reflects the high importance of digital technology the way with a decrease of 8.3 points. The other three to that demographics’ lifestyle. Gen Y, born between were in Europe, with Norway dropping by 5.9 points, 1980 and 2000, have never experienced an adult world followed by Belgium and Germany, each with a decrease without the aid of digital connections. Accustomed to of 5.0 points. instant access and seamless transactions in most aspects of their social and professional lives, Gen Y brings very high expectations to their banking interactions. This
Figure 2: Top 10 and Bottom 10 Countries Based on Customer Experience Index, 2015
Top 10 Countries Based on Customer Experience Bottom 10 Countries Based on Customer Experience Index, 2015 Index, 2015
2015 2013 2015 2013 Rank Rank Rank Rank
Canada 78.9 01 01 Japan 61.9 32 31
Czech 77.5 02 04 Republic UAE 64.7 31 18
Argentina 76.8 03 11 Hong Kong 65.8 30 32
South 76.7 67.9 Africa 04 05 Saudi Arabia 29 15
U.S. 76.6 05 02 Norway 68.1 28 13
Australia 76.4 06 03 Belgium 69.2 27 16
Mexico 76.4 07 21 Sweden 69.3 26 20
Austria 76.2 08 06 Denmark 69.5 25 27
Turkey 76.1 09 24 France 69.6 24 26
Russia 75.8 10 30 China 69.7 23 25
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 8 2015 World Retail Banking Report
Figure 3: Customer Experience Index for Gen Y Customers vs. Others, by Region, 2015
100
) 80.1
E I 77.5 77.2 74.0 ( C 75 72.4 72.2 70.8 70.8 71.8 x 68.3 67.8 e 66.4 d n I
e c n
e 50 r i e p E x r e m o
t 25 s u C
0 Central Europe North America Latin America Western Europe Middle East & Africa Asia-Paci c
Gen Y Others
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services
Figure 4: Positive and Negative Customer Experience Change, by Region (%), 2014–2015
Customers with Negative Customer Customers with Positive Customer Experience (%), 2014–2015 Experience (%), 2014–2015
Percentage Point Percentage Point Change from 2014 Change from 2014
5.2% 55.6% 2.5% 2.7% North America 56.4% (0.8%)
6.7% 54.7% 1.6% Central Europe 16.5% 5.1% 38.2%
7.7% 52.7% 1.5% Latin America 9.5% 6.2% 43.2%
11.7% 49.9% 6.8% Western Europe 10.9% 4.9% 39.0%
2.2% 9.0% Middle East & 39.6% 3.2% 6.8% Africa 36.4%
3.7% 7.7% Asia-Pacific 38.8% 4.9% 4.0% (excl. Japan) 33.9%
20.0% 28.1% 13.7% Japan 4.7% 6.3% 23.4%
2015
2014
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services CHAPTER 1 9
year’s lower customer experience levels for Gen Y are in beating out Central Europe, the slight decline points to keeping with those from a year ago, underscoring the the possibility that return on investments in the front- inability of banks to keep up with Gen Y expectations. office and digital channels are struggling to keep up with evolving customer expectations. This year’s survey found that movement from neutral experience to the extremes of positive and negative Western Europe witnessed a significant increase in experiences has increased, signaling the persistent flux of the percentage of customers with negative experience customer attitudes and the importance of steering them from 4.9% in 2014 to 11.7% in 2015. Eight of the top in a positive direction. ten countries with the highest increases in negative customer experience were in Western Europe, with In almost every region, the percentage of customers with five of them posting negative-experience increases of positive experiences expanded by a significant amount. more than 10 percentage points: Denmark (11.0 points), Central Europe had the biggest increase, jumping Germany (10.9 points), Netherlands (10.5 points), from 38.2% to 54.7% (see Figure 4), bolstered by large Belgium (10.2 points) and Sweden (10.0 points). Only increases in Turkey (24.4 percentage points) and Russia Japan, with an increase in negative experience of 13.7 (23.6 percentage points). The increase in percentage of percentage points, surpassed them. customers with positive experience in Turkey, can be partly attributed to the upgrading of the core systems The increasing incidences of negative experience and significant efforts made in the back-offices. Latin throughout Western Europe led to that region surpassing America was the region with the next-highest boost in Asia-Pacific for the first time in terms of having the positive experience, going from 43.2% to 52.7%. highest levels of negative experience. The 11.7% of customers in Western Europe with negative experience The only region that did not follow this pattern was reflected an alarming increase from 4.9% a year earlier, North America, where the percent of customers with and outpaced the 9.1% in Asia-Pacific by a healthy positive experiences declined from 56.4% to 55.6%. margin. This can be partly attributed to the increasing While North America continues to have the highest customer expectations, due to the proliferation of FinTech levels of positive customer experience overall, narrowly and Internet/technology firms.
Growth of Low-Cost Channels Fails to Displace Branch Usage
Banks have long sought to decrease their distribution Despite the significant leaps to high rates of usage for expenses by building low-cost digital channels that both the Internet and mobile, the impact on the branch would replace brick-and-mortar branches. Over the years, was minimal. Banks continued to fall short in their they have succeeded in drawing significant numbers goal of steering customers away from the branch. In of customers to the newer channels (see Figure 5). But fact, branch usage rose modestly in North America and our research shows many customer segments are not Europe, while decreasing only slightly in Latin America convinced that the new channels offer the same breadth and barely at all in Asia-Pacific. In effect, the banking and depth of service that can be found in the branch. industry’s great effort to minimize the use of expensive branches by replacing them with lower-cost channels still The Internet has quickly become the most-favored leaves work to be done. channel by customers in all regions. Already high levels of Internet usage rose further throughout the last year, While customers have quickly adapted to the idea of resulting in all the regions having at or close to two- tapping into the Internet and/or mobile devices to check thirds of their customers accessing banking web sites their balances, in the customer view, the branch remains at least weekly. Mobile’s popularity also rose in every as the channel of last resort to handle practically any region—including by double-digit levels in the regions other type of matter. Even when it comes to simple of Latin America, North America, and Central products like current accounts and credit cards, our Europe—over the last year. Across most regions, mobile research found customers still overwhelmingly conduct usage is at or close to one-third of customers accessing it the application process in the branch versus via the at least weekly. Internet or mobile. 10 2015 World Retail Banking Report
Figure 5: Customers Using Channels at Least Weekly (%), 2014–2015
65.1% 30.5%
Internet Mobile 57.3% 22.1%
Legend: 16.2% 9.8% Customers (%) in 2015 Social Branch Media 14.2% 9.6%
Customers (%) in 2014
Note: Question asked, “How often do/will you use the following channels for your banking needs? - Never, Couple of times a year, Monthly, Weekly, or Daily” Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services
In fact, customers want to turn towards the branch in industry. Our research found that, while convenience equal measure, whether they were applying for simple was a primary driver for customers to turn to digital products or ones that required more advice and guidance. channels, customers still perceived the branch to be A full 53.2% of customers said they would want to use offering better service than what could be found on the the branch when applying for a simple product; that digital channels. The challenge for banks going forward amount was even more than the 51.7% of customers who will be to convince customers that the levels of service said they would want to use the branch to acquire a more and support to familiarize, they can obtain via the complicated, advice-based product (see Figure 6). Internet and mobile channels are every bit as good as what they can get through the branch. This finding is a stark contradiction to the banks’ preference that customers use the branch mostly to Despite the overwhelming propensity of customers to execute more complex interactions involving products like turn to the branch for any type of product purchase, mortgages and personal loans. Bankers were amenable there were certain demographics and geographies where to the idea of customers using the branch to apply for change was evident. Gen Y customers, for example, advice-based products; 52.4% of them said they would indicated higher usage of the mobile channel to apply for prefer customers to use the branch to get such a product. a product, at a rate of 12.3%, compared to only 7.5% for But they did not expect or want customers to use the customers of all other ages (see Figure 7). We also found branch to apply for simple products. In fact, 56.1% of the Internet to be especially popular in certain geographic them said they would prefer customers use the Internet to pockets. In Netherlands, for example, 40.3% of customers acquire simple products. That compared to only 32.5% of said they applied for a product via the Internet, compared customers who said they would want to use the Internet to only 33.2% who did so in the branch. These shifts in for simple purchases. consumer behavior—isolated for now—indicate a coming wave of transformation in how customers view and use The divergence between how banks and customers view channels. With customers expected to move to the newer the roles of the branch and Internet for simple product channels in ever-greater numbers, banks will be tasked purchases underscores a perception problem facing the with meeting their ever-rising expectations. CHAPTER 1 11
Figure 6: Channels Want to be Used to Apply, by Product (%), 2015
Simple Products Advice-Based Products (Current Accounts and Credit Cards) (Loans and Mortgages)
1.0% 0.0% Social Media 1.8% 0.0% Social Media 100% 100% 5.2% 3.7% Phone 4.9% Phone 7.6% 8.1% 13.4% Mobile 25.6% Mobile 12.0%
75% 75% ) ) 32.5% 29.3% Internet ( % ( %
26.9% s s t t n n e e d d n n 50% 50% o o p p 56.1% Internet s s e e R R
25% 53.2% 25% 51.7% 52.4% Branch
14.6% Branch 0% 0% Customers' Banks' Customers' Banks' Perspective Perspective Perspective Perspective
Note: Question asked, “Which channel did you want to use for applying the Product? Branch/Face-to-face, Internet-PC, Internet-Mobile, Phone, or Social Media”, “Which channel would you prefer for your customers to apply for the product? (Please check the relevant boxes in the below mentioned table) - Branch / Face-to- face, Internet-PC, Internet-Mobile, Phone, or Social Media” Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services
Figure 7: Channels Customers Used, by Lifecycle Stage (%), 2015
Gen Y Others
3.3% 4.2% 2.0% Social Media 2.0% 3.3% 1.2% Social Media 100% 100% 8.2% Phone 7.9% 7.3% Phone 8.3% 9.7% 9.5% 7.8% 7.5% Mobile 12.7% 12.3% Mobile 9.7% 13.2% 75% 75% 23.7% Internet 27.1% ) ) 25.2% Internet
27.3% ( % 30.6%
( %
s t s 30.5% t n n e e
50% d 50% d n n o o p p s s e e R R 60.3% Branch 52.4% Branch 55.2% 25% 48.5% 25% 46.9% 42.4%
0% 0% First Hear Research Apply First Hear Research Apply
Note: Question asked, “Where did you first hear about the product”?, “Where did you research/get advice about the product”?, and “Where did you apply for this product”? Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 12 2015 World Retail Banking Report
Customer Behaviors Impacting Banks’ Profitability
The ability to drive top-line growth by retaining and (see Figure 9). In line with this increase, the average cross-selling to existing customers has long been a vital number of banks that a customer engages with has source of profits for banks. Also critical is the ability to slightly increased from 1.5 to 1.6 in 2015 over 2014. cultivate loyal customers who refer the bank to others, Also, this change is more pronounced for younger age thus drastically reducing the cost and effort of acquiring groups compared to older customers. The rates were new customers. However, the outlook for these profit- highest in Middle East & Africa and Asia-Pacific enhancing activities is diminishing. Our survey found (15.1%), followed by Latin America (14.0%), North that all of these customer behaviors are becoming much America (10.7%) and Central Europe (10.5%). At the more challenging for banks around the world to achieve same time, in every region of the world, the number of (see Figure 8). customers who said they were likely to stay decreased, with the percentage reaching the lowest point in Asia- Banks in every region of the world witnessed a significant Pacific (43.3%) and remaining the highest in North increase in the percentage of customers who said they are America (61.9%). likely to leave their primary bank in the next six months
Figure 8: Likelihood of Customers to Stay, Refer, and Buy from Their Primary Bank, 2015
Unlikely Likely
6.3% (4.1%) Stay
8.7% (3.6%) Refer
20.6% (16.5%)
Buy
Legend: Percentage Point Increase from 2014 Percentage Point Decrease from 2014
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services CHAPTER 1 13
Across all regions, Gen Y customers were the most In addition to the growing number of options, bank likely to switch banks. The difference between Gen Y customers are finding that the logistics of leaving one customers and Others was particularly stark in North bank and opening an account at another is easier than America, where only 47.3% of Gen Y customers said ever. Many banks in the U.S. now offer “switch kits,” they were likely to stay with their bank in the next designed to reduce the hassle of moving accounts, six months, compared to 69.8% of Others (see Figure including direct deposits and automatic payments, from 10). As the wealth and influence of Gen Y customers one bank to another. In the U.K., the Payments Council increases, their increased tendency to switch banks may is upholding participating banks to an “account-switch have important implications for profitability. guarantee,” which stipulates the appropriate timeframes and specific actions banks need to take to ensure Customers with an inclination to switch have many consistent, reliable switches. Similarly, the European more options to which they can turn. Retailers and Commission has published a proposal that aims, in part, grocery-store chains with large volumes of traffic and to establish formal procedures that would aid consumers high brand recognition have begun offering simple, in switching their bank accounts quickly and easily. inexpensive financial services products. In addition, a growing legion of start-up banks are taking advantage Besides being more inclined to leave their banks, of Internet and mobile technology to offer a range of customers were also less likely to refer others. In every flexible and attractive financial products that reflect region of the world, there was substantial increase in the the increasingly digital lifestyles of today’s customers. percentage of customers who said they were not likely to Traditional banks, bound to their legacy systems and refer a friend. The increase was most pronounced in Asia- siloed ways of doing business, are finding it difficult to Pacific (10.5 percentage points) and Western Europe keep up with all the new competition.
Figure 9: Customers’ Likelihood to Stay with Their Primary Bank in the Next Six Months, by Region (%), 2014–2015
Customers Unlikely to Stay, 2014–2015 Customers Likely to Stay, 2014–2015
Percentage Point Percentage Point Change from 2014 Change from 2014
10.7% 61.9% 7.4% North America (5.4%) 3.3% 67.3%
7.9% 60.7% 3.6% Western Europe (1.3%) 4.3% 62.0%
10.5% 51.0% 4.1% Central Europe (3.2%) 6.4% 54.2%
15.1% 46.6% 5.7% Middle East & (6.2%) 9.4% Africa 52.8%
14.0% 46.0% 9.5% Latin America (9.8%) 4.5% 55.8%
12.3% 15.1% Asia-Pacific 43.3% (6.2%) 2.8% 49.5%
2015
2014
Note: Question asked, “How likely are you to change your primary bank within the next six months (please rate on a scale of 1 to 7, where 7 is ‘highly likely’ and 1 is ‘highly unlikely’)” Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 14 2015 World Retail Banking Report
(9.7 percentage points). In Middle East & Africa, one- next highest percentage, at 27.1%, up from 5.7%. Except fifth of customers said they were unlikely to refer others, in Latin America, the percentage of customers who said an increase of 9.5 percentage points. they were unlikely to purchase an additional product was greater than the percentage that said they were likely. A decline in referred customers is a counterproductive trend for bank marketers. Referred customers are highly The declining rate in propensity to buy underscores the desirable because they require fewer marketing resources, ubiquity of banking alternatives available to consumers. causing them to generate more revenue at lower cost. Rather than regard their banks as one-stop shops, In effect, banks that have fewer referred customers will consumers can turn to any one of a number of providers, likely experience a detrimental effect on bank profits. including brand-name retailers, crowd-funding web sites, peer-to-peer lenders, and Internet/mobile service Perhaps the most foreboding finding of our 2015 survey providers, to fulfill their financial needs. At the same was the large decrease across the globe in the likelihood time, aggregation services are increasingly available of customers buying another product from their primary to help consumers view all of these disparate financial bank. Every region experienced a double-digit expansion relationships through one convenient portal. in the number of customers who said they were not likely to purchase another product from their bank (see Figure These non-bank providers for the most part bring 11). Astoundingly, more than one-third of customers in a capability that many banks lack: an expertise in Western Europe (35.3%) said they would not do so, up interacting and connecting with customers, particularly from only 9.6% a year earlier. North America had the through digital touch points. The best-in-class services
Figure 10: Likelihood of Gen Y and Other Customers to Stay with Their Primary Bank in the Next Six Months, by Region (%)a, 2015
Customers Unlikely to Stay (%), 2015 Customers Likely to Stay (%), 2015
Difference Between Difference Between Gen Y and Others Gen Y and Others
9.9% 51.7% 3.0% (13.7%) 6.9% Western Europe 65.4%
15.9% 47.3% 8.0% (22.5%) 7.9% North America 69.8%
9.5% 43.7% (1.5%) Central Europe (10.8%) 11.0% 54.5%
18.1% Middle East & 42.3% 4.3% (6.3%) 13.8% Africa 48.6%
17.0% 36.8% 4.8% Latin America (14.7%) 12.2% 51.5%
16.8% 35.6% 2.7% Asia-Pacific (12.4%) 14.1% 48.0%
Gen Y
Others
a. The number represents the percentage of Gen Y customers who are likely or unlikely to change their primary bank in the next six months Note: Question asked, “How likely are you to change your primary bank within the next six months (please rate on a scale of 1 to 7, where 7 is ‘highly likely’ and 1 is ‘highly unlikely’)” Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services CHAPTER 1 15
of the non-bank specialists often feature greater flexibility their marked regression. Customers are less likely to and price transparency than what banks can offer. stay with their banks, refer others to them, and purchase As such, the non-banks are continually able to meet additional products. Not only are these behaviors likely to rising customer expectations, while also pushing those constrain profits, but, left unchecked, they raise the alarm expectations ever higher. of growing disintermediation between banks and their customers. A solution is for banks would be to focus on Banks, unable to keep up with the growing set of more dramatically improving the customer experience, putting nimble competitors and fueled customer expectations, it on par with that of the non-banks angling for their are losing ground. The notable deterioration across all customers. three behavioral sets linked to profitability underscores
Figure 11: Customers’ Likelihood to Purchase another Product from Their Primary Bank, by Region (%), 2014–2015
Customers Unlikely to Purchase Customers Likely to Purchase another another Product (%), 2014–2015 Product (%), 2014–2015
Percentage Point Percentage Point Change from 2014 Change from 2014
21.5% 28.1% (16.3%) 14.3% Latin America 7.2% 44.4%
22.7% 20.3% 13.9% Central Europe (10.5%) 8.8% 30.8%
24.9% 19.4% 13.6% Middle East & (18.7%) 11.3% Africa 38.1%
27.1% 18.5% 21.4% North America (15.8%) 5.7% 34.3%
23.9% 14.3% 19.7% Asia-Pacific (18.0%) 4.2% 32.3%
35.3% 9.9% (17.2%) 25.7% 9.6% Western Europe 27.1%
2015
2014
Note: Question asked, “How likely are you to purchase another product from your primary bank? (Please rate on a scale of 1 to 7, where 7 is ‘highly likely’ and 1 is ‘highly unlikely’)” Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 16 2015 World Retail Banking Report Landscape Banking the Disrupting Competitive Threats 2 market. the disrupt to potential the have they and sector banking the into inroads significant making FinTech are firms needs. banking their for entities alternative towards look Increasing disintermediation taking place in the banking arena as customers
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CHAPTER 2 17 18 2015 World Retail Banking Report
Growing Competition across Products and Lifecycle Stages
The increasing competition from the more nimble For the most part, customers engaged with other banks competitors has not been restricted to the driving or financial services providers at a relationship level, customer expectations and influencing customer when they strayed from their primary bank. The main behavior. Over the last few years, there has been an exception was in the area of credit cards, where Internet increasing proliferation of new entrants across products and technology firms have carved out a significant and lifecycle stages. However, banks have been presence. That result is not surprising, given the focus moderately successful in holding their ground, as a that technology firms such as Google and Apple have majority of customers still held their products with their placed on developing new consumer-oriented payment primary banks. Most customers (77.1%) maintained products. In effect, banks seeking to bolster themselves their current account at their primary bank (see Figure against coming competition should pay particular 12), but they were not as loyal to their primary banks attention to the vulnerable payments area. when it came to other products. Only 62.1% had their credit card at their primary bank; 59.6% their personal loans, and 52.5% their mortgage.
Figure 12: Entities with Whom Product Is Held, by Product (%), 2015
Internet/Technology Firms/ Supermarkets/Retailers/Telcos/ 0.0% 0.0% 0.0% Others 100% 4.9% 5.4% 3.8% 5.9% Agent/Broker 3.4% 12.9% 18.0% 8.6% 16.1% Other Financial Organizations
75% 20.5% 23.8%
) 25.4% Other Bank ( %
s t n e
d 50% n o p s
e 77.1% R 62.1% 59.6% 25% 52.5% My Primary Bank
0% Current Credit Cards Loans Mortgages Accounts
Note: Question asked, “Who is your product with? My Primary Bank, Other Bank, Other financial organizations, Agent/Broker, Supermarkets/Retailers/Telcos/ Others, Internet/Technology Firms (Google, Amazon, Apple, PayPal), I don’t know” Agent/Broker, Supermarkets, and Internet/Technology Firms are not applicable for Current Account; Supermarkets and Internet/Technology Firms are not applicable for Loans and Mortgages Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services CHAPTER 2 19
Viewed regionally, we found that entities other than exchange, among many other entrants. Banks in other banks had made the greatest inroads into North regions are not immune either. India’s largest mobile America and Western Europe, compared to Latin network operator, Airtel, lets customers use their phones America and Asia-Pacific (see Figure 13). In North to pay bills, shop and transfer money. M-Pesa, a highly America, for example, 23.5% of credit cards were successful mobile money transfer service in Africa, is held by entities other than banks. That compared to now adding savings and loan products. And in the U.K., only 14.9% in Latin America and Asia-Pacific. This Zopa, founded in 2005, is succeeding in making peer- difference may indicate the emergence of a higher level to-peer lending mainstream. of non-bank competition throughout North America and Western Europe. In the course of finding out about, researching and applying for products, customers were far more involved Certainly in North America, the diversity and range with other entities besides banks than bank executives of non-bank competitors vying for a piece of the realized. When it came to simple products like current banking business is vast. In addition to new near-field accounts, 30.6% of customers said they first heard of communications-based payment systems from Google the product from a non-bank entity, while only 19.5% and Apple, banks in the region are contending with of bankers thought customers had done so (see Figure card and checking account products from the retailing 14). A similar type of disparity was evident in all stages behemoth, Walmart; a Starbucks-branded pre-paid card of the product lifecycle, including researching and system; and the popular LendingTree online lending applying for products.
Figure 13: Entities with Whom Product Is Held, by Region and Product (%), 2015
North America Western Europe 6.2% 6.2% 100% 100% ) 23.5% ) 20.4% 21.9% 33.3% 26.8% 26.1% ( % ( %
75% 75% s s t t n n e e d 50% d 50% n 93.8% n 93.8% o o 79.6% 78.1%
p 76.5% 73.2% p 73.9%
s 66.7% s e 25% e 25% R R
0% 0% Current Credit Card Loans Mortgages Current Credit Cards Loans Mortgages Accounts Accounts
Latin America Asia-Pacific 2.5% 3.8% 100% 100% 11.7% 12.3% ) 14.9% 15.0% 14.9% 20.2% ) ( %
75% ( % 75% s
t s n t e n d e
n 50% 50% 97.5% d 96.2% o 85.1% 88.3% 85.0% n 85.1% 87.7% 79.8% p o s p e 25% s 25% e R R 0% 0% Current Credit Cards Loans Mortgages Current Credit Cards Loans Mortgages Accounts Accounts
Other Entities
Banks
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 20 2015 World Retail Banking Report
Customers turned to non-traditional entities in even and apply for the product leveraging the services provided greater numbers when it came to more complex, by the new players without ever needing to interface with advice-based products. When researching mortgages, the bank. for example, 43.3% of customers said they turned to other entities. However, only 23.6% of bankers thought As entities other than primary banks continue to make customers had done so. In some countries, the percentage inroads into the various lifecycle stages of acquiring of customers using other entities was alarmingly high. In financial services products, banks cannot remain idle. the U.S., for example, 52.7% of respondents first heard With every incursion by a non-bank into the financial about loans from other entities, 55.3% used them to services sales process, banks run a higher risk of research loans, and 48.0% applied for loans from them. becoming disintermediated from their customers. While In United Arab Emirates, 64.8% of respondents first in the past, the banking industry has been confronted heard about mortgages from other entities, 59.1% used by different types of competitors, eager to separate them to research mortgages, and 43.2% applied through customers from their primary banks, the emerging them. Across the lifecycle stages, other entities such as threats are across the banking value chain from alternate price comparison web sites and aggregators are starting players both big and small with substantial financial to play a major role. Now, customers can hear, research, backing (See Figure 15).
Figure 14: Entities Customer Currently Used, by Lifecycle Stage and Product (%), 2015
Bank Perspective Customer Perspective
19.5% 9.8% 70.7% Current Accounts 55.3% 14.1% 30.6%
26.8% 17.1% 56.1% Credit Cards 51.1% 15.8% 33.1% e a r H
t
i r s 31.7% 22.0% 46.3% Loans 48.0% 16.1% 35.9% F
31.7% 14.6% 53.7% Mortgages 39.9% 18.6% 41.5%
24.7% 20.0% 55.3% Current Accounts 54.9% 10.3% 34.8%
h 31.0% 19.0% 50.3% Credit Cards 49.8% 13.8% 36.4% e a r c
e s 30.5% 24.4% 45.1% Loans 48.2% 13.8% 38.0% R
23.6% 27.3% 49.1% Mortgages 39.6% 17.1% 43.3%
10.4% 22.6% 67.0% Current Accounts 64.5% 18.7% 16.8%
13.4% 22.0% 64.6% Credit Cards 58.5% 19.6% 21.9%
A p l y 15.6% 24.1% 60.3% Loans 53.8% 19.4% 26.8%
10.9% 27.0% 62.1% Mortgages 44.7% 22.7% 32.6%
100% 80% 60% 40% 20% 0% 0% 20% 40% 60% 80% 100%
Respondents (%) Respondents (%)
Primary Bank Other Banks Other
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services CHAPTER 2 21
Figure 15: Banking Without a Bank
Banking Without a Bank
The banking industry is going through major disruptions with several new players entering the market and seizing significant market share across the banking value chain. Let's explore how Shane who just moved to Silicon Valley in California can Bank Without a Bank.
First stop: Shane needs a new TV for his Shane arrives at the store and selects home. He looks for deals on his phone his TV. He uses his PayPal account to and receives an offer through Apple make the payment and collects iBeacon which sends him to a local store. reward points for the purchase.
Shane needs to buy He uses the Uber location-based some things for his appto hire a car and pays
Technology/ new apartment but through Uber Wallet so he can Internet Firms doesn't have a car yet. get their discount. As of 2014, PayPal has 162 bn active digital accounts in 203 markets
Shane suddenly remembers that Shane stops for a coffee and Shane gets a notification that he needs cash to pay for his uses his Starbucks Card to pay his Walmart Bluebird card laundry at the local laundromat. and get more rewards. account has a low balance.
He finds a nearby Walmart ATM on He deposits a check into his his phone and withdraws cash. account using Walmart Bluebird's Retail Firms mobile check deposit feature. Starbucks has hit $1 bn in mobile payment revenues in 2014 with 13 mn customers
Shane remembers he promised to send his Shane’s old college friend is starting brother money at college. He transfers money a business and is looking for partner from his T-mobile checking account to who can invest immediately. Shane his brother's PayPal account. uses lendingclub.com for a short term loan to invest in his friend's business.
As an alternative, Shane and his friend can also raise funds using crowdfunding.
Social Lending and lendingclub.com is a P2P lender that has offered $6.2 Crowd Funding Websites bn in loans til Sep 2014
How Can Banks Shift Strategy to Become More Customer-Centric? See how banks are facing these challenges across the world
Digitization Simplification Insights & Data Replace manual processes with digital to Simplify internal processes and Leverage vast customer data and bring the bank to customers anytime, external services for a faster and digital tools to help customers anywhere with easy-to-use, one-stop seamless customer experience make better decisions solutions
HDFC Bank: Turkey’s Garanti Bank: App for mobile-to-mobile money Free mobile app that uses location transfer of small amounts and will Simple Finance and past spending data to give soon enable instant mobile loans Technology Corp: customers personalized offers Complete digital banking with advanced features for budgeting and payments
Source: Capgemini Financial Services Analysis, 2015; Lending Club Statistics, LendingClub.com; Stats, Kickstarter.com; www.paypal-media.com; “Starbucks hits $1B in mobile payment revenues in 2013, analysis says”, Computerworld, February 2014 22 2015 World Retail Banking Report
Threat from FinTech Firms As They Gain Customers’ Trust
Today, banking executives find the most threatening and intuitive that users have come to see them as of these competitors by far are Internet and technology indispensible to their daily lives. Banking executives companies. Our poll of bank executives shows that understand that a move by any one of these companies 83.3% already view customers as comfortable with into the financial services space would present an conducting their banking through Internet and enormous challenge, given the comparatively staid technology companies (see Figure 16). That’s higher nature of today’s banking apps and web sites. than even the 64.8% who think customers have high comfort levels banking at banks. Not far behind are Along with the higher customer comfort levels, Internet price/product comparison web sites (55.6%) and retailers and technology companies are also perceived to pose (53.7%), indicating that the field of competitors facing the highest threat to banks. However, the threat is not banks extends far and wide. expected to materialize within the next 36 months (see Figure 17). While the gestation period is longer, Internet and technology companies have a considerable the threat these firms present is unknown, making it lead over banks because of their impressive success difficult for banks to develop strategies for mitigating at winning over the hearts and minds of customers. the risk they present. They have developed devices and services so useful
Figure 16: Banks’ Assessment of Customers’ Comfort Level in Banking with Different Entities (%)a, 2015
Internet/Technology Firms 83.3%
Banks 64.8%
Price/Product Comparison 55.6% Websites
Supermarkets/Retailers/ 53.7% Telcos/Others
Other Financial Services 48.1% Companies
Consumer Advice 47.2% Websites
Agents/Brokers 27.8%
Q. “What comfort level do you believe your customers have in banking with the below entities”? a. Percentage here refers to the banks who perceive the customers to have a comfort level of more than 4 on a scale of 1-7 (with 7 representing the highest comfort level) Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services CHAPTER 2 23
What banks do know is that many technology firms While the banks adopt different strategies to counter have a better feel for the customer experience and how the rising threat from the new competitors (i.e., FinTech to optimize it. They are also capable of using their and Internet/technology firms), they should be mindful expertise in innovation to re-invent banking in brand- of the potential of these new players to disrupt the new ways. In addition, they are not burdened by the banking landscape. This potential is not only driven legacy systems or siloed businesses that tend to slow by their financial abilities but also their ability to banks down. With the increasing activity of FinTech understand the customer by leveraging data, being more firms in the banking space, banks have been trying to nimble and not burdened by legacy challenges, and approach these challenges in a myriad of different ways. delivering better customer experience using intuitive Some of the large banks have set up their own venture and simplified systems and processes. capital funds to invest in this burgeoning sector with some having capital upwards of $100 million.3 Also, some banks have started incubation programs for these firms and some have started acquiring new firms or setting up their own subsidiaries.
Figure 17: Threats from Other Entities that Banks Consider to Materialize in 36 Months (%)a, 2015
Threat Perceptionb
Other Banks 85.2% 4.9
Other Financial Services 73.6% 3.9 Companies
Consumer Advice Websites 68.0% 3.1
Supermarkets/Retailers/ 67.3% 2.9 Telcos/Others
Agents/Brokers 66.0% 2.5
Price/Product Comparison 66.0% 3.2 Websites
Internet/Technology Firms 61.1% 5.0
Q. “Which entity/entities do you believe poses/pose the greatest threat to your current business and in what time period, do you think these entities will start having a significant impact on your current business”? a. Percentage represents the banks that perceive the threats to materialize within 36 months b. Threat perception is calculated as the average of responses provided by banks (with 7 referring to the highest threat perception) Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services
3 “Banks Lure Fintech Startups With Venture Funds”, The Wall Street Journal, August 2014 24 2015 World Retail Banking Report challenges. these overcome them help can roadmap awell-structured back-offices, and While banks face several challenges to digital transformation of their middle- Down Experience Customer Investments Drag Back-Office and Middle- Lagging gains in customer experience levels from front-office investments reverse out. There is an immediate need to transform the middle- and back-offices before the experience throughout the customer lifeexperience cycle. enhanced atruly create banks help can back-offices and middle- their transforming towards Data and Insights Simplification/Agility, and Digitization, on focus A clear digitally transforming front-, back-offices. and middle-, transforming digitally to challenges biggest the are priority, and drive followed by organizational Cost, year. past from risen have levels which already experience negative in to increase leading back-offices from emanates dissatisfaction of customer majority that finds research our levels as experience customer on impact have adverse could an This decrease, while the already high level of investment in the front-office is expected to rise. expected is front-office the level in high of investment already the while decrease, to expected are back-offices and middle- in investments years, three next the Over the front-office. the to compared back-offices, and middle- their in maturity levels of digital lower much cited banks Consequently investments. back-office and middle- in not but front-office, the in of investments adriver as prominently figured experience Customer
2015 World Retail Banking Report
CHAPTER 3 25 26 2015 World Retail Banking Report
Need to Bring the Focus Back to Middle- and Back-Offices
In seeking to improve the customer experience, most In downplaying the role of customer experience in banks have identified front-end touch points, such middle- and back-office investments, banks have ended as mobile applications and Internet web sites, as the up with much lower levels of digital maturity in those primary focal points for investment. Accordingly, 92.6% areas, compared to the front-office. This can lead to of bank executives cited customer experience as the banks losing out on a potentially large opportunity to main driver behind front-office investments (see Figure enhance the customer experience by digitizing their 18). Similarly, based on the research of Capgemini with operations. Ad-hoc improvements in middle- and back- the MIT Center for Digital Business, 94% of banking offices, made without an eye to enhance the overall executives see an opportunity in digital transformation, customer experience, have resulted in nearly 85% of those but a significant portion of the investments are toward areas having only basic to mediocre digital capabilities, enhancing the customer experience through channels.4 according to bank executives (see Figure 19). While these types of investments are appropriate, they obscure the need for banks to also invest in middle- and Compared to the front-office, where 31.5% have back-office processes aimed at improving the customer advanced levels of digital maturity, only 13.2% of middle- experience. offices and 14.8% of back-offices do. Also, over the last couple of years, several banks across the globe have been Bank executives were most likely to make middle- fined significantly for issues such as wrong application and back-office investments with the intention of of interest rates, errors in reporting, and accounting simplifying processes, mitigating risks and reducing mistakes with the cumulative fines running into billions costs. Customer experience figured minimally. Only of dollars. Some of these errors have been attributed to 53.8% of bank executives cited customer experience as a manual processing in middle- and back-offices. While primary driver in middle-office investments, and 46.3% these fines may not amount to a significant part of in back-office investments. their revenues, the loss of reputation and credibility has
Figure 18: Primary Drivers for Making Investments in Digital Transformation of Front-, Middle-, and Back-Offices of a Bank (%)a, 2015
Front-Office Middle-Office Back-Office
Customer Experience 92.6% 53.8% 46.3%
Process Simplification 83.3% 78.8% 81.5%
Capacity Augmentation 52.8% 58.8% 50.9%
Risk Mitigation 51.9% 70.6% 75.9%
Cost Reduction 51.9% 64.7% 77.8%
Q. On a scale of 1-7, please rate the below drivers for making investments in digital transformation of your front-, middle-, and back-office capabilities? a. Percentage refers to the banks that have provided a rating of more than 4 on a scale of 1-7 with 7 referring to highest importance and 1 referring to least importance Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services
4 “Backing up the Digital Front: Digitizing the Banking Back Office”, Capgemini Consulting, 2013 CHAPTER 3 27
Figure 19: Digital Capabilities of Front-, Middle-, and Back-Office Services in Banks (%)a, 2015
Front-Office 9.3% 59.3% 31.5%
Middle-Office 15.1% 71.7% 13.2%
Back-Office 11.1% 74.1% 14.8%
Basic Medium Advanced
Q. “How do you rate the digital capabilities of your front-office, middle-office, and back-office services”? a. Percentage here refers to the assessment of banks’ digital capabilities on a scale of 1-7, with 7 being the best quality and 1 being the worst quality Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services
Figure 20: Break-Up of Firm’s Investment in Transforming Front-, Middle-, and Back-Offices for Last Two Years and Next Three Years (%), 2015
4.0
50% 46.9%
) 42.9% % (
n
o 40% 2.4 t i a m r o
f 33.2% s
n 30.8% a r 30% 1.5 T n i t
n 23.9% e 22.4% t m s
e 20% v I n
f o e r a h
S 10%
0% Front-Office Middle-Office Back-Office
Investments in Last Two Years Investments in Next Three Years
Q. What has been the break-up of your firm’s investment in transforming front-, middle-, and back-office capabilities in the last two years? Q. What will be the break-up of your firm’s investment in transforming your front-office, middle-office, and back-office capabilities over the next three years? Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services 28 2015 World Retail Banking Report
a significant negative impact on the customer experience The overall lack of attention to the customer experience and can be detrimental to the bank in the long run unless in middle- and back-office investments may have dire these issues are addressed as a priority. consequences. The fact that customers rarely, if ever, have contact with the back-office should not obscure the Despite the need to boost middle- and back-office reality that many of the service issues they encounter investments aimed at the customer experience, bank are attributable to problems that occur there. Slow executives predicted their investments in those areas processing times, errors, and exceptions are among the would go down. Over the next three years, investments back-office issues that contribute greatly to reduced in the middle-office are expected to decrease by 1.5 service in the front-office and in turn, a poor overall percentage points to 22.4% of the total investment in experience for the customer. Based on our research data transformation, and those in the back-office by 2.4 reported in “Backing up the Digital Front: Digitizing percentage points to 30.8% (see Figure 20). Investments the Banking Back Office” in 2013, 60% of customer in the front-office, already high at 42.9% are expected to dissatisfaction emanates from the back-offices, 10–20% rise another 4.0 percentage points to 46.9%. of negative experiences at the contact center are due to execution issues at the back-office, and less than one- third of the executives feel their back-offices are agile enough to adapt to external changes.
The Way Forward
The complexity of projects aimed at improving of the organization coming in second (see Figure 21). the customer experience was not lost on bankers. Other difficulties cited were the ongoing presence of They delineated numerous challenges to digitally inflexible legacy systems, which impede upgrade efforts, transforming the front-, middle-, and back-offices, and the difficulty of building a business case for long- with cost rising to the top and the drive and priority term goals such as digital transformation.
Figure 21: Challenges to Digital Transformation of Front-, Middle-, and Back-Offices (%)a, 2015
Front-Office Middle-Office Back-Office
Cost 64.8% 59.6% 72.2%
Integration Challenges 56.6% 56.9% 58.5%
Regulations 55.6% 50.0% 51.9%
Organizational Drive/Priority 53.7% 59.6% 63.0%
Employee Inertia 50.0% 46.2% 46.3%
Unclear ROI 44.4% 40.4% 46.3%
Q. What challenges do you face in taking up digital transformation of your front-, middle-, and back-office? a. Percentage here refers to the banks that consider the factors as a big challenge i.e., those who have rated above 4 on a scale of 1-7 (with 7 referring to the biggest challenge) Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Executive Interview Survey, Capgemini Global Financial Services CHAPTER 3 29
To overcome these challenges, banks need to develop thereby realizing the goal of real-time straight-through a well-structured roadmap that outlines a gradual processing. This digitization can help them on-board approach to digital transformation. One way to address the clients quickly, complete the payments immediately, the issue of cost, for example, is to initiate projects in and process the loans swiftly. Completing all these a phased manner, focusing first on easily achievable activities effectively and in a timely manner goes a long goals as a lead-up to the ultimate objective of improving way in creating better customer experiences and in the customer experience. Standardizing processes, for enhancing the brand image of the bank. example, boosts efficiency by reducing costs, as well as leads to better reporting and control, improving risk However, it would be a massive exercise both in terms management. At the same time, it sets the stage for of investment required and the complexity involved better access to customer information, a critical element for a bank to truly digitize and transform their core of enhancing the customer experience. banking system. The majority of banks do not have the capacity to make all of the required improvements In any project involving the transformation of concurrently. For example, a bank might invest heavily middle- and back-offices, banks should set their sights in new channels; however, the core systems that figures on three main goals (see Figure 22): Digitization– out the risk are still running on decades-old technology replacing manual processes with digitized routines, that simply cannot be ripped and replaced. Given Simplification/Agility–simplifying multiple systems the high cost of implementing a new core banking into fewer to enable faster time to market, and Insights system, business problems are often not addressed and Data–putting in place the ability to capture and comprehensively and a componentized solution provides manage customer data effectively. the best chance of success.
Digitization is clearly the first step toward achieving the The transformation roadmap includes a prioritization goal of transformation. While digitization would often of individual solution components, which augments the be used in the context of customer-facing interactions— chance to accomplish long-term goals. This component- via the front-office, it is equally important to back up by component transformation approach avoids the those front-office digitization drives with similar efforts high-risk rip-and-replace approach and achieves a in the middle- and back-offices. Banks should aim steady stream of return on investment. Banks that use to automate the different processes in the back-end, a progressive approach to drive transformation have
Figure 22: Elements of Middle- and Back-Office Transformation
Focus on automation of Addressing system integration processes such as (legacy and silos) to enhance straight-through processing agility and reduce time to market to reduce manual processes which are prone to errors Optimization of processes and operations to drive ef ciency
Simplification Digitization /Agility Elements of Middle- and Back-Office Transformation
Put in place proper data management systems to obtain single customer view Leverage Big Data and Data Analytics to draw real-time Insights and Data actionable insights and enhance personalization of services
Source: Capgemini Financial Services Analysis, 2015 30 2015 World Retail Banking Report
achieved tangible results in shorter timeframes than with the 360-degree view in the CRM platform and banks that waited until the end of a long transformation translated and pushed into the channels that clients are period. actually using.
The challenge would be to manage the integration of To achieve this, banks will have to get their CRM these old legacy systems with the new generation of platform properly connected to the Customer customer-oriented technologies existing in the industry. Information File (CIF) in their back-office application. This integration should be less about the technologies According to the Enterprise Architecture, this is one involved and more about future proofing and driving data object ideally supported by one system. The reality faster time to market for the firms. This ability to for most banks is, however, that their CIF is spread blend the new technologies with the old through across various systems—often the result of several simplification would enable agility. Firms that can mergers and acquisitions. This means that all types simplify their legacy platforms to effectively support of automated processes are in place to select, combine the business and technology changes at the front-end and merge data before it is ready for use by the CRM would be able to truly differentiate themselves from platform. This makes simplification of the CIF a critical their competitors and well placed to deliver enhanced step in enhancing the bank’s ability to derive actionable experiences for their customers. insights from the customer data.
While digitization and simplification will help in Progress in any one of these areas is likely to have improving existing processes and achieving operational considerable impact on the other two. Often, for efficiencies, the true value lies in leveraging these example, an effort in systems integration can lead enhancements to understand customer needs, both to positive results that go far beyond just a more expressed and latent, and in proactively providing simplified data center. A systems integration project at the products and services to address these needs. one large European bank, for example, led to reduced Understanding the needs starts with having a Customer maintenance costs, improved time to market for new Relationship Management (CRM) platform in place loan products, and a 50% increase in straight-through that provides a 360-degree view on who the client is and processing rates. In addition, during the process, the what type of products they have today. The next step is bank adopted a more flexible channel architecture to gain insight into what a client is actually doing with intended to support Internet-based sales, leading to a these products and derive actionable insights from this further reduction in operation costs. In effect, the effort data. In order to facilitate this, tools from the Big Data to simplify systems also had the outcome of improving suite need to be implemented. Insights derived from digitization rates and adding to customer insight. a bank’s data via analytical tools should be combined Conclusion
Banks across the globe are witnessing a stagnation However, all is not lost for the banks. In order to of customer experience levels due to rising customer compete with the non-banking entities, banks need expectations driven by the proliferation of Internet/ to prioritize transforming their middle- and back- technology firms. Also, there has been deterioration in offices and they need to critically address the areas the profitable customer behaviors. While banks have of Digitization, Simplification/Agility, and Insights been focusing on their front-office digital capabilities, and Data. By adopting a structured approach toward they have not been able to meet rising customer transformation, banks can enhance their abilities expectations and are losing on the perception battle. to provide an enriching experience throughout the Banking executives perceive customers to be more customer lifecycle. With the increasing competition comfortable with Internet/technology players and there and changing customer behaviors and preferences, the is a trend of customers opting for non-banking players banking industry is at an inflection point, the threat of across the lifecycle stages. disintermediation is real and imminent. APPENDIX 31
Appendix
Figure 23: Customer Experience Index, by Country, 2013–2015
Global Average Global Average Point Change 72.7 (2015) 73.5 (2013) 2013–15 78.9 Canada 80.7 (1.8) 77.5 Czech Republic 74.0 3.5 76.8 Argentina 75.1 1.7 76.7 South Africa 77.1 (0.4) 76.6 U.S. 79.5 (2.9) 76.4 Australia 77.8 (1.4) 76.4 Mexico 72.9 3.5 76.2 Austria 75.2 1.0 76.1 Turkey 72.2 3.9 75.8 Russia 71.0 4.8 74.5 Finland 72.0 2.5 73.9 U.K. 76.3 (2.4) 73.7 Spain 68.9 4.8 73.7 Switzerland 75.6 (1.9) 73.6 Poland 74.7 (1.1) 73.6 Portugal 75.7 (2.1) 73.4 Netherlands 71.1 2.3 72.6 Italy 72.9 (0.3) 71.4 Singapore 72.2 (0.8) 71.1 Brazil 72.1 (1.0) 70.9 India 75.4 (4.5) 70.8 Germany 75.8 (5.0) 69.7 China 73.1 (3.4) 69.6 France 71.8 (2.2) 69.5 Denmark 70.1 (0.6) 69.3 Sweden 72.0 (2.7) 69.2 Belgium 74.2 (5.0) 68.1 Norway 74.0 (5.9) 67.9 Saudi Arabia (3.7) 71.6 65.8 Hong Kong 63.8 2.0 64.7 UAE 73.0 (8.3) 61.9 Japan (3.6) 65.5 2015 0 20 40 60 80 100 CEI (On a Scale of 100) 2013
Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services 32 2015 World Retail Banking Report
Figure 24: Customers with Positive Experience, by Country (%)a, 2013–2015
Percentage Global Average Global Average Point Change 41.6 (2013) 48.1 (2015) 2013–15 61.4 Czech Republic 42.5 18.9 59.9 Austria 48.3 11.6 59.5 Argentina 44.9 14.6 56.9 Canada 60.8 (3.9) 56.6 Mexico 39.6 17.0 56.3 Netherlands 39.2 17.1 55.8 Russia 30.5 25.3 54.9 U.S. 57.1 (2.2) 54.9 Switzerland 46.5 8.4 53.3 Spain 34.4 18.9 52.1 Turkey 38.4 13.7 51.9 Italy 40.5 11.4 51.3 Australia 51.5 (0.2) 50.3 South Africa 48.6 1.7 50.1 Poland 44.3 5.8 50.0 Portugal 46.9 3.1 49.8 Finland 39.3 10.5 48.4 Germany 48.0 0.4 48.0 U.K. 50.1 (2.1) 46.9 Denmark 35.9 11.0 46.2 France 36.2 10.0 45.4 Belgium 41.3 4.1 44.7 Sweden 39.8 4.9 42.8 Norway 43.3 (0.5) 42.0 Brazil 40.0 2.0 39.2 Saudi Arabia 41.6 (2.4) 38.1 India 46.2 (8.1) 36.1 Singapore 34.4 1.7 34.7 China 36.3 (1.6) 33.4 Hong Kong 15.0 18.4 28.4 UAE 40.0 (11.6) 28.1 Japan 21.9 6.2 2015 0 20 40 60 80
Customers with Positive Experience (%) 2013
a. Positive experience denotes an integer CEI score of more than 79 Source: Capgemini Financial Services Analysis, 2015; 2015 Retail Banking Voice of the Customer Survey, Capgemini Global Financial Services METHODOLOGY 33
Methodology
2014 Global Retail Banking Capgemini’s Proprietary Voice of the Customer Survey Customer Experience Index (CEI)
A global survey of customer attitudes toward retail The responses from the global Retail Banking Voice banking forms the basis of the tenth annual World of the Customer Survey, which analyzed customer Retail Banking Report. Our comprehensive Retail experiences across 80 data points, provide the Banking Voice of the Customer Survey polled over underlying input for our proprietary CEI. The CEI 16,000 retail banking customers in 32 countries. The calculates a customer experience score that can be survey sought to gain deep insight into customer analyzed across a number of variables. The scores preferences, expectations and behaviors with respect to provide insight on how customers perceive the quality specific types of retail banking transactions. The survey of their bank interactions. They can be dissected by questioned customers on their general satisfaction product, channel and lifecycle stage, as well as by with their bank, the importance of specific channels demographic variables, such as country, age, investable for executing different types of transactions, and their assets and comfort level with technology. The result satisfaction with those transactions, among other is an unparalleled view of how customers regard their factors. The survey also questioned customers on their banks, and the specific levers banks can push to increase likelihood to stay, refer a friend, purchase another the number of positive experiences for customers. product from their bank, why they choose to stay with/ The index provides a foundation for banks to develop change their bank, and other issues. We supplemented an overall retail delivery strategy that will increase these detailed findings with in-depth interviews with satisfaction in ways that are most meaningful to senior banking executives around the world. customers. 34 2015 World Retail Banking Report
About Us
CAPGEMINI EFMA With almost 145,000 people in over 40 countries, As a global not-for-profit organisation, Efma Capgemini is one of the world’s foremost providers of brings together more than 3,300 retail financial consulting, technology and outsourcing services. The services companies from over 130 countries. With Group reported 2014 global revenues of EUR 10.573 a membership base consisting of almost a third of billion. Together with its clients, Capgemini creates all large retail banks worldwide, Efma has proven and delivers business and technology solutions that fit to be a valuable resource for the global industry, their needs and drive the results they want. A deeply offering members exclusive access to a multitude of multicultural organization, Capgemini has developed resources, databases, studies, articles, news feeds its own way of working, the Collaborative Business and publications. Efma also provides numerous Experience™, and draws on Rightshore®, its worldwide networking opportunities through working groups. delivery model. Visit: www.efma.com Capgemini’s Global Financial Services Business Unit brings deep industry experience, innovative service offerings and next generation global delivery to serve the financial services industry. With a network of 24,000 professionals serving over 900 clients worldwide Capgemini collaborates with leading banks, insurers and capital market companies to deliver business and IT solutions and thought leadership which create tangible value.
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Disclaimer
The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user. This document does not purport to be a complete statement of the approaches or steps, which may vary accordingly to individual factors and circumstances, necessary for a business to accomplish any particular business goal. This document is provided for informational purposes only; it is meant solely to provide helpful information to the user. This document is not a recommendation of any particular approach and should not be relied upon to address or solve any particular matter. The text of this document was originally written in English. Translation to languages other than English is provided as a convenience to our users. Capgemini and Efma disclaim any responsibility for translation inaccuracies. The information provided herein is on an ‘as-is’ basis. Capgemini and Efma disclaim any and all representations and warranties of any kind concerning any information provided in this report and will not be liable for any direct, indirect, special, incidental, consequential loss or loss of profits arising in any way from the information contained herein. ACKNOWLEDGEMENTS 35
Acknowledgements
We would like to extend a special thanks to all of the banks and individuals who participated in our Banking Executive Interviews and Surveys.
The following companies are among the participants who agreed to be publicly named:
Alpha Bank Bulgaria, Bulgaria; ANZ, Australia; Banca Generali, Italy; BancABC, South Africa; Banco Bradesco, Brasil; Banco Popular, Spain; Bank Simpanan Nasional, Malaysia; Bankia, Spain; BAWAG PSK, Austria; Bendigo and Adelaide Bank Group, Australia; BLOM Bank, Lebanon; BNP Paribas, Belgium; Byblos Bank SAL, Lebanon; Caisse d’Epargne Rhône-Alpes, France; CheBanca!, Italy; CUA, Australia; Defence Bank Limited, Australia; DNB ASA, Norway; Erste Group Bank AG, Austria; Eurobank Ergasias, Europe; Eurobank Ergasias S.A., Greece; Groupe Caisse d’Epargne, France; Hypo Alpe-Adria-Bank d.d. Slovenia; ING, Luxembourg; ING, Netherlands; Intesa San Paolo Bank Albania, Albania; Intesasanpaolo, Italy; KBC, Belgium; KLP Bank, Norway; Laboral Kutxa, Spain; Länsförsäkringar Bank, Sweden; Maybank, Hong Kong; Maybank (Cambodia) Plc, Cambodia; Members Equity Bank (ME Bank), Australia; Millennium BCP, Portugal; MyState Limited, Australia; Nordnet Bank, Nordics; Privredna banka Zagreb d.d., Republic of Croatia; Promsvyazbank, Russian Federation; R. Raphael & Sons PLC (Raphaels Bank), Europe; Rockland Trust, USA; Rural Finance, Australia; Russlavbank, Russian Federation; SEB, Sweden; Skandias Bank, Sweden; SpareBank 1 SR-Bank, Norway; Swedbank, Sweden; TBC Bank, Georgia; The Bank of Tokyo-Mitsubishi UFJ, Japan; UniCredit, Europe; UniCredit Bank Austria, CEE; and Westpac Group, Australia. We would also like to thank the following teams and individuals for helping to compile this report:
William Sullivan and Sivakanth Dandamudi for their overall leadership for this year’s report; Vamshi Suvarna, Sumit Chugh, Raghunandan Kothamasu, and Chris Costanzo for researching, compiling, and writing the findings, as well as providing in-depth market analysis.
Erik Van Druten, Bhaskar Banerjee, and Ritendra Sawan from Capgemini’s Global Core Banking and Channels Centers of Excellence for their continuous support and inputs for the development of the report.
Capgemini’s Global Retail Banking network for providing their insights, industry expertise and overall guidance: Ravi Pandit, Gilles Savini, Pascal Spelier, Kishen Kumar, Christophe Vergne, Francis Hellawell, David Delfosse, Philip Gomm, Anders Rygh, Øystein Refsnes, Krister Rydmark, Johan Bergström, Klas Rutberg, Filip Goldmann, Sharon Rode, Fredrik Borchgrevink, Buchignani Marco, Jessica Ingrami, Gert Littooij, and Mercedes Chacón Otero.
The Global Product Marketing and Programs, and Corporate Communications teams for producing, marketing, and launching the report: Vanessa Baille, Mary-Ellen Harn, Martine Maître, Stacy Prassas, Suresh Chedarada, Ed Johnson, Gabriella Lucocq, Sourav Mookherjee, Omkarnadh Sanka, Erin Riemer, Karen Schneider, Rosine Suire, Jyoti Goyal, Partho Sarathi Bhattacharjee, and Sathish Kumar Kalidasan.
The Efma team for their collaborative sponsorship, marketing, and continued support: Patrick Desmarès and Karine Coutinho. Visit www.worldretailbankingreport.com www.efma.com/wrbr
For more information, please contact: Capgemini [email protected]
Efma [email protected]
For press inquiries, please contact: UK/EMEA Cortney Lusignan [email protected] or +44 20 7067 0764
North America and Rest of the World Mary-Ellen Harn [email protected] or +1 704 490 4146
Karine Coutinho [email protected] or +33 1 47 42 69 82