August 2015 Issue 716 www.retailbankerinternational.com HIDDEN REMITTANCE FEES

A NOVEL SOLUTION TO THE ELEPHANT IN THE ROOM

● ANALYSIS: DIGITAL ● STRATEGY: ISLAMIC BANKING ● COMMENT: CLOUD PROCESSES ● REPORT: PACKAGED ACCOUNTS

RBI 716 Aug.indd 1 24/08/2015 16:18:14

Retail Banker International COMMENT: EDITOR’S LETTER

CONTENTS

2 STRATEGY: ISLAMIC BANKING Franchesca Hashemi speaks to Al Rayan about the bank’s digital push Snap to switch – 4 ANALYSIS: M-BANKING PMG and UBS Evidence Lab predict teams up with Jumio mobile banking will almost double by 2019. Patrick Brusnahan reports

5 DISTRIBUTION: TORONTO DOMINION alifax teams up with Jumio to enable Two immediate thoughts spring to mind. Robin Arnfield examines Toronto ‘snap to switch’ Once the Halifax/Jumio innovation is seen Dominion Bank Group’s targeted mobile Account switching rates in the to be a winner, expect to see this extended to banking and branch strategy H UK remain stubbornly low despite sister brands Lloyds and . 8 ANALYSIS: DIGITAL the successful implementation in September Secondly, it is refreshing to see technol- National Bank of Canada is re-working 2013 of the seven day switching initiative. ogy, hitherto previously used successfully by its digital strategy to leverage data But the story is not all one of doom and online retailers, become adopted by financial analytics. Robin Arnfield writes gloom. There are a few winners, principally institutions. 10 REVIEW: DIGITAL BANKING Halifax, Santander and Nationwide, in that Aside from the Halifax deal, Jumio’s order. Digital are lining up to flog their technology is increasingly being used by a non-legacy wares to the British public. In the first four quarters for which detailed growing number of financial institutions to Are they worth the switch? Patrick stats are to hand, Halifax ranked top of all authenticate customer documents. Brusnahan speaks to Mondo to find out UK current account providers for net switch- Meantime, Jumio has released results from 11 COMMENT: CLOUD BANKING ers; since late 2013, its total current account its latest Mobile Consumer Insights study, a Donald Ross, SAP’s director of strategic numbers have grown by more than a net look at user behaviour and transactions on accounts explains how cloud solutions 250,000 customers. mobile, and a follow-up to its 2013 study of can ease regulatory burden to become And Halifax looks set to consolidate its the same name. as breezy as cirrostratus position as the prime beneficiary of seven If you have not had sight of the report, I 12 INNOVATION: WRIST WATCH BANK APPS day switching by teaming up with the clever commend it warmly. The latest form of banking applications guys at Jumio, to give itself a key advantage Conducted online by Harris Interactive, is available, wearable and on your wrist. in improving the customer experience. the latest survey found that more than one- Patrick Brusnahan speaks to CaixaBank Customers looking to switch their half of US smartphone owners (56%) have and Scotiabank about their latest work accounts to Halifax can now speed up the developing apps for the Apple Watch abandoned a mobile transaction. process by uploading a photo of their debit Pretty dire - but a slight improvement 14 STRATEGY: REMITTANCES card from their smartphone or tablet. from last year’s 66% finding. Amid the backlash on hidden remittance The Halifax ‘snap to switch’ tool means Bluntly, as mobile transactions soar, so do fees of late, Franchesca Hashemi looks that consumers submit their existing bank abandoned purchases. That means revenue at Xendpay to fin out about the offering that trumps transparency to offer a free details without having to go through the rig- is being lost due to a lousy customer experi- service- if you want it marole of populating the information on a ence. form. One positive for financial institutions is 16 REPORT: PACKAGED ACCOUNTS Using the bank’s optimised tool populates that they are from the worst placed com - Patrick Brusnahan outlines the results the switch from bank account fields auto- of a survey conducted by Assurant pared with other verticals. Solutions and YouGov on Packaged Bank matically. The innovation is timely and will Less than one in four of those surveyed Accounts prove to be popular with more and more (23%) said that they had abandoned the customers looking to switch accounts from 17 GUEST COMMENT: TEMENOS transaction while applying for a financial their tablet or smartphone. services account (e.g. opening an account, Temenos’ David Arnott writes about the risks bank run if they don’t take up the As David Pope, European marketing money transfer). overhaul challenge director at Jumio told me, ‘snap to switch’ By contrast, the corresponding figures will enable the customer to save about 40 for retail/apparel were 60% while food and key strokes. travel both scored a pretty dismal 41%. “The quicker that customers gets across the finishing line means more and more cus- Douglas Blakey tomers will complete the switching process.” [email protected]

Editor: Douglas Blakey Sub-editors: Nick Midgley, Kev Walsh For more information on Timetric, visit Tel: +44 (0)207 406 6523 Director of Events: Ray Giddings our website at www.timetric.com. As a Email: [email protected] Tel: +44 (0)203 096 2585 subscriber, you are automatically entitled to Email: [email protected] online access to Retail Banker International. Financial News Publishing, 2012 Deputy editor: Anna Milne For more information, please telephone Registered in the UK No 6931627 Tel: +44 (0)207 406 6701 +44 (0)20 3296 2636 or email customer. Head of Subscriptions: Sharon Howley Email: [email protected] [email protected] ISSN 0956-5558 Tel: +44 (0)203 096 2636 Unauthorised photocopying is illegal. The Office Reporter: Patrick Brusnahan Email: [email protected] contents of this publication, either in whole or 5th Floor, Tel: +44 (0)207 406 6526 part, may not be reproduced, stored in a data Farringdon Place, Email: [email protected] Sales Executive: Alexander Koidis retrieval system or transmitted by any form or 20 Farringdon Road, Tel: +44 (0)203 096 2586 London, EC1M 3AP means, electronic, mechanical, photocopying, Franchesca Hashemi Junior Reporter: Email: [email protected] recording or otherwise, without the prior Tel: +44 (0)207 406 6711 Asia Office permission of the publishers Email: [email protected] 1 Finlayson Green, #09-01 Customer Services: Singapore 049246 Group Publisher: Ameet Phadnis Tel: +44 (0)203 096 2636 Tel: +65 6383 4688 Tel: +44 (0)207 406 6561 or +44 (0)203 096 2622 Fax: +65 6383 5433 Email: [email protected] Email: [email protected] Email: [email protected]

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RBI 716 Aug.indd 1 24/08/2015 16:18:17 STRATEGY: ISLAMIC BANKING Retail Banker International

Al Rayan goes digital after Qatari boost Britain’s first fully Sharia-compliant retail bank Al Rayan is gaining momentum. It has undergone a major revamp following the acquisition by Qatar’s Masraf Al Rayan (MAR) QSC in 2014. Franchesca Hashemi asks Tim Sinclair, senior head of sales and marketing at Al Rayan, about the bank’s transformation and products

l Rayan, founded in 2004 under the name Islamic Bank of Britain, has reinvented itself as a digitally-apt A financial institution. It boasts nine bases in England, a robust parent company and posted its first annual profit since incep- tion for the twelve months preceding Decem- ber 2014 of £1.2m ($1.9). It is a modest yet impressive figure, up from a £5.5m loss in the previous year. Yet the financial insti- tution owes a large part of its success to a £75m investment from MAR in early 2014. Tim Sinclair is senior head of sales and marketing at Al Rayan. He believes the acquisition has been emblematic of MAR's desire to expand its global reach: "They are looking to help individuals from the Gulf Corporation Council, Qatar in particular, invest in London but farther afield as well." The bank anticipates a 35/ 65 split in com- mercial/ retail assets in the short term, with both areas expected to see further growth going forward, according to Sinclair. Al Rayan's flagship Knightsbridge branch and Private. Interest versus Profit-Sharing Agreements will cater to this commercial property goal While the exact eligibility categories are The crux of Islamic banking lists transpar- and, specifically, Private GCC clients. still a work in progress, Premier will require ent and ethical standards while interest, in He says: "Knightsbridge is tailored around high net worth individuals have £75,000 any shape or form, is forbidden. Funds are the individual's personal and financial needs. or more worth of Al Rayan deposited sav- instead generated on the Islamic finance "Staff at this branch can help with prop- ings or investments, a joint or sole income principle of Mudaraba, meaning the bank erty searches, as well as helping customers over £100,000 or home finance in excess of and customer share an agreed percentage on understand how to identify property and the £500,000. Interestingly, Private clients will the deposit. This calculation, according to UK process." deal almost exclusively with GCC citizens Sinclair, is set by the profit allocation com- Sinclair explains Al Rayan has three cli- however Sinclair reasons "crossovers" may mittee every month. ent-based propositions: standard, Premier occur. Presently the customer's expected profit rate (Gross P.A) stands at 0.15% for a Direct Savings account, 0.05% for On Demand Savings and 0.10% for Young Person's Where to find Al Rayan Instant Access Saving (YPSA). While the accounts shown are subject to T&C, Al Ray- There are 9 locations in total: a flagship as Leeds and Bradford are under consid- branch in Knightsbridge, then Whitechapel eration. an's expected profit share is 40% for Direct Road and Edgware Road in London, Bir- Sinclair explains areas with ‘relatively Savings Account, 50% for On Demand Sav- mingham, Leicester, and Manchester. The high Muslim population density’ and ‘sat- ings, and 50% for YPSA. bank also has three agencies in Luton, ellite hubs’ are strategically important. He Customer deposits are invested in line Tooting and Blackburn. The latter are says: “We are also looking into a model with UK regulatory requirements, as Sinclair more so elements of spaces within some- where we have a HPP advisor that can do explains: "The bank does not offer a prod- one else facility, according to Sinclair, and transactional banking services on a smaller uct which enables the customer to choose focus on the growth of Home Purchase scale than a regular branch.” only to invest in the London property mar- Plans (HPP). Potential ‘satellite hubs’ include Bir- ket. Instead, it invests savers' deposits in Al Rayan looks to open another three mingham, Midlands and different parts Sharia compliant assets, such as property via branches in 2015, with Ilford and Slough of the North with Manchester as the focal key contenders. Yet other territories such point. Al Rayan's own Home Purchase Plan, Buy to Let Purchase and products and metals."

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RBI 716 Aug.indd 2 24/08/2015 16:18:17 Retail Banker International STRATEGY: ISLAMIC BANKING

Sharia Compliant Debit and Credit Cards Adaptation and Ethics Al Rayan’s website states that transactions out transactions prohibited by Sharia, but There are 2,706,066 Muslims living in around gambling, tobacco, arms, pornog- cards are not declined for this reason. the UK, according to the nation’s 2011 raphy or any other speculative activity that “Our principle focus is to be Sharia com- Census. This makes up 4.5% of the is prohibited by Islamic teachings are not pliant from a financial perspective. What total population. Yet Islamic banking is allowed. So what would happen if an Al that in practice means, and this is a 100% not exclusive. Al Rayan found 87% of Rayan customer used their debit card to requirement, is that we structure our pay for one of these products, because organisation; we review our decisions, cre- applications for its Fixed Term Deposit technically it should be declined? ate products and look after our staff and accounts from December 2012 to 2013 Sinclair answers: “A condition of the customers in a way that is compliant with were non-Muslims. account is that cards are not used to carry Sharia standards. Moreover, Al Rayan’s figures show 81% of its Muslim and non-Muslim cus- tomers will use Sharia finance in future. Ethical standards and competitive n RESULTS - AL RAYAN BANK FY DECEMBER 2013- DECEMBER 2014 (£M) products speak to an international 2014 2013 audience and as support from all Net income from Islamic financing transactions 11.09 4.06 demographics increase, including its tar- Net fee and commission 0.708 0.39 get, Al Rayan’s future looks promising. Sinclair says: “We have an external Operating income 11.79 4.44 ethics committee [which is] the Sharia Total operating expenses 11.29 -9.96 supervisory committee. It is made up Profit/ (loss) before income 0.502 -5.513 from three external and independent Net profit/ (loss) 1.21 -5.513 eminent scholars in Sharia compliant Source: Al Rayan Bank finance. They regularly audit us, much like the external auditors KPMG.” “We also have the head of Sharia com- pliance. That individual is like an inter- n RESULTS - AL RAYAN BANK FY DECEMBER 2013- DECEMBER 2014 (£M) nal ethics officer so again they review 2014 2013 the teams and decisions on a routine Total assets 647.9 368 basis, and sit on various committees - Net Investments in home purchase plans 311.6 207.1 just to make sure all the right things are done for the customer and society as a Net investments in commercial property finance 138.5 34.33 whole.” Investment securities- Sukuks 109.4 19 Total Liability 544.9 344 Source: Al Rayan Bank access ISA. Two of which are notice ISAs, while our fixed ISA is top of the tables." Al Rayan's 120 Day Notice Cash ISA has Yet in terms of the difference between a with a selection of slick animations as well a 2% return and requires a minimum £250 Sharia compliant business account and that as pieces-to-cameras with bank executives. It deposit. This product is making waves on of any one of the UK business is all very Generation Y, but what about the online comparison sites, with BT Money accounts, Al Rayan's senior head of mar- substance of the matter? writing in April 2015: "The top deal from keting and sales explains that in principle Sinclair, as the individual brought in to Al Rayan Bank pays ... a third more than the both are very similar: "The arrangement oversee Al Rayan's transition, says: "[3 - 4 top easy access account open to all." we have is that your capital is always pro- years ago] our online strategy was frankly When asked if saving accounts are a cen- tected. In any case it is protected under the appalling. tral focus in product innovation, Sinclair Compensation Scheme. "We rebranded all our digital assets in replies: "Absolutely. Prior to 2011, direct If we were ever - and to emphasis we never 2014, and that has supported us a lot." non-branch sales were about 10% of our have - unable to pay the expected profit, a The online offering comes in three parts: total. Now they are 70% of our total, and customer would still retain their capital and part one is mobile enabled, where the cor- by sales I refer to savings and investment. profit earned up to that point, or exit the porate website informs the audience about "There is a stream of asset and liability deal entirely." products. At the same time, an online acqui- product development - we've launched four In both April and May of 2015, Al Rayan sition platform has been developed through already this year we could well launch up to paid more than double its expected profit a sales force- all of which is coupled with a four more by the end of 2015.” rate to its On Demand and YPSA customers, broader investment in digital marketing. Sinclair concludes: "Sometimes there is a while Direct Savings account holders were Al Rayan has created a fluid one-stop shop perception that we are investing in all sorts paid 73% more than expected in May. for customer's internet-banking needs. But of unusual activities that may or may not how far this will be taken remains to be seen. make profit. The reality is that we only really Digital and Products Could there be fist-flashing payment tools invest in very secure commodities. Typically, The most striking aspect of Al Rayan is its on the horizon? Sinclair gives nothing away: property, and non-precious metals or stand- super-smooth web design. This includes a "Last year we were the first people to launch ard metal. Between those investments and presence on practically every social media a Sharia-compliant notice-cash ISA, this year our longer term property investments, they platform. It even has a YouTube channel, we launched a fixed term ISA and an instant will produce a return." <

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KPMG: Mobile banking set to keep rising and rising

The number of mobile banking users across the world is increasing at such a fast rate it is predicted to double to nearly two billion users over the next four years. That’s over a quarter of the world’s population. All this, according to the latest research from KPMG and UBS Evidence Lab. Patrick Brusnahan reports

n its news Global Mobile Banking needs to be short- and long-term strategies, market in both online and mobile banking Report, KPMG found that while capability and security. services with most banks having launched mobile is currently the largest banking The report said: “As customers demand these services around 2010. The report I channel by volume of transactions, its frictionless online experiences, especially showed a quick initial take-up of services by adoption by new customers is still increasing on mobile devices where there is a particu- early adopters in the market. at a fast rate. While the number of mobile lar demand for speed and responsiveness, An interesting aspect of this was that Brit- banking users is currently 0.8 billion, KPMG organisations need to match the roll out of ish consumers were already utilising bank- expects this number to reach 1.8 billion by functionality to perform riskier transactions ing services on their smartphones prior to 2019. with their ability to authenticate the device, the designed-for-purpose services. This is As a result, the report claimed that bank- the application, and the user, in ways pre- despite the user experience being particular- ing without a clear mobile banking strategy ferred by the customer and permitted by ly tricky and particularly unsuited to mobile will lose customers and cross-sell opportuni- local laws and regulations.” phones. The banks had to actually catch up ties in the short-term, as well as hindering Today, users with non-tampered devices with their customers and provide dedicated competitive advantages. with applications from official vendors have mobile services. The report forecasts that the next 5-10 relatively little to worry about. Not much Early mobile products were purely service years will see exponential growth in this sec- vulnerability has been utilised by malware. propositions with no specific focus on sell- tor before the growth curve flattens. However, as mobile becomes more domi- ing. This was a bit of a nuisance for banks Adoption rates are highest in developing nant for banking services, malware will as cross-sales through online channels were countries, hitting 60-70% in China and increasingly target mobile devices. As a growing at a steady pace. India, while developed nations such as the result, banks need to focus on the current A minority of banks made severe mis-steps US, Canada and the UK have lesser adop- threat landscape or a more pragmatic strat- in their mobile functionality, allowing their tion rates. egy that can evolve as other threats take apps to do nothing except check account bal- Currently, almost all banks have some shape. ances. This led to extremely critical reviews form of mobile banking offering, whether Creating an end-to-end mobile channel on the Apple App Store and provided a big it is developed in house or through a third- architecture is not completely different from lesson for banks; if you fall behind, it is very party, such as Monitise. creating any other architecture in a technol- difficult to catch up. ogy driven domain. However, if institutions Customer profiling are already on a fairly monolithic or poorly The United States People in their mid- to late-thirties are the structured solution, it may be at a dead-end Both regional and national banks in the US optimum target market for mobile bank- and have to move backwards before mov- have launched apps with new functionalities ing, which reflects a level of ‘technological ing forwards. Developing a capable response that have made the mobile channel a prefer- comfort and relatively high economic activ- to the changes in technology may also take ence for a large chunk of consumers. Basic ity’. This drives the relevance of competent longer than usual. An evolving architecture features, such as alerts, have moved towards mobile banking services and higher adoption is the way forward and the one most likely a more advanced login and account manage- rates. to survive. ment features. While mobile capability is a factor in The ability to be omnichannel and multi- Utilising existing features in smartphones, which bank a switcher would select, UBS’ provider is also crucial. The lines are blur- such as GPS and biometric authentication, research showed a negative correlation ring between Google, Apple, and Microsoft has added multiple functionalities to mobile with the likelihood of mobile banking users and banks or payment solution providers apps. Even the camera is getting used to its remaining with their current institutions. need to be available on all smartphones and full potential with 56% of North Americans The report suggested that this could be due digital devices to maintain relevance. reporting interest in video chat with a bank to the more technologically savvy being representative using a mobile or tablet. more demanding of their providers. Europe The report concluded: “The banking In a very general sense, mobile banking Across the whole of Europe, the average industry is entering a hugely exciting phase services are led by banks in the developing adoption of mobile banking services was at of development but one that will also pre- world and largely by telcos in the develop- 38%. The UK exactly matched that average sent major challenges to profitable growth. ing world. and the report stated that the country was a As data from numerous sources make clear, ‘bellwether for both the rest of Europe, and usage of mobile banking services will con- Difficult security issues also parallels other developed economies tinue to grow, and at an accelerated rate, Financial institutions with mobile solutions such as the US and Australia’. over the next five years until they become have a difficult balance to maintain. There The UK can be considered to be a mature essential and ubiquitous.” <

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TD moves ahead in North American digital banking

Digital transformation is a priority for TD Bank Group, which has built a customer-centric platform to capitalise on Canadian and US consumers’ appetite for digital banking. Robin Arnfield examines the Group’s successful mobile offering, Smart ATM roll out and branch strategy over the last year

Everything we do starts with the customer, mer,” he says. “As a result of adding these US branches in the context of the restructur- which means we view every interaction digital conveniences, we’re seeing some of the ing charge. It will also close 24 US branches. as an opportunity to build engagement more routine service transactions migrate to Tim Hockey, TD’s group head, Canadian and provide a comfortable and conveni- self-service channels. However, the branch Banking and Wealth Management, said in “ is still an integral part of how we serve our the earnings call that TD is seeing a transac- ent experience,” says Rizwan Khalfan, TD’s senior vice president and chief digital officer. customers.” tion decline in its Canadian branches. “But “In the digital space, we achieve this by deliv- the transaction decline in our Canadian ering purposeful designs putting customers’ Restructuring branches is about half the rate of the US, and needs first with a focus on features to help In May 2015, TD announced an after-tax that's generally true of Canada versus the US them make better financial decisions and restructuring charge of $228m to cover the banking industry,” Hockey said. achieve their goals.” cost of merging branches, call centres and “Everything TD tries to do in digital bank- corporate offices as well improving its busi- Canadian digital banking trends ing takes advantage of its North American- ness processes. “This phase focuses mainly A 2014 quantitative consumer study by wide economies of scale,” says Mitchell Osak, on the US and some functions in Canada, Canadian consultancy NorthCard found that president of Canadian banking advisory firm and we expect to complete most of this work 83 percent of Canadians use their primary Quanta Consulting. “From a senior manage- by the end of this year,” Bharat Masrani, TD bank’s online banking service bank at least ment perspective, TD has a North American Group president and CEO, said in an earn- a month, with 64 percent doing so weekly. mandate for digital investments. So, when ings call. Mike Bradley, NorthCard’s managing you see a new TD initiative in the US, there “Some of the cost-savings will be rein - director, says the survey shows 28% of is a good chance it will be introduced in vested in advancing our digital and mobile Canadians use their primary bank’s mobile Canada, and likewise with Canadian initia- capabilities, including modernising our tech- banking service at least once a month and 17 tives being implemented in the US. TD’s core nology infrastructure and adding additional percent weekly. “For Canadians’ secondary digital principles are to focus on customers, resources and expertise to improve our agil- FI, the numbers are still high with 53% doing be true to its brand mission, and to be North ity and speed to market. This will enhance online banking at least monthly, and 18% American in view and mandate.” the customer experience and help us com- mobile banking at least monthly,” he says. As of April 30, 2015, TD had 9.3 million pete with players who weren’t encumbered In April 2015, TD came top in U.S.-based active online users across North America, with legacy systems.” digital analytics comScore’s Mobile Metrix and 4.6 million active mobile users compris- “Canadian banks were earlier adopters ranking of Canadian mobile banking prop- ing 2.8 million in Canada and 1.8 million of online banking than their counterparts erties including both browsers and apps. in the US. Enhancements to digital banking elsewhere,” says Lian Zerafa, a partner in comScore estimates that TD had 2.8 million capabilities resulted in record U.S. online KPMG Canada’s Financial Services practice. unique visitors in April 2015, followed by account openings and double-digit growth “But this meant that they are having to play RBC Royal Bank of Canada with 2.07 mil- in the number of active users of digital bank- catch up, as they have unwieldy legacy tech- lion, Scotiabank with 2 million, CIBC with ing services in the U.S. in 2014, TD said in its nology platforms dating back 15-18 years 1.9 million and BMO Bank of Montreal with 2014 annual report. that have been incrementally built on.” 1.4 million. “We continue to see positive, upward Mike Pedersen, TD’s group head, US Bank- trends in digital banking transactions across ing, said in the earnings call that, as a result TD Canada Trust our North American footprint,” says Khal- of customers banking on digital channels, TD In March 2015, TD’s Canadian subsidiary fan. “Mobile deposit is a good example of is seeing transactions in its US branches drop TD Canada Trust launched its redesigned this. One year after launching in the US in by six to seven percent a year. “That gives us mobile app for Android-based smartphones 2014, we surpassed US$1.3 billion in mobile an opportunity both to change and enhance and iPhones with an emphasis on ease-of-use. cheque deposits. We were able to leverage the customer experience and to become more “Our redesigned Canadian smartphone app this capability to be one of the first banks to efficient and more productive,” Pedersen said. incorporates extensive feedback from our offer mobile deposit in Canada six months “So the things you're seeing us doing, employees, customers and non-customers, ago, with similar success.” whether it's the heavy investment in digital gathered through focus groups, pilot pro- Khalfan says TD has experienced high or the optimisation of our store network, or grams and online discussions,” says Khalfan. transaction volumes with its envelope-free, the introduction of new smaller stores that “This allowed us to create a more engaging image-enabled ATMs. “Our entire ATM are focused on advice and sales as opposed to experience that allows users quicker access fleet was converted in the US two years ago transactions, is all a function of that.” to popular features such as the ability to to image-enabled deposit, and we will have Pedersen added that TD has decided not to view account balances discretely and with- completed the rollout in Canada by this sum- proceed with the opening of 16 planned new out having to login and to make one-touch

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payments. We also added capabilities such as submitting US bill payments – a first for a TD Canada’s enhanced mobile features include: Canadian banking app. TD Direct Investing clients can make trades and view real-time • Quick links: customers can access ity to add recipients straight from the quotes using the app. The way the app was TD’s most popular banking functions customer’s smartphone contact list. from the top of their home screen. redesigned allowed us to leverage our mobile • US and Canadian bill payments: TD platform to launch our TD app for the Apple • Quick access: customers can choose customers can submit US bill pay - Watch in April 2015.” to view their account balances with- ments from their eligible TD Cana- TD’s Canadian mobile banking customers out having to log in. dian or US dollar personal chequing who have downloaded TD’s iPhone app, can • Quick TD credit card bill pay - or savings accounts. Customers can view banking and credit card information, ments: this features the option to also add and manage Canadian bills as well as track stock market and investment pay via three pre-populated payment directly on their smartphone. portfolio activity, on the Apple Watch. amounts, as well as the customer’s • Direct investing features: TD Direct “For just under a decade, TD Canada Trust ability to type in a specific payment Investing clients can make trades and was behind the other big five Canadian banks amount. view real-time quotes, analyse port- in digital banking in almost every way,” Peter • Transferring money: sending an folio information with the new Heat Wannemacher, a senior analyst at Forrester Interac e-Transfer inter-bank person- Maps tool, and monitor investments Research, says. “Yet, despite being behind to-person payment via the TD app is and stocks with advanced, full-screen the others in mobile banking, TD Canada now simpler and faster, with the abil- charting. Trust never suffered from a major decline in overall customer satisfaction and brand perception. Customers were frustrated with someone in the branch said ‘you can do all leaders in their community and asked them TD’s digital offering but, if asked whether this on a smartphone,’ and helped me install to give the money to valuable causes within they liked TD, they always said yes.” the TD mobile app. So I leapfrogged TD’s tel- 24 hours. It then filmed surprised individuals TD came top in U.S.-based consultancy ephone and web banking and went straight receiving unexpected donations, displaying J.D. Powers 2014 Canadian Retail Banking to its mobile app. I get a similar customer the videos on the maketodaymatter website Customer Satisfaction Study in the Big Five experience using the app to going into the as well as a four-minute YouTube video, Canadian Banks category for the ninth con- branch. which has had over 5 million views. secutive year. Also, I use TD’s social media channel to get “With #MakeTodayMatter, TD was try- “In the last two years, TD Canada Trust quick answers, and have bought more bank- ing to do a good thing, but it created a social really started to up its game and did a lot ing products from TD since going mobile by media campaign that, as a by-product, gener- of work on its mobile banking app,” says using the app. TD’s Canadian social media ated views,” says Greer. Wannemacher. “This culminated in the channel is very closely aligned to the bank’s TD’s US subsidiary TD Bank operates TD March 2015 launch of TD Canada Trust’s brand and its other channels, and is very cus- Helps (www.tdbank.com/tdhelps), a man- totally rebuilt mobile banking app which is tomer-centric and responsive.” aged social community providing financial now much stronger.” information and guidance to US consumers. In Forrester Research’s May 2015 ranking Social media On TD Helps, people can ask questions of the top five Canadian banks’ mobile offer- “TD is an example of a bank trying to make about a wide range of personal finance top- ings, TD came third after the joint number social media more than just a tool to generate ics and receive answers from TD Bank spe- ones, CIBC and Scotiabank, and number two sales,” says Stephen Greer, an analyst in US cialists and other consumers. “TD Helps BMO. RBC came fourth. consultancy Celent’s banking group. “The specialists take a unique and personalised “TD wanted to ensure its digital offering trap most banks fall into is that social media approach when answering consumers' ques- reflects its high level of customer brand loy- becomes another way to try to sell products. tions, understanding that people want real, alty and that its mobile experience has the At that point, the message gets lost to con- tangible answers to their questions,” TD says. same feel as its branch banking experience,” sumers, because they just shut off the valve.” “We continue to see growth within the TD says Wannemacher. “Every bank pays lip ser- TD is adept at making the bank relatable to Helps forum, and are currently answering vice to that concept, and TD has tried harder the community, says Greer. “The best exam- thousands of questions a month,” says Khal- than most banks to implement it. Also, TD ple of this was TD’s social media campaign in fan. started to enhance its digital sales platform 2014 to honour long-time customers, hand- one and a half years ago and it’s now pretty ing out money when people used in-branch Agreement with Moven strong. For example, it lets digital shoppers ATMs, direct depositing into user accounts, In December 2014, TD signed an agreement save and retrieve their application.” and posting selfies,” he says. “The video TD with New York-based Moven for the exclu- TD is using IntelliResponse (www.intellire- made of people getting gifts at its ATMs went sive Canadian rights to Moven's real-time, sponse.com) virtual agent software to answer viral and received north of 11 million views. mobile-based money management app. TD customers’ questions on its Canadian digital It was just a feel-good story that made a huge said that the Moven app will operate along- banking platform. “The only drawback with impact for a relatively little investment.” side the TD mobile banking app and provide TD’s IntelliResponse implementation is that Another example of TD’s innovative use customers with the ability to manage their customers really have to go and look for the of social media marketing is the #MakeTo- spending habits at every transaction by link- information they want,” says Wannemacher. dayMatter online advertising campaign it ing their TD banking activities in real-time to “I think TD’s new Canadian mobile app is launched in October 2014, featuring a video their savings goals. very good,” says Osak. “As a TD Canada that went viral (maketodaymatter.td.com). Moven works with both conventional customer, I used to visit my branch to do all For the campaign, TD gave $30,000 each to card-based and mobile wallet transactions, my banking transactions, and then one day 24 people in the US and Canada who were giving consumers instant feedback via mobile

6 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 6 24/08/2015 16:18:18 Retail Banker International DISTRIBUTION: TORONTO DOMINION

alerts on their spending activity, telling them As of January 2015, TD had over 2,800 n CANADA MOBILE - APRIL 2015 how much they are spending on different cat- ATMs in Canada. TOTAL UNIQUE VISITORS egories and how recent transactions compare to past activity. The U.S. Total mobile audience 17,460 “Offering a personal financial management TD entered the U.S. market in 2004 with the (browser and app) (PFM) app like TD is doing with Moven purchase of Portland, Maine-based Bank- Business/finance – banking 9,529 helps create stickiness for a bank,” says North. It then acquired several other banks 1 TD Canada Trust 2,817 Ed O’Brien, director of Mercator Advisory including Commerce Bancorp and became 2 RBC Royal Bank of Canada 2,073 Group’s Banking Channels service. one of the largest regional banks on the East “Following the deal with Moven, we're in Coast and the fourth-largest in Massachu- 3 Scotiabank 2,004 the process of adding real-time money man- setts. 4 CIBC 1,934 agement capabilities to the TD Canada Trust TD Bank had 1,302 branches in the US in 5 BMO Bank of Montreal sites 1,445 mobile app,” says Khalfan. “This new capa- April 2015 across the Northeast, Mid-Atlan- 6 Desjardins 861 bility will help customers be better informed tic, Metro D.C., the Carolinas and Florida, 7 Capital One 599 on how they use their money and empower compared to 1,165 branches in Canada in them to improve their financial wellness with April 2015. TD uses Twitter to promote new 8 American Express 562 each spending decision they make.” branch openings in the US, says US-based 9 President’s Choice Financial 480 marketing advisory firm Media Logic. 10 National Bank of Canada 302 All of TD Bank’s ATMs in the US are Smart ATMs Source: comScore In January 2015, TD announced that it is image-enabled, which means that when cus- testing “smart ATMs” at selected locations tomers deposit a cheque, the receipt includes in the Greater Toronto Area, with the ATMs a picture of the cheque. network. initially being installed in four branches. “The Canadian banks that have acquired Instead of tellers, the pilot branch has staff The ATMs incorporate enhanced self- US banks have also acquired their technol- members known as financial service associ- service technology including the ability to ogy infrastructure, which may be at a dif- ates, trained to take customers through a withdraw bills in various denominations and ferent starting point from their Canadian variety of banking services, from obtaining deposit cheques using image-enabled tech- infrastructure,” says KPMG’s Zerafa. “This new debit cards to learning mobile banking nology. They feature a more intuitive user means they can introduce new technologies features to enquiring about mortgages. In interface, with larger font and touch screens in the US which they can’t easily roll out in addition, the associates can handle typical for ease of use, and the option to get on-site Canada.” teller transactional functions. help from branch staff. In May 2015, TD Bank extended its US “The Canton Crossing store has been very Feedback from users will be used to deter- footprint through a deal with retail ATM well received by customers,” says Khalfan. mine the desire for access to additional capa- operator Cardtronics to place the TD brand “In fact, a non-customer came in on the first bilities and ensure the new technology is on ATMs in 143 Walgreens pharmacies. The day and was the first person to use the new meeting customers' needs, TD says. deal marks the first time that TD Bank has ATMs. The customer was so impressed that Four branches were he could choose cash denom- chosen as initial test “The customer was so impressed that he could choose cash inations that he immediately sites based on their high denominations that he immediately opened an account with us” opened an account with us. volumes of over-the- The store’s ATMs are gen- counter and traditional ATM transactions, deployed ATMs within a retailer's store net- erating significantly more over-the-counter defined peak service periods, and as having work, reflecting a focus on providing con- transactions involving tellers, and deposits an ideal floor plan to accommodate smart venient banking options to its customers, TD represent the highest percentage of total ATMs, which are located at the end of tra- said. TD also signed a deal with Cardtronics ATM transactions compared to any other ditional teller counters as well as in common to place the TD brand on Cardtronics ATMs store.” spaces. deployed at Corner Store locations in Atlan- "Customers visiting the branch for routine tic Canada, Eastern Ontario and Quebec. Mobile account-opening transactions will be able to enjoy a faster TD Bank launched a mobile account-open- level of self-service, while those who need Branch pilot ing functionality in August 2014 enabling assistance with more complex matters will In October 2014, TD Bank launched a US customers to open personal banking be served more efficiently, as our customer pilot of a small, teller-less branch in Canton accounts using their smart phone at TDbank. service representatives will have increased Crossing, Baltimore featuring three advanced com. capacity to attend to more specific customer ATMs performing some of the functions usu- Designed and customised for mobile needs," said Jim Grimmer, TD’s vice presi- ally conducted by tellers. The ATMs are able devices, the functionality can be used to dent, North American ATM channel. to dispense bills in $1, $5, $20, $50 and $100 open chequeing, savings, money market, or “Initial overall feedback has been quite denominations and can be programmed to CD accounts by simply accessing TDBank. positive to the Smart ATMs,” says Khalfan. handle multiple-check deposits or commer- com using an Android-based smartphone or “Customers repeatedly tell us that they really cial deposits. iPhone. “TD Bank's mobile account-opening like the ability to choose withdrawals in mul- According to the Philadelphia Business application has been well received by custom- tiple denominations and the easy to use touch Journal, the pilot branch is 2,275 square feet ers,” says Khalfan. “In general, we’re seeing screen. We’re still completing our analysis compared to an average size of 3,000 square an increase in overall smartphone usage both and evaluating customer and employee feed- feet for other TD Bank branches. Depending in new account applications as well as for back, so it's too early to comment on rolling on customer response, TD Bank may roll out overall US banking activities, as more cus- out the Smart ATMs.” similar teller-less branches throughout its tomers conduct their finances on the go.” <

www.retailbankerinternational.com August 2015 y 7

RBI 716 Aug.indd 7 24/08/2015 16:18:18 ANALYSIS: DIGITAL Retail Banker International

NBC to expand nationwide via digital National Bank of Canada, the sixth largest Canadian bank, plans to use digital channels and sales technology to expand its customer footprint across the country from its Quebec base. It expects to generate incremental revenues of C$500m ($393 million) by 2018 as a result. Robin Arnfield writes

he theme of National Bank’s personal and commercial banking investor day National Bank of Canada key data on 1 May 2015 was that the Montreal- 2.3 million retail customers T based bank is focusing on expanding its retail presence not just in its home prov- 135,000 business customers ince of Quebec but in key regions across Can- ada. “We expect total revenues coming from 8,500+ (including 1,300 outside Quebec) employees outside of Quebec to represent over 40% 450+ branches of our revenues this year in 2015,” Louis Vachon, National Bank’s president and CEO, 2,515 ATMs (including 931 owned by National Bank of Canada) told investors. “This is a new historic high Source: National Bank of Canada for revenues generated from outside Quebec.” “We can meet the diverse needs of all our clients across Canada through multiple chan- respectively up by 40% and 30%. “This ery channels and marketing, whereas Nation- nels, branches, business centres, our mobile implies that we not only continue to increase al Bank has a holistic, integrated approach. sales force, call centre and digital channels,” our reach, but are doing so geographically,” “When we designed our marketing and oper- said Diane Giard, National Bank’s execu- Leggett said. ating model, we spent quite some time ana- tive vice president, Personal and Commercial lysing the friction points in our competitors' Banking. Technology investments models,” she said. “(Other banks’ model is National Bank has made substantial invest- that) each product line independently decides Growth in digital channels ments in technology to enable its expansion on its own individual client strategy as well as Karen Leggett, National Bank’s executive vice plans. Its technology spending rose by a com- on marketing strategy. president, Marketing and Corporate Strate- pound annual growth rate (CAGR) of 10.6% This creates an excessively siloed approach gy, said that, as a result of deploying a new from C$145m ($114m) in 2005 to C$269m to the client and results in a tendency toward mobile platform, National Bank has seen a ($211m) in 2014, with a large share being singular product push, rather than a holis- 57% year-on-year increase in mobile banking devoted to personal and commercial banking. tic client-centric needs-based approach. In transactions and a 32% increase in mobile In September 2008, National Bank designing our new model, we eliminated active users in the last 12 months. announced its One Client, One Bank stra- those friction points through deliberate struc- “Our new mobile infrastructure enables tegic vision, which focused on transforming turing of the marketing team. (software) reuse across all platforms, which the bank’s technology, processes and human The innovation in our client-centric model will reduce our time to market,” said David resources to ensure a more customer-centric is in the actual structure itself at two levels. Furlong, National Bank’s senior vice presi- approach. According to Giard, One Client First, it's an end-to-end integrated model that dent, Marketing, Experience Delivery and One Bank resulted in efficiency gains of 2-4% leads with a client strategy team at the fore- Transformation. and a 7-8% CAGR in net income before tax front that is secondly underpinned by pow- Using its new mobile infrastructure, between 2008 and 2014. erful data-driven analytical tools as well as National Bank launched two iPad apps in National Bank is building on the founda- talent to anticipate, intercept and respond to January 2015: NBC mobile banking and tion of One Client, One Bank to take the client needs.” MyIdea, which is intended to help customer bank further, Leggett said. “We’re on our way to put in place an inte- plan short-, mid- and long-term projects such grated omnichannel model for marketing and as home renovations, travel or retirement. Integration channel delivery,” Jean-François Cadieux, Once a customer has used MyIdea to create “Bank-wide, we grouped together all of our National Bank’s chief advisor, public affairs, a plan, they can request help from a National client experience, brands, marketing activities, told RBI. Bank expert. campaigns and offers, all of our direct chan- National Bank is making substantial invest- “Our iPad (mobile banking) app is ranked nels, including mobile, ATMs, online and the ments in its data capabilities and analytics the number one financial services app in Can- full suite of capabilities within digital and so it can become more proactive in meeting ada by Apple users, with 4.5 out of 5 stars,” data,” said Leggett. “This is a major next step its clients’ needs. “We are one of only two Furlong said. in the evolution of our One Client, One Bank Canadian banks that have recently deployed On National Bank’s English-language site strategy to bring customers more directly into a (big) data discovery platform,” Leggett said. nbc.ca, traffic was up 55% year-on-year at the boardroom, so to speak.” “This platform will allow us to find new pat- the end of March 2015, while online credit According to Leggett, other Canadian terns in our client information and rapidly card and personal loan applications were banks have a siloed approach to their deliv- create models based on the combination of

8 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 8 24/08/2015 16:18:18 Retail Banker International ANALYSIS: DIGITAL

structured and unstructured data such as with National Bank’s pre-approved line of orchestration tool across all products and client demographic data, transactional data, credit campaign generating a 68% conver- channels. “This means that our mobile sales their entire digital footprint data through all sion rate and a credit card limit increase cam- force, our contact centre and our branches our platforms, all the call center data such as paign generating 50% in retail and 40% in will have exactly the same profile information why clients call and when they call, all our commercial. about a customer,” Furlong said. “They will fraud (data), all our collections data, all our see all the offers the customer has historically behavioral data, client complaints data and Real-time optimisation been given and see the next best action for purchased third-party data.” National Bank is moving to real-time that customer.” According to Furlong, the bank’s big data optimisation in its digital campaigns. “We're “We're going to integrate the leads orches- platform, which was implemented during its deploying a productivity-enhancing campaign tration tool's videoconferencing and docu- second quarter ending 30 April 2015, is able automation platform that will dramatically ment-sharing capabilities and other collabo- to model 50 million transactions against 2.2 increase our contact rate and efficiency,” said ration tools,” said Furlong. “As an exam- million customers in two minutes to deter- Furlong. “Through process redesign, we've ple, if National Bank has an Ontario-based mine the next best offer for an individual gone from about 12 campaigns a year to agricultural lending specialist and a client in customer. about 160, and this (campaign automation) Saskatchewan with a very specific need, the platform will bring us to 300. Also, based on Saskatchewan-based commercial account Digital sales detailed analytics of client behaviour on our manager will start a videoconference, share National Bank has recently implemented digital properties, the platform will allow us all the client documentation, and integrate intercept functionality to increase digital to dynamically optimise clients’ interactions the client and the specialist into a single con- sales. This means that, when a client logs on live. The result is that we can better target our versation.” to National Bank’s apps or its website, or car- offers to clients and give them the offer they Furlong said National Bank plans to ries out product research online, the bank pre- want when they need it.” improve (sales) close rates by leveraging its sents them with relevant offers. Leggett said In the near future, National Bank will cross-channel architecture to deliver person- an example of how National Bank uses inter- begin integrating third-party digital data to alised experiences in a multichannel environ- cepts is enrolling customers for e-statements. improve its sales prospecting capabilities and ment. “At ATMs, we need to be able turn all “We rolled out new e-statement function- to have a better knowledge of its customers. our incoming transactions into a sales oppor- ality in January 2015,” Leggett said. “With “By 2018, we will have created a single inte- tunity,” he said. “We're going to expand our our traditional marketing activities, we were grated data ecosystem with a complete view ATM network and expand our sales reach. In initially averaging about 1,000 new (e-state- of our clients and potential clients,” Furlong 2016, we will rebuild our entire ATM fleet, ment) enrollments per day. said. “So we're going to get real-time segmen- moving to touchscreens, imaging, and new “Twice per week, we ran our intercept tation and personalisation, in effect one-to- interfaces.” functionality and went from 1,000 new one marketing.” (e-statement) enrollments on each of those Furlong cited the example of one of Nation- Straight-through processing days to between 4,500 and 5,000 on each al Bank’s customers who uses its mobile appli- Jacques Chamberland, National Bank’s vice day when we ran the intercept functionality. cation, and who gave the bank permission to president, Business Strategy and Efficiency, So our savings have improved dramatically see where they are at any given time so it can Personal and Commercial Banking, said that, by just deploying that functionality during a improve its service levels. “We've just given like its peers, the bank is digitising its forms two-day period each week. We plan to apply that client a new mortgage,” he said. “We can and processes. “We’re also driving a supe- this functionality in a multichannel effort by tell by using geolocation technology that they rior customer experience by using straight- capitalising on National Bank's inbound and have walked into a furniture store. We also through processing in our top 20 processes outbound customer interactions, which are know they are nearing their credit card limit. such as account payments and retail lending growing quickly and are projected to respec- So we can push a credit card limit increase services,” he said. tively reach 300 million and 10 million by through the mobile app. The client clicks ‘yes’ “Today, if you were to open a (National 2018.” and walks out of the furniture store with a Bank) account, you would have to walk into In 2014, National Bank had 4 million out- washer and dryer that they need.” a branch, fill in some forms and photocopy bound customer interactions. your driver's licence as a proof of identity,” Leggett said National Bank is investing Cross-channel Chamberland said. “This package would heavily in its call centre capability to capital- By 2017, National Bank aims to have then be sent to our processing centre, and ise on its new intercept functionality. “Mar- deployed a cross-channel suspend and resume processed manually with our IT systems. ket-leading banks drive approximately 30% functionality. “What that will allow clients With straight-through processing, the client of new sale units out of their call centre,” she to do is start transactions in one channel and using a mobile app within the comfort of his said. “National Bank is currently at 7%, but finish in another,” Furlong said. “For exam- own home will be able to complete an appli- it's growing rapidly month-over-month with ple, a new homebuyer has filled out a mort- cation form online, take a picture of himself the multiple deployments of (call centre) gage application online, but she needs to be and his driver's licence, and with simple capability. We've also historically had a lower advised on what's the best rate for her: is it OCR (optical character recognition) technol- annual contact rate out to our clients than the five-year fixed or five-year variable? So, ogy, our system will process the information our competitors’ industry average, which is rather than lose all of the information she’s within seconds, and the account will be open between 4 and 7% per year. We've been pro- already put into the system, she saves it, calls without further human interaction.” actively growing this indicator over the last our contact centre and get the mortgage spe- By using straight-through processing and year through the rigorous application of our cialist online and they simultaneously see the automating processes, National Bank will new marketing model.” same application information to get the right add C$30m ($24m) to its bottom line by Leggett said early campaigns have dem- advice for her and submit the application.” 2018 and improve the “wow factor” for its onstrated exceedingly high conversion rates, National Bank plans to deploy a single lead customers, Chamberland said. <

www.retailbankerinternational.com August 2015 y 9

RBI 716 Aug.indd 9 24/08/2015 16:18:19 REVIEW: DIGITAL BANKING Retail Banker International

Mobile-only Mondo hoping to make its mark

You wait years for one new bank to launch and then a whole bunch tries to at once. However, Mondo Bank feels it will be the only one to stand out from the crowd. Patrick Brusnahan speaks to its CEO, Tom Blomfield, about the mobile-only bank, the path to launch and why exactly it’s different to the rest

tom. Fidor. Starling. These are just waiting two weeks to tell me they’ve charged collecting and for what purpose. We’re very a few of the new challenger banks me? Why aren’t they telling me three days cognisant of that. If they don’t want to have attempting to enter the British mar- before? I can speculate why they do that, but that collected, it’s absolutely their choice. ket. A common differentiator is the I think we deliver something that really pulls Secondly, once it’s collected, their own data A banking into the 21st century.” is their own property. We might do stuff on focus on being a ‘mobile-only’ bank with no branch presence. Why are so many new an aggregate level, but we will not sell per- entrants taking this approach? So how is Mondo different? sonal data to third parties. Tom Blomfield, chief executive and co- Mondo is fully incorporated within a mobile “The future of personal data is not flog - founder of Mondo, believes it to be a com- app and a debit card. After any transaction, ging it. If banks become a conduit for selling bination of several different factors. a notification comes up on the consumer’s adverts, we will lose customer trust.” Talking to RBI, he says: “The thought smartphone and your bank balance is Mondo Bank’s system is built from scratch process behind Mondo was really a com - updated. to ‘be fit for purpose’, something that large bination of three or four trends. Massive Blomfield says: “There’s no ‘Balance’ and retail banks cannot do. smartphone penetration has led to customer ‘Available Balance’. Imagine if Gmail made Blomfield says: “Banks cannot do this expectations of digital services transforming. you wait overnight to see the e-mails you stuff. Their systems date from the 1970s. A This is an age where you can click a button received that day.” smartphone is more powerful than the main- on your phone and a black cab turns up in Transactions are displayed on a graph frames from the 1970s. It’s not surprising two minutes or you can go onto Amazon, within the app to show your expenditure they can’t deliver this stuff. They are creak- order any product in the world and it’ll and income over each month. Based on ing under the burden of that legacy. Many arrive the next day. This real-time access spending patterns, it can predict if you will banks spend over £1bn ($1.57) a year to to information and total control has trans- overspend in the month. keep their legacy software alive.” formed the way people think about eve - Every transaction, whether it is a purchase rything. Banks have not reacted to that in or a payment, is tagged with various forms Ready to launch? any sense whatsoever and, to be frank, they of information, such as where you spent the There a few hurdles left before Mondo fully suck.” money and into categories, such as groceries enters the market. If all goes well with the As an example, Blomfield describes how or transport. Utilising this, the app can tell regulators, the bank could be in the palm of his bank statement has changed over the you how much the consumer has spent over consumers’ hands within six months. This is years. He describes it as a ‘static list of trans- time on certain things and in certain places if the funding is there, Blomfield stating that actions’ which was first delivered via post, with the touch of a button. around £15-20m more is needed. then the bank’s website then smartphones. According to Blomfield, this can lead to However, who will join Mondo Bank? He considered that to be ‘not transforma- crucial insight into your spending. He says: Switching bank is easier than ever in the UK, tion’, but merely the same product on anoth- “Insight is using smart analysis of the data to yet the switching rate was a dismal 2.4% in er channel. tell you something. Say a transaction with 2014. Another crucial factor has been the shifts an energy company, it can tell you that the Blomfield says: “The reason I think people in the regulatory practices in the United bill is 30% higher than normal. Maybe I’ve don’t switch is twofold. There is no differen- Kingdom, shifts that Blomfield sees as ‘posi- been overcharged. Maybe it’s a water bill tiation between banks. Even with the new tive’. Becoming a bank is ‘not a simple pro- that’s leapt 100%, maybe there’s been a leak. challenger banks, I don’t think they’re truly cess, but achievable now’. It’s that kind of insight that can vary from differentiated. You’re going to get screwed However, the key factor according to that to things like you’re spending more on by NatWest or Lloyds, choose your poison. Blomfield is the ‘personal frustration’ that coffee and bagels this month. “Also, getting a bank account is an incred- banks can cause. “If it’s ten days before payday and you’re ibly painful process when you compare it to He says: “The only time I heard from running out of money, we can turn your installing Whatsapp or signing into Face- my bank was an e-mail a month ago say - account or card off for free or we can give book. If you can make a product that is truly ing ‘Here is your pre-notification of charges. you an extended overdraft.” differentiated and loveable and you can The e-mail says to go to the website to view Data is a key area of concern for many make signup 30 seconds, you’ll see a very it and it said two weeks ago, I exceeded my consumers. While it can be used to the con- different changing rate. Our biggest focus is overdraft. It waited two weeks to tell me sumer’s benefit, it can also be sold off to making something people want.” and now it’s charged me. their annoyance. Blomfield concludes: “We’re really “In a world where we have these smart - Blomfield says: “Fundamentally, it’s the focused on making something that a few phones where we can send information in customer’s data. A lot of people have got people love rather than something mediocre milliseconds 24 hours a day, why are they very sensitive about what data people are that people will be ambivalent about.” <

10 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 10 24/08/2015 16:18:19 Retail Banker International COMMENT: CLOUD BANKING

The missing link: How technology can help banks navigate the evolving regulatory landscape

The retail banking industry is evolving at an exponential rate. From growing customer expectations and shifting demographics to increasing regulatory requirements and disruptive technology, the forces reshaping the industry are coming from all sides, argues Donald Ross, SAP’s director of strategic accounts

ithin a decade, retail banking will is available on demand to satisfy the FCA. assessment management tools, which allow look very different. Banks which The regulations will also reverse the ‘bur- managers to provide certification, record are able to sucessfully navigate den of proof’– meaning individual senior proof, and demonstrate the validity and the complex industry landscape managers will be presumed responsible until reliability of high-stakes tests. Lastly, social W banks can demonstrate all reasonable steps technology platforms, enable employees to will be those that are able to simplify the decision-making process, enabling better to avoid a breach were taken. solve problems collaboratively, build con- choices to be made in response to almost In this way, the new SM&CR will impact sensus and improve decision making. continuous change. That said, less than 20% the fundamental operations of banks and Cloud computing is also a key enabler of of executives feel prepared for the future. is an area in which technology can play a Big Data analytics, allowing information Technology has a central role to play here. significant role in driving compliance. Cru- to be adequately stored in the cloud and A case in point can be found in the compli- cially, with less than 12 months to put meas- retrieved in near real-time. Combined with ance and regulatory challenge the industry ures into place and the threat of a potential a single platform across all silos, this would faces, and which has become a fundamental 7-year jail sentence, plus unlimited fines for allow banks to base regulatory reporting operational focus for banking institutions banks, the stakes have never been higher. and real-time business decisions on reliable since the global financial crisis of 2008. information from a single source of truth. As concerted efforts continue to be made Legacy issues to restore public faith in banks and ensure Banks cannot simply ‘bolt on’ new offerings The missing link greater resilience in the banking system to to legacy processes and systems, as these are Its no secret that the banking industry has reduce the risk of repeat crashes in the future, no longer reliable or agile enough to support traditionally been slow to adopt technology. technology can ensure that compliance new and constantly evolving requirements. Despite broad uptake in other industries, projects both satisfy regulators and enable Simplifying existing systems and introduc- only 16% of banks had rolled out cloud banks to run better. ing new technologies is crucial to reduce the computing in 2014. risks associated with the new SM&CR and The current regulatory drive is more than Strengthening accountability the ever-changing regulatory landscape as a just an initial storm in response to the 2008 One important area set to have far reach - whole. One of the ways in which forward- crisis. The demands, such as shifting custom- ing implications for the sector is the new thinking banks are starting to achieve this is er expectations, that have brought us to this Senior Managers and Certification Regime through cloud computing. point will remain, and continue to evolve. (SM&CR). The regulation, introduced by Today’s banks are awash with data, and the Prudential Regulation Authority (PRA) Banking in the cloud technology is enabling them to access this and Financial Conduct Authority (FCA), With the technology burden being carried information more quickly and in a way that will attempt to combat breaches in the future by the service provider, enabling banks to provides real time insights. This paves the and tackle the culture that is widely viewed work around the limitations of their own way for better decisions, based on more to have contributed to the 2008 crisis. systems, a cloud delivery model offers sim- accurate, precise and instructive informa- Set to come into force on 7 March 2016, plicity, speed, and cost savings to processes tion, and can help banks remain competitive. the new SM&CR regulation places greater that were previously on premise. Banks that prove successful over the next accountability on senior managers by hold- A flexible and agile banking environment decade are likely to look very different to ing them responsible not only for their own can quickly respond to new business needs, those that flourished pre-2008. actions, but also for the shortcomings of all enable more interactive collaboration, and From e-banking to micro-credit success employees involved in regulated activity or provide senior managers with a holistic view stories, this is an industry in which technolo- whom the regulators view as performing a of their business. gy is truly enabling a re-imagination of tradi- “significant harm function”. Cloud HR applications, for instance, can tional practices and agile, simplified delivery. Consequently, banks must take on the enable firms to take a single view of employ- At the same time, the age-old requirement responsibility for regulating their own work- ees throughout their lifecycle with the bank, of banking organisations – trust – is once force and face a dramatically enlarged pool critical given they are to be vetted annually again a focus. of employees to monitor and certify ‘fit and under the SM&CR, and any disciplinary Banks, large and small, need to reestablish proper’ on an annual basis. action reported to the regulator. that trust and the need to do so creates an With strict documentation also required These applications can also include per- opportunity for new market entrants. to record the allocation of responsibility to formance and goal managament solutions But with the right systems and analytics in individual senior managers, banks will have that can enable banks to record decisions place, banks, new and old, have never been to be much more stringent in the way they and communicate goals to the employees in a better position to make the right deci- track and report to ensure that accurate data responsible for their delivery. Learning and sions today and in the future. <

www.retailbankerinternational.com August 2015 y 11

RBI 716 Aug.indd 11 24/08/2015 16:18:19 INNOVATION: WRIST WATCH BANK APPS Retail Banker International

Watch Yourself: the banks moving onto your wrist First you had banking move from a branch to your computer. Then it moved from your computer to your pocket. Well, there’s no need even to reach down there anymore as it has now landed on your wrist. Patrick Brusnahan talks to CaixaBank and Scotiabank about their respective usage of the Apple Watch

n the same manner of Apple aficio - when the first iPhone was launched, we A spokesperson for the bank told RBI: nados rushing to purchase the Apple expect Apple’s first venture into the segment “We launched the Balance Peek feature on Watch, financial institutions have been to spur the market enormously.” our mobile banking app earlier this year as rushing to launch their applications on Scotiabank brought its mobile banking we found more and more customers looking I app to wearable technology as soon as pos- to check their account balances quickly and said device. CaixaBank is one of the banks to be at the sible. Its Quick Balance app was the first of easily without having to go through a full forefront of this new digital drive. The bank its kind to be released on smartwatches in login process. has more than four million mobile service Canada. The app allows its consumers to “The update last month to deliver Balance customers, 3.4 million of whom check their bank balance and Peek on Apple Watch was a logical progres- regularly use its Linea Abierta up to five of their most recent sion to support this new wearable technol- application. CaixaBank pro- transactions from their pre- ogy to provide customers with another way cesses 120 million mobile ferred Scotiabank account. of easily keeping track of their finances transactions per month, All of this is without need- wherever they are. We’ll continue to look at 33% of which are fund ing to log in or use a pass- ways we can enhance the service we provide transfers. Currently, the word. to customers in this space.” Spanish lender has 70 When speaking to As with every new development in tech- applications avail- RBI, Jeff Marshall, nology, changes must be made. Everyone able, which have Scotiabank’s Vice remembers the days of tedious websites been downloaded President of Self- unfriendly to mobile phones. Transferring more than 10 mil - Service Customer apps from device to device can take a lot of lion times. Experience, said: work. It also created the “We wanted to However, Scotiabank’s experience was dif- maiden banking focus on the most ferent. Marshall said: “It was actually quite application in Spain active things that seamless and painless for us. Our first foray for the smart weara- people do. The into this space was last fall. We were the ble device. Focused most common first bank in Canada to launch an app on on a branch and thing people do the Samsung Gear 2 so we had some experi- ATM search tool, it on our mobile ence with what we wanted the customer and allowed consumers app is check their user experience to be so when it came to the to find exact loca- balance and their Apple Watch, we were in a good position to tions of the nearest recent transactions. mirror that and migrate our thinking onto branches and cash “We also wanted to the Apple device.” machines. protect the consumers This includes map dis- from a security perspec- Success rates play and shows information tive and the type of transac- It is still early days for the Apple Watch and on each branch, including tions they would be willing nobody quite knows how successful smart- available services, opening to do in a non-authenticated phone-based apps will be for the banking hours, contact numbers and environment. The watch pre- industry. accessibility information. sents their balance and their last Marshall said: “It’s still new, but the Apple Talking to RBI, a spokesperson from five transactions. It's a quick balance feature Watch sold more on the first day than what CaixaBank said: “Harnessing innovation so there's no extra authentication required Samsung had sold in the year prior. (An esti- that provides added value to clients is part of at all.” mated 957,000 American shoppers ordered the CaixaBank spirit. This mindset is what also adapted its mobile bank- the watch on launch day while the Android has driven us to become the very first bank ing app for smartwatches early on in the Wear watch sales were stuck at 720,000 by to create an application for the Apple smart- trend by adapting their ‘Balance Peek’ fea- the end of 2014.) We’re dealing with a small watch. The service will allow us to provide ture onto the wearable device. This app group of early adapters, which is exciting, all information required by clients directly allows Tesco Bank customers to check but the numbers themselves are not yet sig- on their wrists, with no need to remove their their balance without having to log-in. So nificant. We’re more enthused about where smartphones from their pockets. far, it has been a relative success with over the numbers are going to go. “Wearable devices are currently on an 110,000 customers activating the app and “I can’t even project the number because upward trend. As we saw with smartphones close to three million usages. it’s really going to depend. The more peo-

12 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 12 24/08/2015 16:18:24 Retail Banker International INNOVATION: WRIST WATCH BANK APPS

ple give back to the ecosystem, the higher adoption will be in terms of people want- ing the watch. Only time will tell how the early adopters will trickle down into more mass adoption. I would say it’s too early to tell. The good thing about Apple is that they certainly put a lot of muscle behind things when they want.” CaixaBank said: “Some forecasts indicate that between 5% and 10% of iPhone users will buy a smartwatch. Extrapolating these numbers to the Spanish market, we estimate that 10% of our mobile customers will own a smartwatch by the end of 2015, whether they are Apple or Google devices, and will use our applications for wearables. “By the end of five years, and assuming that these devices improve over successive versions to better suit user requirements, with longer battery life and greater inde - pendence from other devices, it would not be far-fetched to expect this figure to rise to 20% of our mobile users. However, it is dif- will tell us what they are comfortable with. new customer adoption.” ficult to forecast an accurate figure.” They have a choice. They do not have to While it remains hard to tell if bank - have the data in their watch. I would say Watching for the future ing applications will succeed on smart - that we err on the side of privacy when we While the services on smartwatches are lim- watches, this is not a particular concern for make these decisions. We’re very careful.” ited at the moment, Scotiabank sees much Scotiabank, merely another channel for its CaixaBank said: “One limitation for any more potential for the future. consumers. financial app on mobile devices is the need Marshall said: “We’re looking at the other Marshall said: “Here’s the thing: we have to ensure airtight security. It is vital that the transactions that customers would be will- a large number of mobile banking users. For same security levels are upheld regardless of ing to do outside of keying in a PIN num - us, a smartwatch app is not necessary, but whether the app is used via a smartwatch, ber. We’re looking at things like an ATM we want people to be able to access their mobile device or computer. This extends locater and maybe being able to move funds banking on whatever device they want. beyond providing the actual technical secu- between accounts. We’re somewhat agnostic on whether they rity; we must also ensure that clients perceive “The other exciting part that I’m really use the wearable or not because it’s just an transactions via smartwatches to be fully enthused with is that back in first launch- enhancement to this existing [mobile] app. secure. ing ATMs or online banking, we were giving It’s for the customer’s convenience. It’s not a “Meanwhile, the services offered by such customers a service they didn’t know they metric we’re going to actively drive. devices must adhere to prevailing legislation, needed. Now, early adopters are telling us “We wanted to make sure that if people which is true of all channels, and will have to what they want and they’re feeding us the have the watch, we have a strong function- evolve in step with technology to offer new ideas, which is an exciting time to be in. ing app for it. We’re not saying we’ll only be and improved services.” We’ll listen to our customers in that regard.” successful if we hit a number; it’s not some- CaixaBank believes that the smartwatch As technology companies grow and gain thing that we’ve lost a lot of time thinking. itself might even be too limited to have an more attention, from the massive conglom- We want our customers to know we have effect on the financial sector. The spokes- erates such as Apple to the small fintech it. The reality is if somebody has the Apple person continued: “Nonetheless, wearable start-ups, banks may be pushed towards to Watch, they’ll be checking if their bank has devices have two obstacles to overcome sidelines. It is not inconceivable that banks an app and we can say, ‘Yes, we do’.” before they can become firmly established could end up as mere pipelines in the finan- on the market: longer battery lives and inde- cial industry, rather than the face of it. Limitations and struggles pendence from other devices in order to On that point, Marshall concludes: “Yeah, With financial applications on phones, tab- work on a standalone basis.” but I think that’s okay. For me, it’s really lets, or even smartwatches, are becoming The Apple Watch and its banking apps are, about the customer and the user experience. easier and more frictionless, the risk increas- according to Marshall, unlikely to be a differ- Too often, banks were guilty of it being es. With some apps not even needing to be entiator. He said: “I would not say it’s one of about the bank. We tried to make our cus- logged into anymore, for the sake of the user those things that people are going to change tomers better bankers and those days are experience, how can a bank make sure that banks for. I think that would be overly opti- gone. this ease of use is not taken advantage of? mistic. Most of our efforts have been taking “Now, we want to drive the best cus - Marshall is well aware of this puzzle. He some credit for demonstrating our innovation tomer experience and give them choice; said: “We wanted to be cautious about the in the marketplace. It’s been communicating they demand it. It’s definitely a win for the transactions we were willing to do outside to our existing customers. We haven’t made consumers and it’s good for us, because if of the authenticated environment. We were any significant efforts in pushing it as a mass customers are happy and have more choice, comfortable with showing balances and marketing message. We haven’t gone down they are more loyal and, ultimately, more recent transactions. In time, our customers that road because we don’t [see it] driving profitable for us.” <

www.retailbankerinternational.com August 2015 y 13

RBI 716 Aug.indd 13 24/08/2015 16:18:25 STRATEGY: REMITTANCES Retail Banker International

How much does it cost to Xend money abroad? Why, however much you want it to Remittances prop up the world’s most fragile economies and the high fees associated with these payments have created an opportunity within the FX market, which digital disruptors are seizing. Franchesca Hashemi quizzes Xendpay’s CEO, Rajesh Agrawal, about his new ‘pay what you want’ money transfer model

he emergence of digital-first companies “This creates a huge cause to lower high fees, Yet Sub-Saharan Africa remains the world’s is reshaping the FX model. Nowadays because the market helps with the mainte- most costly area to send money to, with an remittances represent twice the global nance of families, setting up enterprise, gen- average fee of 9.74%, according to the World aid budget, according to the World erating profits and improving social mobility.” Bank. This particular region epitomises the T The World Bank is one of few financial Bank, which recorded that $583bn was trans- high degree of market concentration, ampli- ferred in 2014. Of this figure, 75% ($436bn) institutions that regularly collate up-to-date fied by exclusivity agreements that allow flowed to developing countries, proving the remittance statistics. Its second quarterly MTOs and local agents a significant foothold. magnitude of the remittance industry. report for 2015 found the average global Yet parts of the continent are showing political Rajesh Agrawal, founder and CEO of remittance cost was 7.68%. This is a stable resistance, with governments in Ghana, Nige- Xendpay, a challenger money transfer service result in comparison to the first quarter of the ria, and Senegal leading the way. launched in 2011 that allows customers to pay year (7.72%) but still a long way off from the Contrastingly, South Asia is the least cost- what they want – if anything - in fees, believes 5% global average goal championed by lead- ly region (5.74%), according to the World offering interbank exchange rates, which are ers of the G8 and G20, commonly referred to Bank’s figures for Q2 2015. effectively a zero spread on the FX, will force as ‘5x5 Objective’. Agrawal says: “The market is developing the industry’s main players to change tactics. It has been widely reported that migrants and there are two key points to remember: Talking to RBI, he says: “We set up Xend- spent $1.8bn in remittance fees in 2014. This one is the reach has got wider, so people who pay with a single objective: to lower the cost is enough to pay for the education of 14 mil- never had banking facilities before now have of remittances around the world. lion primary pupils in the region, according to access. The second point is technology lowers “I remember the day we launched and eve- the Overseas Development Institute (ODI), an costs.” rybody thought I had gone mad. I was inter- independent think-tank based in London. In viewed on CNBC and I was told that no-one 2014, the same body accused Western Union Unbanked Nations would pay because technically they don’t have of imposing a 12% per $200 ‘super tax’ on The potential for mobile-centred companies to to. But I disagreed. I have huge faith in man- African remittances. rejig FX services is palpable. kind, and it has proven me right.” Western Union strongly denied the claim, Agrawal reasons that in African and Asian and argued that its fees averaged 5%-6% over countries, where mobile phone penetration Competition and Controversy the last four years while specific transfer cor- is very high but banking penetration is low, According to Agrawal, 90% of Xendpay users ridors are not targeted. digital-first removes the need for banks. pay something while 70% choose the “recom- Speaking to RBI, a Western Union spokes- He said: “It is a smaller part of our business mended” remittance charge. This is usually person stressed that a comparison between but a growing one. Countries like India and between 0.3% - 0.4% and can be amended so itself and challengers should be considered Kenya are really embracing the technology. that a customer pays less or more. on a product-for-product basis: “Western “The day we launched Xendpay’s website it Transfer incentives are cementing microfi- Union’s pricing varies among the 16,000 cor- was available in seven languages. Now there nanciers’ place in the market, creating more ridors in which we operate and the cost fac- are vast amounts of transfers taking place competition and providing consumers with tors the complexity of the marketplace.” from France to other “Francofiled” countries greater choice. This is vital for the FX, which Key determiners of Western Union’s pricing in Africa. It is a huge market. has typically been dominated by banks and include market dynamics, customer product Yet Xendpay’s CEO warns that regulations money transfer operators (MTOs) like West- value and customer distribution value. The are getting tighter, and while social media and ern Union and MoneyGram. Yet both com- spokesperson continued: “It is well-doc- technology enable a level of compliance, these pany’s revenues, according to the Wall Street umented by development institutions and modern tools are also part of the problem: Journal, for Q2 2015 (up 1% to $1.41bon for researchers that remittance costs generally “Unfortunately, due to terrorism, there are Western Union while MoneyGram fell 3.7% have been decreasing for more than a decade strict controls around sending money to par- to $358.8m) reflect the remittance market’s as part of the natural evolution of a develop- ticular countries. As a result, many people are stunted growth, thought to pick up in 2016, ing market.” suffering. For example, there are restrictions due to weak European and Russian econo- for people sending money to Somalia, yet mies. Costly Corridors and Cheaper Alternatives 50% of the country’s GDP is through inbound Bricks and mortar networks have been Today, three quarters of the World Bank’s 227 remittances. known to operate complex and costly infra- recognised country corridors have an aver- “This isn’t a new corridor, it is an obvious structures. This, according to Agrawal, age remittance cost of less than 10%. It is a one. Whenever there is a time of crisis, remit- restricts financial inclusion: “The majority of marked difference compared to six years ago, tances see a surge. remittances are sent to countries with a lack of when only half the corridors operated below “It creates a challenge, but for me this isn’t social and economic infrastructure. the 10% rate. just about my business. It is a mission.” <

14 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 14 24/08/2015 16:18:25 Retail Banker International STRATEGY: REMITTANCES

Q & A

Franchesca Hashemi speaks to Maria Quattri, economist and co-author of Remittances: the huge cost to Africa in money transfer fees The money transfer industry is worth we propose in the report flow from our (Ghana, Nigeria, Tunisia and Senegal) $538bn. Yet ‘unethically expensive’ fees, as assessment of the underlying problem. to revoke these restrictive business UN diplomat Kofi Annan put it, charged Fundamentally, the problem comes down arrangements. by traditional MTOs are causing a socio- to three related issues: lack of competition, We also propose that African economic uproar. insufficient transparency and restrictive governments should allow micro-finance In 2009, leaders of the G8 summit in business practices. institutions to enter the remittance market, L’Aquila made a pledge to lower the global FH: What are your key FX not least because only 11% of the Sub- average cost of remittance from 10% to 5% recommendations? Saharan African population (aged 15+ and in 5 years. The goal has not been achieved – excluding South Africa) has an account at a current figures show a global average remit- • Legislation requiring money transfer formal financial institution. tance fee of 7.68%. operators to declare in a transparent We are still waiting for clear progress on However, as a result of political interven- fashion the charges imposed through the three points above. This helps explain tion, the World Bank monitors the cost of foreign currency conversion rates. why the 5% target by 2014 has yet to be remittances, publishing quarterly reports This is an issue addressed in the Dodd- met. while providing a comprehensive analy- Frank legislation in the US. In this sis of the money transfer market. One of regard, we wonder whether the Com- FH: Could Britain spend less on overseas many solutions, championed by NGOs and mission could introduce an amend- aid if remittance fees were cut? In effect, touched on by the main MTO players, is ment to its proposals on Interchange allowing migrant workers to send more of increased competition. Fees and Card Payments (MIF) to cap their money back home? FH: The global community pledged to cut these excessive fees, including those MQ: Overseas Development Assistance remittance fees to 5% by 2014. This didn’t associated with exchange rate spreads. and remittances are not mutually exclusive, happen, why not? • Reviews by financial regulators to they are reinforcing each other. ODA plays investigate whether or not money a vital role for development, even more so MQ: The Overseas Development Institute’s within the Sustainable Development Goals (ODI) research on remittance charges transfer operators (like WU and MG) are securing unreasonable margins on framework. Aid could guarantee that by Kevin Watkins and myself looked at a opportunities (to health and education for range of restrictive business practices on the transfers to Africa by exploiting their market power. instance) are provided to every member part of Western Union and MoneyGram. of a community in a developing country, It really strikes us that this is an area in • A call for African Governments to and not only those that are remittance- which regulatory reform in the EU and revoke exclusivity agreements that recipients. the US, coupled with parallel reforms bind banks and agents to certain in Africa, could make a huge difference. money transfer operators. These are FH: What do you think of challenger Several central banks and competition sole-use agreements which stipulate transfers services, such as Xendpay that offers a ‘pay what you want model’, in authorities in Africa have taken up the issue that once a bank or agent works with, comparison to traditional MTOs? and the L’Aquila targets showed political say, Western Union or MoneyGram, commitment, but the 5X5 target has yet to they cannot work for other provid- MQ: WU and MG cover two thirds of all be met. Our sense is that far more could be ers. This in turn restricts entry into pay-out locations. This indicates a high done. the market place. We support the ini- degree of market concentration. The lack The policy recommendations that tiatives of some African Governments of market competition limits the ability of customers to influence and reduce remittance costs. 5 Most Costly Country Corridors ($) Xendpay, as well as M-Pesa, WorldRemit South Africa to Zambia 19.35 etc. are all attempts to provide customers with more choices, and open the South Africa to Malawi 17.95 remittance market to competition. They Singapore to Pakistan 17.45 are all welcome if the information provided Switzerland to Serbia 17.16 to customers is clear and transparent, if customers do not incur hidden costs and if South Africa to Botswana 17.12 customers can access the same service (eg. mobile money transfers) from a variety of 5 Least Costly Country Corridors ($) providers offering that service. Saudi Arabia to Pakistan 1.82 The Cost of Sending Money Abroad as of 3 July 2015 (see tables, left) Singapore to Bangladesh 2.16 UAE to Pakistan 2.55 The data shows the world’s most expensive and inexpensive regions to send money to. Saudi Arabia to Nepal 2.66 It covers 227 corridors from 32 remittance- UAE to Nepal 2.73 sending countries to 89 receiving countries. Source: World Bank The average is based on a transfer of $200, transaction fee and exchange rate margin.

www.retailbankerinternational.com August 2015 y 15

RBI 716 Aug.indd 15 24/08/2015 16:18:25 REPORT: PACKAGED ACCOUNTS Retail Banker International

Are banks delivering the full package? A report from Assurant Solutions and YouGov, ‘Packaged bank accounts and Young Adults 2015’, asked over 500 UK consumers on PBAs about their relevance and usefulness in the market today. Despite more options than ever, 69% of respondents are not considering switching accounts. Patrick Brusnahan reports

he fourth such report conducted by does suggest that there are selling opportuni- placed to offer those accounts. However, YouGov represented 500 UK adults ties if a packaged can offer these products at over four in ten packaged bank account aged over 18. It included two boost a lower price than purchasing them separately. owners don’t feel they could get better value T surveys, one of 18-24-year-olds hold- Overall, mobile phone insurance was con- elsewhere. ing a packaged bank account, and one of 25-34 year-olds holding a packaged bank “There were three products which outweighed all others; travel account. There were 263 packaged bank account owners aged 18-34 and 366 current insurance, mobile phone insurance and car breakdown cover” account holders aged 18-34 who did not have a packaged bank account. sidered most likely to be relevant, but pack- On the other hand, there was more cer- aged bank account holders are significantly tainty regarding customer service and bank Packaged vs. Current more likely to say that a product is relevant accounts. As to be expected, the majority of bank than current account holders without pack- The report stated: accounts were held by the bigger banks in the aged bank accounts. “Over half of PBA owners select banks for UK, with NatWest taking the largest share of Mobile phone insurance was also consid- best customer service, falling to 35% of cur- current accounts at 19% and Santander hold- ered most valuable: rent account owners. These percentages are ing the largest share of packaged accounts at • 43% of all packaged bank account reversed for those stating they don’t know. 16%; not a surprise considering the success of holders called it very valuable The good news for banks here is that poten- its 123 Account. • 65% of respondents believed it to be tial competitors are not ranked highly; the There was a large level of satisfaction with valuable to some degree. bad news is only one-third of current account bank accounts recorded. The reaction was not as high for travel customers (who, after all, also have a rela- • 84% of packaged account holders insurance or car breakdown cover: tionship with banks) choose them.” were satisfied • 64% and 60% of packaged account Banks are definitely considered more trust- • 82% of current account holders were holders regarded them as valuable, worthy than their competitors, despite the also satisfied. respectively constant stream of negative publicity towards • While these are very close levels, it In terms of engaging with banks, for all them since the global financial crisis. How- changes when looking at the top two reasons for contact, online was the preferred ever, once again, a large chunk of respondents levels of satisfaction (Levels 6 and 7, option. This included opening an account, didn’t know who was the more trustworthy out of 7) in the survey. upgrading an account, making a query about between banks, mobile phone providers and • In these tiers, 64% of packaged account benefits, managing account benefits insurance companies. account holders were satisfied com- and utilising account benefits. The only chan- pared to 55% of current account nel where there was some competition was in Claims handling holders. account opening, where online was preferred On who is best at dealing with claims This level of satisfaction might have led to by 46% of respondents, but face-to-face regarding a packaged bank account, insur- 69% of respondents declaring that they had received 42% preference. ance companies actually tied with banks. not considered switching accounts. A fairly surprising result was the lack of The runaway winner though was ‘Don’t The report stated: “While ownership of a preference for mobile apps as every reason Know’ with 39% and 49% of packaged PBA does not appear to make a customer any received a less than 5% approval rating. Few bank account owners and current account more or less likely to switch, those who do consumers actually preferred to utilise apps owners respectively. own such an account are more likely to be for banking engagement, despite their surge The report concluded: highly satisfied with their provider.” in popularity everywhere else. “Banks appear to be in a strong position, with existing PBA owners in particular sup- Giving the young what they need Potential threats portive of their providers. Perhaps most When it came to which products 18-34-year- While banks received the most support for important are the results regarding claims – olds had as part of their packaged accounts, providing packaged bank accounts, there is if claims handling ability is equally likely to there were three products which outweighed a lot of uncertainty. 41% of packaged bank be seen as good when comparing insurance all others; travel insurance, mobile phone account holders and 48% of current account companies and banks, but payouts are more insurance and car breakdown cover. The holders didn’t know. likely to be thought of as coming from banks, same three products came top when current With regards to current account hold - then the latter are likely to be seen as having a account holders were asked which products ers, this was nearly double the amount of more attractive PBA (or equivalent) proposi- they have owned, but at a lesser scale. This respondents that felt a bank would be best tion.” <

16 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 16 24/08/2015 16:18:25 Retail Banker International GUEST COMMENT: DAVID ARNOTT, TEMENOS

IT systems costing banks their business Believe it or not it is still not too late for banks to take up the challenge of the legacy system overhaul. However, writes David Arnott, CEO of Temenos, if banks don’t replace their old inefficient and expensive IT systems soon they will find themselves out competed, out performed and what’s more, out of business

anks are in the last sector to be potential saving, where IT departments still writing its own software and typically run between 3,500 and 4,000 it’s killing them. staff to patch and maintain their systems. On average banks spend 15% New IT packages can be customised of their total costs on IT; other sectors for regional and local markets, taking spend an average of 7%. This is crazy and into account different regulations and the it’s leaving them vulnerable to the more sophistication of the customers. They will nimble, more modern, more profitable allow the banks to launch new services, new entrants. effectively cross-sell using customer data, Companies like Lending Club, Trans- and offer robust 24/7 services, enhancing ferWise and Apple are already successful- their reputations. ly picking off high-margin business and Many of our clients come to us because leaving the dull, boring low margin stuff their systems just can’t cope anymore and to the slow moving banks. are deeply concerned about outages and compliance. Unfit for purpose Regulation is piling on the require- But that’s not all. The IT on which ments and the systems have to produce they are spending all this money is old, more and more reports, sliced and diced decrepit, and not fit for purpose. They in a myriad of ways. are spending a fortune just to keep it But they are also aware that new sys- together, ticking over – and sometimes tems will allow them to compete with the not even managing that. newer, fresher, players and develop new These systems certainly aren’t able to ing. Traditionally, the next generation would brands. Bank Leumi in Israel, for exam- help the banks grow. They fall over, don’t take on the family bank with their inherit- ple, recently launched an internet bank to talk to each other, keep data in silos, offer no ance; today they do not. which it is moving existing customers. real time visibility and just can’t compete in Instead they look for alternatives that offer the modern, fast banking market. phone, internet and real-time banking so that Modular systems Banks are sitting on significant systemic they can actively manage their own portfolios. Today’s modular systems mean that banks risk. For years they have been held together If just 10% of the billions inherited each year don’t have to rip it all out and start again. with sticking tape and today the risk of fail- leaks away, you’re in real trouble. They can upgrade piecemeal, doing mort- ure is significant – just remember how one Banks can no longer assume they will keep gages, then payments, then deposits. It’s less bank’s customers couldn’t take cash out at this money. Instead they must compete with risky and provides quick wins. ATMs last Christmas, and similar outages are the new players, deliver new services from Now is the right time to change. Today’s happening regularly across the sector. When robust platforms that don’t fall over, improve banks have gone through six years of restruc- this happens, the damage to the brand can be efficiency, leverage their customer data to turing and that process is largely complete. huge and given the changing nature of cus- develop cross-selling campaigns to capture Investors are starting to look for growth and tomers’ relationships with their banks, it can more of the business, and deliver real time new management teams are working out how also be very costly. account management. to deliver it. While today more people use banks than We’re about to reach tipping point where ever before, they increasingly have multiple Cost vs. savings those that are left behind will struggle to sur- relationships, picking those that offer them This means new IT. But who can afford the vive. They just won’t be able to compete. the best deal, the best service, or simply do bespoke systems they have always commis- It’s a no brainer. These new systems are cut- what they want when they want. sioned? Today, the solutions have got to ting costs, increasing revenues, building new The choice means customers are becoming be generic, off the shelf and customisable – brands and creating value. more and more fickle – the Capgemini 2015 which means much lower cost. With the sector priced for growth, banks World Retail Banking report indicates less Banks that have installed new generic that don’t install them soon will not only see than 50% of Gen Y customers are likely to software can cut IT expenditure from 15% profits slump, but share prices too. < continue with their primary bank in the next of their total costs to around 5%: one Asian six months. bank recently cut its IT headcount from 87 To give an idea of how much this is costing people to just seven. banks you just need to look at private bank- For Tier One banks this represents a huge David Arnott, Temenos CEO

www.retailbankerinternational.com August 2015 y 17

RBI 716 Aug.indd 17 24/08/2015 16:18:26 NEWS: DIGEST Retail Banker International

REGULATION RBI's consent. overall $290bn planned reduc- samples already stored within Banco Sabadell Also, banks are now not tion. a database. required to report details of The transaction, subject to Available on iOS and Android receives banking launching new mobile branch- regulatory approval, is expected phones, the app called Inge is licence in Mexico es, automated teller machines to close by June 2016. already in use by over 100,000 Spain's Banco Sabadell has (ATMs) or call centres. ING Netherlands customers. secured a banking licence in Under the new rules, banks SECURITY The app measures unique fea- Mexico, one year after start- need to ensure that customers BMO Harris Bank adds tures like shape of vocal cavities ing to offer funding in Mexico are informed well in advance fingerprint recognition and mode of delivering speech. through subsidiary Sabadell of the shift, merge, closure or Biometrics company Nuance Capital. conversion to avoid any incon- option to mobile app will provide the speech-recogni- The move forms part of the venience. BMO Harris Bank, Chicago tion technology for ING Neth- lender's broader expansion Banks also need to continue area's second-biggest bank by erlands. strategy, which is one of the pil- to fulfil the role entrusted to deposits, has added Touch ID The app also records and lars of its Triple strategic plan the merged, shifted or closed and Passcode options to its stores fraudulent voice activa- (Transformation, Profitabil- branches under government- mobile banking app. tions to improve security and ity and Internationalisation) for sponsored programmes and Touch ID will allow iPhone help reduce fraud. It serves as a 2014-2016. direct benefit transfer schemes. users to sign onto the bank's simple alternative to entering a Banco Sabadell managing "However, it may be noted mobile banking app using their pin or password. director Jaime Guardiola com- that banking activity- that is, fingerprint as a password. ING internet and mobile mar- mented: "We have been operat- deposit or loan business, cannot Passcode is a numerical pass- keting manager Jeroen Lose- ing in Mexico for 24 years now be maintained at both places, word which can be used by koot said: "Thanks in part to and this represents further pro- and the new location for part- Android users to access the app the inclusion of biometric appli- gress in our internationalisation shifting would have to be with- quickly. cations, we are able to make process." in 1km of the existing location. After signing in, customers banking faster, smoother and The commercial bank will ini- They (banks) may also spin off will be allowed to view their easier for our customers and tially concentrate on companies, certain activities such as gov- balance and recent transactions, improve access." and later on seek business with ernment business into separate as well as use the bank's mobile private individuals. branches at their discretion," cash technology. PRODUCTS The bank is scheduled to start RBI added. BMO Financial Group North Saudi Hollandi Bank commercial banking operations American channel strategy & rolls out new Shariah- by the fourth quarter of 2015 M&A solutions for digital channels compliant product through three branches, which HSBC to offload vice president Cesar Rainusso include Mexico City North, Brazilian arm to Banco said: "BMO Harris Bank is ded- Saudi Hollandi Bank has Mexico City South and Mon- icated to investing in technology launched a new Shariah-com- terrey. Bradesco for $5.2bn that makes the digital banking pliant product, known as Ready HSBC has agreed to sell its experience quicker, easier and Cash, to offer its customers REGULATION entire Brazilian business to Bra- more secure for our customers. flexible repayment options and RBI grants greater zil's private sector lender Banco "Recognising that our cus - usage. operational freedom to Bradesco in an all-cash deal tomers already have many pass- Touted as the first-of-its-kind worth $5.2bn. words to remember, the integra- product in Saudi Arabia, the Indian banks The sale of the Brazilian oper- tion of Touch ID and Passcode new product has been designed The Reserve Bank of India ations forms part of HSBC's simplifies the user experience to enable funding based on (RBI) has allowed the banks to strategy to optimise its global and securely enhances our each customer's needs as well as shift, merge or close branches in network and reduce complexity. mobile banking app." empower customers to manage urban areas without seeking its HSBC group chief execu - their finances with flexibility. prior permission. tive Stuart Gulliver said: "We SECURITY Saudi Hollandi Bank head of The central bank in a notifi - announced at our Investor ING rolls out voice- retail assets Bander Al-Samman cation on its website said that Update on 9 June that we were activated payments said: "Ready Cash will appeal the banks can now ‘shift, merge targeting a series of actions to to a wide range of customers, or close all branches except generate increased value for feature on its mobile including employees from both rural branches and sole semi- shareholders. banking app the government and semi-gov- urban branches at their discre- "I am pleased to be able to ING Netherlands has rolled ernment sectors who need fast tion’, without seeking its prior announce today a transaction out a new feature on its mobile and flexible access to financing permission. which achieves both a solid banking app that allows cus - solutions. However, the shifting, merger financial outcome and swift tomers to use their voice to "Ready Cash enables cus - or closure of the office needs to delivery of one of our stated access bank accounts and make tomers not only to obtain fast be reported at Department of actions." payments. access to financing but also pro- Banking Statistics of RBI. The deal is projected to con- With this app, customers vides a full flexibility to select Further, RBI has allowed the tribute to the Investor Update can now log into their bank a repayment option that suits banks to shift some activities action to reduce the company's account, check balances and their financial circumstances from a branch, due to space or risk-weighted assets (RWAs), make transfers using their voice. and all with no early repayment rental restraint without seeking amounting to $37bn of the It compares users' voices with charges.

18 y August 2015 www.retailbankerinternational.com

RBI 716 Aug.indd 18 24/08/2015 16:18:27 Retail Banker International NEWS: DIGEST

"Applications can be made offices. we're determined to build a Reuters. online through the SHB website, Post-merger, one current bank the country can be proud According to the central bank, call centre or by visiting one of Metro director will join the of." the capital gap was created as SHB nearby branches." board of directors at FNB. Probusinessbank “carried out a The transaction, approved by DISTRIBUTION high-risk policy connected with DIGITAL the board of directors of both Nedbank Group placing its monetary means in Orange plans to companies, is expected to wrap deploys NCR’s teller low-quality assets.” provide mobile up in the first quarter of 2016 The central bank deputy following the receipt of regula- cash recycler chairman Mikhail Surkov said banking service in tory and shareholder approvals. South African lender Nedbank that the Russian lender’s liabili- France Commenting on the deal, Group has chosen 250 units ties exceeded its assets by at French telecoms group Orange FNB CEO and president Vin- of NCR's teller cash recycler least RUB67bn ($1.04bn). is planning to offer mobile cent Delie, Jr. said: "We are to speed up transaction and “The hole was caused by the banking in France by early very excited about this transac- enhance branch banking expe- presence at the bank of various next year, in partnership with tion and the significant scale it rience. financial assets that had signs a French bank, said the group’s adds to our franchise in Central NCR Cash Recycler 11 has of being fictitious,” Surkov was CEO Stephane Richard. Pennsylvania. been designed to automate the quoted as saying by the news Richard, in an interview to "The meaningful size of this acceptance, authentication and agency. French daily Le Figaro, said: transaction will allow FNB to validation of bank notes as well As per the second-quarter “Orange has the legitimacy to leverage the significant infra- as make the notes instantly accounts, Probusinessbank become a bank: it’s got a strong structure investments we have available for dispensing to cus- managed about RUB27bn brand, 1,000 selling points and made in the expansion of our tomers. ($420m) in retail accounts and 27 million clients.” product offerings and risk man- This gives tellers more time deposits. Richard said that the project agement systems. Addition- to interact with customers and The cancellation of Probusi- would be managed by Laurent ally, Metro is a well-established also allow them to cross-sell nessbank’s license comes in the Paillassot, former general man- institution with an excellent additional products and ser - face of an economic contraction ager of LCL bank, who joined customer service culture and vices. in Russia created due to low oil Orange in September 2014. He an attractive deposit base with Besides, NCR's cash recyclers prices and Western sanctions however, did not disclose the modern branches in prime loca- also bring down cash deposit over the Ukraine crisis, in turn name of the banking partner. tions." transaction times by up to 50% resulting in deterioration in The French telecoms giant and cash dispensing transaction banks’ assets. already operates a bank in REGULATION times by up to 40%, claims the Poland, which caters to 100,000 UK offloads 5.4% stake company. DISTRIBUTION customers. in RBS for £2.08bn NCR country manager for CIMB Group receives The Poland banking unit, South Africa Dimitri Kanello- licence to offer trading as Orange Finanse, The Britain government has poulos said: "There is a grow- was launched in October 2014 kicked off a long-awaited pri- ing trend for financial institu- banking service in through a partnership between vatisation of the Royal Bank of tions to transform their branch Vietnam between Orange and Poland’s Scotland Group (RBS) by sell- banking experiences with new Malaysian lender CIMB Group mBank. ing a 5.4% stake in the bank for technologies. NCR is playing a has received in-principle approv- £2.08bn ($3.24bn). critical role to assist banks dur- al from Vietnam’s central bank M&A UK Financial Investments ing this transformational jour- to establish and operate a 100%- FNB agrees to buy (UKFI), which handles the ney with our next-generation owned subsidiary in the country. Metro Bancorp for government's stakes in banks, solutions to unlock amazing The bank intends to offer a sold the stake at 330 pence per customer experiences. wide range of wholesale, com- $474m share, far below the 502 pence "The NCR teller cash recy - mercial and consumer banking FNB Corporation, a diversified at which the government bailed cler's transforms branch experi- products and services in Viet- financial services company in it out. ence by enabling tellers to inter- nam. Pittsburgh, Pennsylvania, has RBS was bailed out by the act with customers face-to-face CIMB Group’s first branch agreed to acquire Harrisburg- UK government with £45.5bn without any boundaries." in Hanoi is expected to be fully based Metro Bancorp, the par- of taxpayers' money in 2008. operational by the third quarter ent company of Metro Bank, in The move will reduce the gov- REGULATION of 2016, during which the lender an all stock deal worth $474m. ernment's holding in the bank Russian central is expecting to secure the full Under the terms of the deal, to 72.9% from the current bank revokes operating banking licence. shareholders of Metro will 78.3%. Commenting on the approv- receive 2.373 shares of FNB RBS CEO Ross McEwan Probusinessbank’s al, CIMB Group CEO Tengku common stock for each com - said: "I'm pleased the govern- licence Dato’ Zafrul Aziz said: “This mon share of Metro. ment has started to sell down its The central bank of Russia has approval allows us to expand Following the completion of stake. It's an important moment decided to withdraw the licence our presence in Vietnam, a the deal, FNB will have $19.6bn and reflects the progress we are of Russian mid-sized lender country that has shown resil- in assets, including $14.7bn in making to become a stronger, Probusinessbank for failing to ient growth, backed by a large total deposits, $13.7bn in total simpler and fairer bank. There comply with minimum capi - young population and growing loans and over 300 banking is more work to be done but tal requirements, according to middle class. <

www.retailbankerinternational.com August 2015 y 19

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