What Are People Watching?

May 2016 Issue 725 www.retailbankerinternational.com

WHAT ARE PEOPLE WATCHING?

TV BANK ADVERTISING: WINNERS AND LOSERS

● DISTRIBUTION: North American Mobile Wallets ● DIGITAL: Moven ● EVENT: RBI Asia Trailblazer Summit 2016 ● TECHNOLOGY: Artificial Intelligence

RBI 725.indd 1 22/04/2016 16:34:06 Multichannel digital solutions for ﬁ nancial services providers

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IE RBI final design.indd 1 17/09/2015 11:21:32 Retail Banker International EDITOR’S LETTER

CONTENTS 2 TECHNOLOGY: ARTIFICIAL INTELLIGENCE Has account switching Edwin van Bomme,chief cognitive officer at IPsoft, considers the impact that artificial intelligence could have on switched on? the banking sector, both in the front- and back-ends 3 DISTRIBUTION: NORTH AMERICAN MOBILE WALLETS Robin Arnfield reports on the wide ake a bow Santander, Halifax and bills for £3 a month. variety of mobile wallets available in Nationwide, the big winners in the North America. Despite a wide selection latest account switching stats Efma and Capgemini report on customer on offer, customers still feel undersold on this solution T A monthly record 124,000 plus UK experience customers switched their current account in As RBI goes to press, the fifth annual World 6 MARKETING: TV ADVERTISING March, highlighting the success of a new ad Retail Banking Report from CapGemini and Patrick Brusnahan speaks to Nielsen and examines the effectiveness of campaign at the start of the year promoting EFMA comes to hand. banks’ adverts in the UK. While some the seven day switching initiative. As ever, the report is a good read. have made strides in this arena, there Only around 2.5% of current account Some positives: retail banks have acceler- are still a few with a lot to learn users switch per year; by contrast 3.4 mil- ated their drive towards optimising the cus- 8 DIGITAL: MOVEN lion UK customers switched their electricity tomer experience and that has resulted in an Robin Arnfield talks to Vincent Bahk, Moven’s Chief Customer Officer, about provider in 2015 and 2.7 million switched increase of 2.9% in the CapGemini Custom- the New York-based neo-bank’s offering gas provider. er Experience Index (CEI). and how it hopes to change the face of the sector However, for the first quarter of 2016, As for some negative findings-take your 10 AL DIGIT : BRACKET 309,678 switches took place, up 20% com- pick. Key takeaways include one killer. Alexander Atkins investigates how the pared to the fourth quarter of 2015 and 10% Despite the rise in the CEI, profitable cus- uses of the public cloud have developed more than the same period last year. tomer behaviour has improved only margin- and how financial institutions are The ad campaign was badly needed with ally. beginning to see its true potential account switching rates remaining stubborn- The report also discusses the highly topical 11 DEBATE: DIGITAL BANKING CLUB ly low. Overall, only 1.06 million switches issue of fintechs and their relationship with In the first Digital Banking Club debate were completed in the 12 months to end financial institutions, the topic for debate by of 2016, banking experts assembled to discuss what the financial sector in March 2016 compared with 1.13m in the the by at the upcoming Digital Banking Club the UK could learn from its European prior 12 months. Live Debate in June. brethren. This ranged from the value And the winners: well, the most up to date According to CapGemini, fintechs are of a high quality branch network to the problems regarding regulation. Patrick data on a bank by bank basis covers the three making increasingly significant inroads with Brusnahan writes month period to end September last year and customers, yet the vast majority of banks 14 EVENT: RBI ASIA TRAILBLAZER SUMMIT Santander is the big winner by a distance. admit they are not adequately prepared to 2016 Between July and September, Santander manage this emerging threat. The RBI Asia Trailblazer Summit 2016 attracted an additional net 51,000 customers The report states that nearly two-thirds of – hosted in Singapore – featured panellists from start-ups and banks operating ahead of Nationwide (+15,000) and Halifax the 16,000 retail banking customers polled across the region, who discussed the (+11,000). are now using fintech products or services, banking model of the future in Asia. Xiou Ann Lim reports on the event The only other brands to show a net gain and are much more likely to refer friends and 16 OPINION: TEMENOS were TSB (+3,300) and Tesco Bank (+600). family to their fintech provider (55%) than Ben Robinson, Temenos’ chief Biggest losers: well RBS NatWest lost over to their bank (38%). marketing and strategy officer, 2,000 per week (down more than 27,000 for Nearly two in three of the banks execs examines how PSD2 might have a more the quarter) just ahead of Barclays (-25,000) surveyed by CapGemini say that they need positive effect than most people assume and Lloyds (-10,000). to view fintechs as partners while only 18% 20 GUEST COMMENT: ALLIED WALLET Switching figures released in the third and say that they plan to acquire fintechs or their EUROPE fourth quarters this year will be of signifi- technology. Steve Wilson, managing director of Allied Wallet Europe, argues that the cant interest given recent product changes at It will be interesting to see how the stats in only way to receive huge rewards is to Santander and RBS. this report compares to the attendees at the take huge risks. Otherwise, what’s the In January, the monthly cost of Santand- DBC debate when they are polled. point? er’s 123 current account more than doubled from £2 to £5 a month while last October, RBS launched a 123 type product, the RBS Reward account. The latter product gives Douglas Blakey customers 3% cashback on seven household [email protected]

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RBI 725.indd 1 22/04/2016 16:34:11 TECHNOLOGY: ARTIFICIAL INTELLIGENCE Retail Banker International

Can AI breathe new life into banking relationships?

Edwin van Bomme,chief cognitive officer at IPsoft, examines artificial intelligence and cognitive technology and whether it can make a difference in the ever-changing banking sector. With a more demanding consumer emerging in the industry, could this satisfy their growing list of needs?

etail banking is facing the deepest level With new capabilities that can optimise tunity in decades to establish new operational of disruption in decades. Shifting cus- value rapidly, banks have a fighting chance to models. Many of the reactive service elements tomer needs and a generation of mil- both compete and team with fintech entrants can be automated at a fraction of the cost. In R lennials resistant to traditional banking and disruptors that have quickly gained mass the back office, robotic process automation methods are challenging established models. appeal amongst customers of all groups. (RPA) is already being used to populate data After years of change, banks need to plan for a entry and increasing processing speeds for all fundamental rethink in order to thrive in a rap- Winning customer loyalty in the age of agile elements containing structured data. With idly digitised, globalised and data-driven world . start-ups other technologies and policies, this will lead Although consumer relationships in the AI will only be impactful if customers are willing to a radical slimming down of back-offices retail banking space have never been particu- to engage with it and that means understanding organisations. larly strong, a recent survey revealed that all how to leverage AI to meet changing customer With customer patience becoming ever four of today’s leading banks are amongst the preferences. Banks can learn from fintech com- shorter, always available service will become a ten least loved brands by millennial consum- panies who are growing fast in popularity by necessity in order to maintain customer loyalty. ers. Today’s generation is dealing with a dearth addressing these squarely. Analysing successful In the US, research shows that more than half of jobs and personal debt. As a result, today’s fintech initiatives shows that above all custom- of consumers will hang up after waiting on hold hyper-connected consumer associates personal ers want cross-platform, 24/7 responses, ease for 6-15 minutes while 25% will cut out of the finance with crowdfunding, virtual currencies of use, and low cost. Banks need to follow this call within the first five minutes. and online payment apps – rather than paper example in order to protect their profits, 60% Cognitive agents integrated in mobile apps cheques, bank branches and ATMs. of which are under attack from fintech players and websites are beating the convenience of The emergence of these fintech start-ups is according to McKinsey & Company. the current generation of apps and websites. A heating up competition across all industries. The advent of the internet has created the customer who has just lost his debit card can Against this backdrop, retention is paramount most educated financial services customers in immediately start a chat with the cognitive to success, making it critical for retail banks history. Millennials have access to constant agent to explain what has happened and have to reform their business models quickly or risk comparison information and alternative finan- the issue resolved without delay. losing customers and value. The largest banks cial solutions which have seized a consider- By contrast, existing apps would oblige the have announced aggressive cost cutting meas- able market share from more traditional FIs. customer to follow a much slower and rigid ures that promise to shave 20% of operations Winning the trust and loyalty of millennials, process, which might well not satisfy all the but they do so in a market that any will be however, is becoming more difficult. Increased specifics of that customer’s situation. Because heavily penalised by customers with multiple competition has made it harder to differentiate the cognitive agent can answer questions in alternatives. based on pricing or offerings alone. Custom- the same way as a human, the process is much ers around the world have reported increased more efficient for the customer. This hybrid AI supporting the workforce likelihood to leave, with 52.7% of millennial workforce equates to a more agile workforce. The key to transforming the finance industry is customers likely to switch their banks by 2016. So what is the result of tying cognitive and reliant upon the successful rise of artificial intel- Accessible anywhere at any time is the start- other AI developments together? It will be the ligence (AI) and cognitive computing. Financial ing point. Customers can open a bank account emergence of a fully automated bank that can firms are turning to machines to do the job in minutes with Bank Simple or get immedi- provide personalised service at scale. Clients humans have done for decades. In fact, there ate confirmation of a loan through Lending will be interacting in natural language with the has been an increase of more than 400 million Club. Both these services offer the same simple bank’s cognitive agents that are stand-by 24/7 people using intelligent digital assistants in the straight-through process that consumers have on their mobile. The bank’s financial backbone last five years alone. come to expect through other services. will be managed in a proactive fashion. Intelligent automation is not a quest to Fintech companies have generated fanfare By pairing retail banking with cognitive tech- replace people in the workforce. Instead, it is for introducing updated products and services nology, banks can launch first-of-a-kind servic- more about changing the way businesses oper- that improve quality-of-life and feature innova- es at a speed and cost unmatched by today’s ate by complementing and augmenting human tion. In 2014, an astounding 73% of millenni- current standards. Now, with a growing num- capabilities with intelligent machines. als stated they would rather handle their finan- ber of competitors, it’s important for banks to The McKinsey Global Institute estimates cial services needs with Google, Amazon, Apple, keep customer at the centre of their strategy. As that the economic impact of the automation of PayPal or Square than with their own bank. banks construct their digital future, they have knowledge work will reach $6.7trn annually an opportunity not only to revolutionise the by 2025. AI will make it possible to automate Seizing the competitive advantage efficiency of their operations, but to deliver an vast proportions of work and manage data at AI technologies have matured and are ready to entirely new level of AI-enabled superior cus- record speeds for a fraction of the cost. implement now. They offer the biggest oppor- tomer service. <

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RBI 725.indd 2 22/04/2016 16:34:12 Retail Banker International DISTRIBUTION: NORTH AMERICAN MOBILE WALLETS

Chase Pay to galvanise US bank mobile wallet market

Unlike their Canadian counterparts, US banks have held back from launching own-brand mobile wallets for proximity payments. But the mid-2016 launch of Chase Pay may well force them to offer mobile wallets or risk losing customers to JPMorgan Chase. Robin Arnfield reports

anadian banks have a lot of momen- Apple Pay has won 12 million monthly users based Desjardins, Canadian retailer Loblaw’s tum in payment-enabling their apps globally since its October 2014 launch, and banking subsidiary President’s Choice Finan- for proximity payments using NFC,” Android Pay has won five million monthly cial, and Scotiabank, along with the Ugo and “C Derek Colfer, Visa Canada’s Head users since its September 2015 launch. Suretap mobile wallets. of Technology and Digital Innovation, says. Samsung says five million registered Ugo, which is provided by UGO Mobile “CIBC was the first Canadian bank to launch users processed over $500m using Samsung Solution, stores consumers’ TD and Presi- a mobile wallet in 2012, followed by RBC, Pay in the first six months since its August dent’s Choice Financial credit cards, gift Scotiabank, TD and Desjardins Group.” 2015 South Korean and September 2015 US cards and loyalty cards on NFC-enabled By contrast, US banks were held back by launches. Android smartphones connected to the Rog- Softcard (originally Isis), a mobile payment JV However, transaction volumes are low for ers, Bell, Telus, Koodo Mobile or Virgin between US telcos AT&T, T-Mobile and Veri- Apple Pay and Android Pay because, unlike Mobile networks. zon. “US banks were slow to get off the ground Starbucks’ mobile wallet which combines Suretap is owned by a partnership – also in developing their own wallets, as originally payments and loyalty, they don’t give con- called Suretap – between Rogers, Bell and the only way they could do so was through sumers a compelling reason to change their Telus, each of which offers the mobile wallet. Softcard, whose owners controlled access to payments behaviour. “Once Apple Pay and As of March 2016, Suretap had been their customers’ handsets,” says Colfer. “Prior similar schemes offer the ability to redeem downloaded almost one million times. Over to Google buying Softcard in February 2015, rewards and loyalty points at the point 20 popular loyalty programmes, including US banks couldn’t get their proprietary pay- of sale, they will see significant growth,” seven of the top 10 Canadian programmes, ments apps onto customers’ smartphones.” Conroy says. can be stored on Suretap, along with CIBC “In the US, a significant challenge is the and Rogers Bank credit cards. “Still to come HCE relatively low distribution of NFC-enabled are debit cards, coupons and other offers,” Despite the advent of Google’s HCE (Host terminals for accepting Apple Pay, Android Suretap says. Card Emulation) software, US banks have Pay and Samsung Pay,” says Thad Peterson, partnered with Apple Pay, Android Pay and a Senior Analyst at Aite Group. “NFC ter- Samsung Pay instead of launching their own minal distribution is increasing, however, mobile wallets. Meanwhile, the Canadian and, as NFC achieves critical mass, we will banks have yet to make any announcements see a more rapid uptake in usage of these about support for Apple Pay, Android Pay schemes.” and Samsung Pay. Samsung Pay offers merchants who HCE stores mobile wallet credentials in haven’t upgraded their magnetic-stripe-only the cloud for Android devices instead of on a POS terminals to NFC/EMV the ability to smartphone’s secure element, meaning banks accept mobile payments using Magnetic don’t need agreements with telcos to put Secure Transmission technology. This sends Mobile Payments Reference Model their credentials onto customers’ handsets. magnetic signals from the customer’s device In 2012, under the auspices of the Canadian “RBC was the first bank in North America to the terminal’s card reader. “Samsung Pay Bankers Association, the Canadian bank- to launch its own native mobile wallet using is doing very well in the US because of its use ing industry published the Canadian NFC HCE,” says Julie Conroy, research director of mag-stripe acceptance technology,” says Mobile Payments Reference Model, a set of at US-based consultancy Aite Group. “So Crone. “Its usage reviews are pretty good, voluntary, open guidelines for the develop- far, in the US only Chase and Capital One and consumers use it at a lot of places.” ment of secure proximity mobile payments. have opted for native mobile wallets. There BMO Bank of Montreal, CIBC, National are US banks that want the consumer to stay Canada Bank of Canada, RBC, Scotiabank and TD in their own banking app and not to open One difference between Canada and the US published the Payments Security White Paper up another bank’s mobile payments app. But is the Canadian FIs’ and telcos’ collaborative in July 2015, which outlines the principles we haven’t seen much traction with Apple approach to developing an open mobile pay- for securing mobile payments in Canada, Pay and Android Pay yet, so a lot of banks ments environment. including open mobile wallets containing will sit on the side-lines to see what happens Canada’s three largest mobile carriers, Bell cards from multiple issuers. with Chase Pay after its launch in mid-2016.” Mobility, Rogers Wireless and Telus Mobil- “Canadian banks are focused on protect- ity, operate the EnStream mobile credentials ing consumers in the payments ecosystem,” The “Pays” management partnership. Canadian issuers says Hisham Salama, TD’s associate vice Richard Crone, CEO of US m-payments con- using EnStream to load customers’ creden- president of emerging payments. “You have sultancy Crone Consulting, estimates that tials onto their handsets include Montreal- to look at the safety and soundness of any

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RBI 725.indd 3 22/04/2016 16:34:13 DISTRIBUTION: NORTH AMERICAN MOBILE WALLETS Retail Banker International

n CANADIAN MOBILE PAYMENTS PRINCIPLES n MOST FIs BELIEVE THEY SHOULD OFFER DIGITAL PAYMENTS UNDER THEIR OWN BRANDS

Security – Maintain the level of security consumers and retailers have come to expect from payment service providers in Canada, equivalent to that FIs should continue to provide branded payment instruments in the digital world 18% 53% 26% 3% provided by EMV chip-and-PIN. Identify and protect (e.g. own digital wallet). consumers and retailers against technological and operational risks. FIs should acknowledge that third parties Strongly agree (e.g. handset manufacturers, merchants, Openness – Create and support an open mobile social media sites, etc) are better placed to provide Agree payments environment that allows consumers to digital experiences for customers and should 5% 43% 24% 22% 6% Neither agree nor disagree focus on ensuring that their payment Disagree credentials are available for customers to use pay for goods and services using any mobile wallet Strongly disagree wherever they want them. on any mobile device, leveraging the contactless payment terminals that many retailers already have. To make sure they are not disintermediated in payments, FIs should seek to curate digital Innovation – Support innovation in mobile experiences for their customers, e.g. provide 5% 24% 24% 45% 2% storefronts/marketplaces to sell third party payments by creating an environment that products and services (non-nancial). promotes consumer choice and is conducive to the development, evaluation and introduction of new 0% 20% 40% 60% 80% 100% products and services.

Source: “Payments Security White Paper,” (Canadian Bankers Association) Source: Celent Digital Research Panel, November 2015

products offered to consumers, starting with and isn’t shared. This technology is more secure TD identity and verification for customers trying than existing credit and debit cards.” In March 2016, TD became the first Canadian to digitise plastic cards.” Secure Cloud works with multiple mobile bank to use the HCE-based Visa Tokenization devices and platforms, as well as existing Service in its new Android mobile payments app. RBC contactless-enabled POS terminals. “We’re “The app has been very well received by RBC is leading the way in offering wallets pro- also well positioned for how payments will customers,” says Salama. “This is a testimo- viding added-value compared to plastic cards. be transformed with the Internet of Things,” ny to the seamless experience we designed “We constantly look for ways to improve Mantia says. using Visa’s network-based tokenisation our mobile payments platform so it pro - RBC has been experimenting with bio - service, which makes it easier for people to vides choice, convenience and flexibility,” metric technologies such as wearables. In use mobile payments. Also, while the pay- says Linda Mantia, RBC’s executive vice November 2015, it participated in a pilot ment app is part of our banking app, you president of digital, payments and cards. “In involving the Nymi Band, a wearable authen- can make quick payments using an Android Autumn 2015, we rolled out beta mobile gift tication device that uses the uniqueness of the widget without firing up the whole app. card capabilities in RBC’s mobile solutions. wearer’s heart to authenticate transactions. This means clients can load, purchase, gift “We’re investigating these technologies Canadian credit unions to another individual and redeem gift cards with our clients’ needs in mind, while ensur- From Spring 2016, Canadian credit unions using the RBC Mobile app. We’ll be adding ing the safety and security of their personal will be rolling out mobile Interac Flash pay- digital receipts to the RBC Mobile app soon, information,” says Mantia. “The pilot ments using Canadian debit scheme Interac’s allowing clients to have all their receipts at showed that early payment technology adop- Token Service Provider platform. their fingertips so they can track their pur- ters valued the concept of wearable payment The first four credit unions to launch the chases to reconcile their receipts with bank- devices. It aligned with our mobile strategy of mobile payment service are Affinity Credit ing statements.” providing choice, convenience and flexibility Union and Conexus Credit Union in Sas - Mantia says contactless cards are an efficient, to our clients while moving all the security katchewan, First West Credit Union in Brit- secure and simple way to pay at the point-of- into the background. Wearable, biometric ish Columbia, and Meridian in Ontario sale. “So, for mobile payments to take off, they payment technologies have the potential for should offer clients more than what they’re seamless secure payment authentication, as The US already carrying in their wallet,” she says. they can assure issuers that both the payment “In the US, mobile payments are being led by In March 2016, RBC updated the RBC information and client are present during the retailers, not banks,” says Crone. “Retailers Wallet for Android as a stand-alone app giv- transaction.” such as Starbucks, Dunkin’ Donuts and Sub- ing clients access to the wallet without hav- way have been very successful with mobile ing to use RBC’s mobile banking app. Cus- Scotiabank payments. Starbucks says 21% of its sales tomers can also use an Android widget to Since October 2015, Scotiabank’s My Mobile come via its Starbucks mobile payment app.” select their card and pay with one tap from Wallet has supported credit and debit card pur- One way banks can play in mobile pay- the home screen without having to sign in. chases on both Android and BlackBerry devices. ments is to embed their payments creden- RBC’s mobile payments are powered by RBC Scotiabank customers with eligible tials inside a retailer’s own app. “But issuers Secure Cloud, which keeps sensitive customer Android smartphones from Rogers, Bell, need to ensure their branding isn’t subsumed data secure in RBC’s HCE-based cloud, not Virgin Mobile, Telus and Koodo can tap inside the retailer’s app,” Crone says. “There on the customer’s smartphone secure element. their phone to pay for purchases up to need to be embedded links between the “Secure Cloud is based on (proprietary) tokeni- the contactless limit of C$100 ($76.53) at bank’s mobile banking and payment apps sation technology, where the secure token is a Interac Flash (Canadian contactless debit and retailer apps. A bank’s mobile bank - representation of a card and is used at the point- cards) or Visa PayWave-enabled terminals. ing app can use presence detection to detect of-sale to facilitate a payment, but the secure Customers can store their Scotiabank when a cardholder is in a Walmart store, for token itself doesn’t contain sensitive client data,” SCENE loyalty card in their mobile wallet to example, and offer a link to the Walmart loy- says Mantia. “That data resides with RBC’s earn and redeem SCENE points at participat- alty app for shopping, while providing the Secure Cloud instead of on the mobile device ing merchants. bank’s payment app for the actual purchase.”

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RBI 725.indd 4 22/04/2016 16:34:14 Retail Banker International DISTRIBUTION: NORTH AMERICAN MOBILE WALLETS

Research by Celent shows that most US ity. Five years ago, Chase was one of the first vides MCX’s platform. “We will soon sup- banks are more likely to engage with third- banks to launch mobile RDC, and every time port NFC for contactless payment through party wallets than explore their own HCE its RDC ad played on national TV, it opened our recent partnership with MasterCard wallets. In November 2015, Celent surveyed up 10,000 new accounts. Over half of US through integration with the MasterPass 42 US banks and credit unions for its US millennials will move their primary banking digital wallet,” the CU Wallet spokesper- Financial Institutions and Digital Payments: relationship to get a mobile payment capabil- son says. “We have also partnered with two Digital Research Panel Series Part 3 report. ity from a bank.” national merchant networks, Empyr and Celent senior analyst Zilvinas Bareisis says Chase plans to prepopulate all of its 94 Relevant Solutions, with a third that will be 61% of respondents already support Apple million credit, debit and GPR prepaid cards announced in the coming weeks, to provide Pay and the majority of the others are plan- in Chase Pay. “Chase Pay will be accepted consumer value through national and local ning to join the scheme. by the 49 major retailers such as Krogers, discounts and card-linked offers.” “When we asked the FIs about HCE, just Walmart and Wendy’s which belong to MCX 5% said they offer HCE wallets, 17% plan and account for over $1trn in annual spend. MCX to do their own HCE wallets and 32% are It will offer transactions which are cleared Walmart, Best Buy and Target launched considering them,” Bareisis says. “But 46% through Chase’s own processing network MCX in 2012 in order to develop a retailer- said they have no plans for HCE. The para- and have fixed-fee pricing with volume- centred mobile payment system focused on dox is that when we asked what they were based discounts plus zero merchant fraud loyalty and rewards that would cut the cost worried about in digital payments, they all liability and zero network fees. This means of card acceptance in its members’ stores. talked about the need to be top of wallet and merchants are motivated to accept Chase MCX subsequently launched the CurrentC not lose control, and all agreed that banks Pay’s lower-cost transactions.” mobile app which, as of March 2016, is in pilot should provide their own branded wallets.” “Chase did a deal with Visa according to mode in Columbus, Ohio with retailers such as which it carved out a portion of VisaNet Kmart, Sam’s Club, Sears, Walmart, CVS/phar- Chase Pay called ChaseNet so Chase can process trans- macy, Target and Wendy’s. MCX’s members The rollout of Chase Pay by Chase, the larg- actions in an Amex style closed-loop envi- collectively operate over 110,000 locations. est US card issuer, will awaken the bank- ronment,” says Bareisis. “Because Chase Pay “CurrentC provides consumers with branded mobile wallet market, says Crone. encompasses both issuance and acceptance multiple ways to pay, including chequeing “Chase Pay will spur every bank that wants to through Chase’s merchant services busi - accounts, Chase Pay, gift cards, and retail- keep their customers to offer a bank-branded ness, it’s a unique proposition that not many ers’ private-label credit and debit cards,” an wallet,” he says. “Banks need to have a plan banks can replicate.” MCX spokesperson says. “CurrentC com- for mobile payments. Signing up for Apple Chase Pay’s benefit to consumers will be the bines these payment accounts and consum- Pay or Android Pay isn’t a mobile payment ability to activate offers and redeem rewards ers’ loyalty cards, automatically applying strategy, but will actually erode the bank’s from within the wallet. “Chase will be the only coupons, promotions and loyalty rewards at franchise and brand value over time. Most wallet provider able to offer seamless rewards checkout in a single transaction.” importantly, banks offering a mobile pay- and offers integration,” Crone says. “I estimate MCX’s prospects are uncertain due to the ments capability will have a platform for that Chase will see revenues of $300 per active fact that many of its original members no providing personalised services such as cus- Chase Pay user per year from merchants whose longer have exclusive agreements to accept tomised credit offers when the customer is in offers are activated.” CurrentC, which means they can accept the store making a purchase.” Although its default option is QR code other m-payment methods such as Apple Chase’s QR-code based mobile wallet will payments, Chase Pay will support NFC pay- Pay and Android Pay. Another potential be accepted at US merchants belonging to the ments for Android devices as well as Blue- drawback of CurrentC is the fact that only MCX (Merchant Customer Exchange) tooth Low Energy beacons which detect a Chase-issued cards linked to Chase Pay can mobile payments alliance as part of MCX’s mobile wallet user’s presence. “BLE can be be stored in it. CurrentC wallet. used for applications such as paying for take- out food at drive-ups,” says Crone. Walmart Pay In December 2015, Walmart launched its CU Wallet QR code-based Walmart Pay mobile wal- US credit union service provider CU Wallet let which it plans to roll out to its 4,600 US has developed the white-label CU Wallet app stores during the first half of 2016. Walmart which credit unions can issue using their own Pay works on iOS and Android devices brand. CU Wallet has 120 credit union par- which have downloaded the Walmart mobile Chase is partnering with 17 technology ticipants, which together represent over 10 app, and accepts any major credit, debit and vendors so merchants who are not Chase million members. prepaid cards as well as Walmart gift cards, Commerce Solutions merchant acquiring “The CU Wallet application is already live,” a Walmart says. clients can participate in Chase Pay. From CU Wallet spokesperson says. “Two early adop- Walmart has a head start for Walmart Pay Autumn 2016, Chase Pay will also be accept- ter credit unions have launched the app and are as it already has 22 million Walmart mobile ed at the 7,500 company-operated Starbucks testing with friends, family and employees in app users. The app lets Walmart customers locations in the US. preparation for a full release to membership. A look at and activate in-store offers and store “Market research surveys show that con- third credit union is on the cusp of doing the a shopping list. sumers prefer to get a mobile payment same, and a dozen or so others have signed con- “What Walmart is doing is cross-popu - capability from their primary FI, and Chase tracts and are in our deployment pipeline.” lating the payment credentials customers is playing into that,” Crone says. “Chase Currently, CU Wallet supports QR code use in Walmart.com and allowing them to knows that the number one reason for transactions using technology supplied by make purchases in physical stores with the switching banks, after fees, is mobile capabil- PayPal subsidiary Paydiant which also pro- Walmart app,” Crone says.<

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RBI 725.indd 5 22/04/2016 16:34:15 MARKETING: TV ADVERTISING Retail Banker International

The ‘black horse’ gallops to Lloyds’ advertising rescue

Companies spend millions on advertising and banks are no exception. From attracting new customers to maintaining a brand presence, advertising can be crucial in a firm’s strategy. There only remains one question: Does it actually work? Patrick Brusnahan speaks to Nielsen and examines its effectiveness

hen one thinks of Nielsen ratings, n the mind usually wanders to tele- SUCCESS OF TELEVISION ADVERTISING FOR UK BANKS vision shows and how said ratings 90% W hold their futures in the balance. However, it isn’t just the latest Channel 4 80% First Direct drama that the company tracks. Advertise- Lloyds ments are also monitored to check their effectiveness. Halifax A service entitled TV Brand Effect (TVBE) 70% Nationwide runs seven days a week between 6pm to mid- Barclays night on Channels 4 and 5, ITV and Sky 1. Christopher Cox, the UK TVBE lead at 60% Natwest TSB Nielsen, speaks to RBI about this service. HSBC

He says: “Any advertising that airs in our Brand Communication Santander coverage period is surveyed to our panel. So 50% it’s pretty comprehensive. Since it launched in 2010, we’ve received about 10 and a half million completed surveys across about 40% 45,000 ads and about 3,500 brands.” Research carried out by the global information and measurement company focuses 30% not on showing adverts to consumers, but 40% 50% 60% 70% Ad Memorability seeing what consumers can recall about them. Cox explains: “The interesting thing about Source: Nielsen what we do is that we never show a consumer an ad, we basically are testing on the basis of ‘Can they remember it the next day, based variables in the field and it can be easier really steady look and feel; they follow a for- on watching it alongside normal TV?’ defined when considering brand value. mula which often works. It’s been like that “So we ask a consumer what they watched. Cox says: “We saw a high degree of what for a while now. But there’s a following that’s If they say they watched the Simpsons, we’ll we call variants. We have a metric called gone: black and white, weird animal, joke. know that a Lloyds ad was on in a break less impact potential which measures peo- That kid of consistency works, they don’t and we see whether they remember that. We ple’s ability to remember the ad and also have to put as much weight behind it because define effectiveness as being able to remem- to correctly attribute the brand. We know it locks in quickly and people know what it ber the ad and the brand within the ad. If across categories that the benchmark norm is over time. those two things don’t happen, nothing else of less impact potential is around 30% for “Some of the other brands tend to do well, will, it’s as simple as that.” all advertising. Typically, we see banking for example, we’ve seen Halifax do quite Nielsen gets around 4,000 to 4,500 hit around the same level with some brands well historically. Again, in 2015, they were responses a day split across approximately over-performing and some brands under- up in the top group. 100 pieces of advertising. Afterwards, a view- performing.” “One brand that changed quite significant- point can be reached in close to two weeks. Looking within a brand can reveal unex- ly in the last year was Lloyds. We saw real This is then compared to spend data in order pected results. For example, if one brand uplift for it primarily due to the return of the to ‘investigate how much these ads are cut- is performing to an average extent, it may black horse imagery which is familiar to con- ting through in the real world environment’. not be because all of their content is aver- sumers and even now, having not has that Through this, a better understanding of how age; the bank could have the best and the on screen for however many years, it’s some- wisely banks are spending their advertising worst advertising campaign, which evens thing that people associate with the bank and budget is reached. out. it’s helped define it as its own thing.” According to Cox, there are a few stand- Lloyds is an interesting case as it had to Was 2015 a good year for banks’ ads? outs in advertising. He clarifies: “Tradition- keep its own brand image after splitting from Nielsen wanted to get an overview of what ally within the last few years, I would say TSB. Cox continues: “There are implicit sorts of advertising were connecting with FirstDirect has typically been a leader. Their brand queues and for a lot of consumers who audience members. However, there are many advertising has got a lot of consistency, a remember Lloyds before it was Lloyds TSB,

6 y May 2016 www.retailbankerinternational.com

RBI 725.indd 6 22/04/2016 16:34:16 Retail Banker International MARKETING: TV ADVERTISING

when it used the [black horse] imagery all the to a broad audience, but it has to work to companies trying to work out how they time. Those are implicit queues to the brand. cut through and there’s no way of pushing make TV and digital best fit alongside I think it really helped it in that campaign.” it in front of the consumer you want in a each other.” However, some other banks didn’t fare so proactive way whereas digital theoretically However, younger generations simply well. “Santander slipped a bit, it didn’t cut allows you to do that in a more assertive have no patience for ads. With countless doc- through in the way it has historically, and it way.” umentaries, and even serial dramas (such as slipped towards the middle of the pack. TSB With that level of targeting available with Mad Men), examining the advertising world, was weaker as well. The other ones that kind internet advertising, surely most of banks’ viewers are now more cynical. of lagged were the supermarket-type bank- efforts would go towards that? On this trend, Cox says: “A trend that ing operations. They just didn’t get the kind “There is an inherent debate in the industry we’ve been tracking since 2010 is that of weight needed. I think they suffer a bit of where budget goes. No one has as much amongst younger audiences is a steady slip because banking for them is not a priority money as they want to have and they have in terms of ad effectiveness. It’s not vast within the business.” to make tough calls about going down a very year-on-year, it’s only a couple of points of targeted digital approach or going down a effectiveness each year, but it is noticeable. The importance of advertising broad TV approach or is there a way of bal- The challenge for everybody is how do I link So does advertising work? While it is as ever- ancing them both out? to those younger consumers who are going present as always, especially on television, “TV is challenged a lot with regards to to be tomorrow’s big customers and driving the effectiveness of it has been in question as ‘am I getting a return on my investment?’ that is really important. the more cynical millennial generation comes TV is inherently tougher to measure in “We talk about that millennial group, the to the fore. terms of your return on investment than buzzword everyone has, but that’s definite- Cox says: “TV is a broad, effective tool for digital. Digital is much simpler as it is ly a big challenge as it’s a highly distracted any brand. It’s something you can use to go the ad; the eyeballs it went in front of audience that don’t work the way the pre- out and get a wide audience. The challenge and did it do anything? Whereas TV, vious models of activity have done and this is that you don’t get to target in the way that because it’s broad, it’s harder to go back is where the challenge lies. They are seeing you do through digital and things like that. and this is why we try to tie it back. TV [ads] on the TV, but they’re distracted by That’s the trade-off that brands make. is not going anywhere, we’re still seeing the smartphone. So how do you get an ad in “TV is great at pushing a broad message a lot of spend going to that, and it’s just front of them in the right time?”<

Review of banking category TV ads Jan/Feb 2016

Throughout Jan and Feb 2016, Nielsen mea- advertising typically has a highly recognisable • Novel visuals and music cues – Ensure that sured adults’ reaction to TV ads from 13 leading look and feel, ensuring that consumers can pick the visuals and music are set up to draw banks in three key areas: up on those implicit brand cues. attention to the screen, keeping these ele- • Ad Memorability: Ability to remember the Halifax and Lloyds have also been strong, with ments consistent across different ads can narrative of an ad; Lloyds doing extremely well on their branding, also help. First Direct stands out by using • Brand Communication: Amongst those likely driven by a long running, consistent cam- black and white images and unique animal who would remember the ad, those who paign featuring the ‘black horse’ imagery which mascots to catch attention and implicitly could correctly identify the advertiser, and is familiar to many consumers. link to the brand. • Net Impact: Amongst total audience, Typically ads in banking which do well feature: those remembering ad and brand. • Ownable imagery/themes – Styles Amongst the new ads only in 2016, the single which are consistent over time and stand most effective one is Barclays’ Fraud Prevention The retail banking category is relatively dense, out amongst the competitor set, such ad ‘Imposter’ featuring ‘David’ with a person with a large number of brands advertising heav- as Lloyds’ Black Horse which has been a behind him revealing all his lines are a scam. ily for services which can overlap in consumers’ hallmark of the brand for many years. If This ad follows several best practices, which have minds. Each year we’ve tracked a significantly a competitor could put their logo on the helped it cut through despite a relatively short larger number of creatives being run amongst ad and it still be effective for them it isn’t time on air. The novel look and feel, with a char- these brands, with 25% more creatives on air in considered ‘ownable’; acter interacting directly with the audience and 2015 vs. 2014. • Clear, early, frequent branding – Brand- a ‘mystery’ voice, the lack of music or any other Already in January and February, 26 differ- ing can be verbal, visual, implicit or secondary sound, and the early brand cue all com- ent creatives from different brands have been explicit. It should be a core component of bining to grab and keep viewer attention. seen on air, many of which are continuations of the creative however, ideally with both a campaigns which first ran in 2015, but others verbal and visual cue. Nationwide almost Notes are new. Barclays and First Direct have been the always include “At Nationwide…” at the Demographic: Adults 18+ most active, with eight creatives between them. start of a creative, a strong verbal cue; Time period reviewed: 01/01/10-29/02/16 Performance so far has been highly varied. • Create a recognisable offer – Within bank- Surveys conducted 24 hours after exposure in ing there are opportunities to create ads the home. 2016 Performance which feature an offer that is structured Brands evaluated: Barclays, First Direct, Hali- The strongest brand, overall, so far this year is in a highly recognisable way. Santander’s fax, HSBC, Lloyds, TSB, M&S Bank, Nationwide, clearly First Direct, who has traditionally been 1-2-3 campaign is a good example of this, NatWest, Santander, Tesco Bank, Co-operative, extremely strong amongst the group. Their and Virgin Money. Source: Nielsen

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RBI 725.indd 7 22/04/2016 16:34:18 DIGITAL: MOVEN Retail Banker International

Is Moven truly a modern game changer? New York-based neo-bank Moven has been widely heralded as a disruptive innovator which is changing the nature of banking. Robin Arnfield talks to Vincent Bahk, Moven’s Chief Customer Officer, about the challenger bank’s views on the marketplace and how it feels it can change the banking paradigm

ounded in 2011 and launched com- becoming something they rely on.” In December 2014, TD signed an agree- mercially in March 2014, Moven Bahk claims current digital banks are still ment with Moven for the exclusive Canadian offers a US fee-free FDIC-insured not meeting the specific needs of millenni- rights to Moven's PFM app, and is currently mobile checking account and debit als. “While digital banks are in the medium in pilot mode. In February 2015, Westpac F that millennials prefer, they are still bringing MasterCard which are provided by its US New Zealand launched a new version of its banking partner, Weir, Kansas-based CBW old rules and trying to apply them to a new digital banking platform incorporating Mov- Bank. It also offers real-time personal finan- behaviour,” he says. en’s PFM tool. cial management (PFM) and budgeting and “The millennial mindset is thinking about “There are others banks in the pipeline, savings apps as part of its mission to encour- money management, banking, savings, and but we’re not at liberty to reveal their names age what it terms ‘financial wellness’. planning for the future in a completely differ- yet,” says Bahk. “Moven isn’t your typical bank,” Alex ent way thanks to innovations of the sharing "Offering a PFM app like TD is doing with Sion, Moven’s president, wrote on his Linke- economy such as AirBnB and Uber. Similarly, Moven helps create stickiness for a bank," dIn page. “We provide banking and finan- millennials have different customer service says Ed O'Brien, director of Mercator Advi- cial services, and we work with banks and expectations compared to previous genera- sory Group's banking channels service. industry partners to do this. So you get the tions.” In May 2015, Moven signed a services protection and security of depositing at a agreement with Accenture to develop digital bank, but none of the frustrating baggage. Advice banking solutions such as next-generation We’re changing the definition of what a bank “Moven’s key differentiator is ‘advice and account opening, biometric authentication, does and how it works with its customers. guidance’,” says Ron Shevlin, Director of and real-time marketing, which they will So, while we’re not set up like a typical bank, Research at US consultancy Cornerstone provide to banks globally. we’ll provide all the products, services, and Advisors. “It has developed a number of “Accenture gives us immediate scale, so we features of a typical bank and will even create PFM functions to give its customers real-time can meet our clients’ needs,” says Bahk. some much-needed innovations of our own.” information on how they’re doing against “We have pursued global partners to their budget.” not only distribute our platform but also Digital banking strategy Moven works with conventional plastic strengthen our offering,” says Bahk. “Since “We’re about connecting a bank to the card and mobile wallet transactions, giving launching these partnerships (with TD and moment (in time) that matters for the consumers instant feedback via mobile alerts Westpac), we’ve created an infrastructure customer,”Vincent Bahk, Moven’s chief cus- on their spending activity including real- that is multi-currency, multi-lingual and on tomer officer, tells RBI. Using Moven’s app, time, categorised receipts and the colour- a distributed cloud system. This is proven consumers can make decisions about spend- coded Spending Meter. to be a leading formula for a future-proof ing and saving when they are at the point of This helps users avoid overspending by platform, something we wouldn’t get if we sale. showing how much they are spending on dif- pursued only domestic partners.” “We believe banking products are on ferent categories and how recent transactions the road to commoditisation and becoming compare to past activity. Moven uses three Business model ‘utilities’ - just like the telephone dial-tone colours – red, yellow and green – to indicate Bahk says Moven’s business model is SaaS and the Internet,” says Bahk. “Mobile has a user’s financial health. (Software-as-a-Service) based. “We’ve struc- enabled us to play a role in our customers’ Moven app users can get a complete tured our contracts to share risk and upside lives, instead of simply selling them a bank- money management picture by linking and with our partners, but, fundamentally, we ing product. Transaction data, location aggregating all their accounts with different are an engagement platform of which any data, social media, etc. all give us insights on banks through the app, Bahk says. financial institution, including banks in the how to address a true customer need in the US, can take advantage.” moment.” Partnerships Moven differentiates between its Direct Bahk says that what differentiates Moven In addition to its US business, Moven is seek- to Consumer US banking customers and its is its ability to connect the customer expe- ing to partner with banks in other countries, PFM app users. “While we keep our numbers rience layer directly to banking products. and has already teamed up with Canada’s close, we can that we have tens of thousands “Other providers, like traditional PFMs, are TD and New Zealand’s Westpac. of active users on our platform in the US who limited to being a referral engine, but today's “If we partner with a bank, our first are direct customers with Moven accounts,” customer is smarter and knows that they are assumption is that they have their own prod- says Bahk. “We also have hundreds of thou- being sold to,” he says. “Our engagement ucts which we connect with,” Bahk says. sands of (Moven) app users, and, with our data tells the story that our customers are “In essence, we’re the customer engagement global partners, our usage will be in the mil- depending on us in their daily lives. We’re layer to our partners’ financial products.” lions.”

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RBI 725.indd 8 22/04/2016 16:34:18 Retail Banker International DIGITAL: MOVEN

Bahk stresses that Moven’s Direct to Con- sumer US banking business is “created specifically to be a live, working laboratory for the firm’s software platform. It’s enough to be a ‘real’ business and ‘practice what we preach,’ which is a key differentiator to any other FinTech firm out there,” he says.

Enhancements “We’re always making enhancements to our digital offerings in order to take a customer- centric approach,” says Bahk. One example is support for Moven’s PFM tools on iOS and Android-based wearables. “We have more to come in our product roadmap soon,” Bahk tells RBI. In January 2016, Moven released a new version of its app which no longer requires passwords or fingerprint authentication for certain basic level transactions such as viewing balances, provided customers have enabled auto-login on the app. Once they have set up auto-login, customers use their mobile device as ID authentication. However, risk-based transactions such as fund transfers still require authentication through usernames, passwords or fingerprint ID. “We’ve taken an old paradigm of passwords and moved it to a mobile-first world of fingerprints and device ID where passwords are obsolete,” says Bahk. “We will be taking the approach of auto-login and fingerprint ID as we introduce new features within transferred into their Moven spending In July 2014, Moven completed its Series our app and our banking products.” account for their desired purchase. A Funding round led by SBT Venture Cap- During the first half of 2016, Moven will ital, raising $8m from investors such as introduce its Impulse Savings feature which Moven will also launch a GPS-based Emer- Route 66 Ventures and Standard Bank. includes: gency Cash notification feature which tells users their funds are low as they enter their Loan repayments • Prompts to ‘lock away savings’ when favourite or most frequented merchants. In January 2016, Moven announced a user’s spending behaviour has placed Using its behavioural insights on a user’s partnerships with US loan refinanc - them sufficiently in the green (below typical spending habits at that location – for ing providers Payoff and Common - their average spending) that it makes example, their average grocery bill – Moven Bond to incentivise its customers to sense to do so. “Moven gamifies that sends the user an alert offering them a real- pay down their loans. CommonBond moment in time when you’re thinking time overdraft with a transparent upfront operates a low-cost student loan mar - about spending that cash that is burning fee, to bridge the gap between their typical ketplace, while Payoff provides tools a hole in your wallet, and turns it into a spend and their current balance. When the to help customers pay off credit card savings moment,” the firm says; user’s next direct deposit to their Moven debt. account comes in, the emergency cash Moven’s customers who become • The ability to set up a visual wish list of advance is settled. Payoff Loan repayment members will items a user wants to save for, as well as receive a $100 credit to their Moven the option to curate these directly from Funding account, while those who become Com - a user’s board on visual social media In October 2015, Moven closed a $12m monBond members will receive a $200 services such as Pinterest, and Series B Funding round led by Route 66 credit to their Moven account and a 25 Ventures with investments from back - basis point discount off their monthly • When users have reached a savings ers such as Anthemis Group, its original student loan repayment when they pay milestone, they access their savings by seed capital provider, and Atlas Asset via Moven. tapping the app interface three times Management. The new investment will “As many Moven users have credit to simulate ‘breaking the glass.’ This be used for international expansion, card or student loan debt, incentivising employs behavioural gamification to enhancement of Moven’s consumer bank- them to pay their balances through these make users think before spending their ing experience including new spending partnerships allows them to manage hard-earned savings. If they proceed, and credit products, and expanding its and improve their financial health via their savings funds are immediately US technical team. a seamless experience,” Moven adds. <

www.retailbankerinternational.com May 2016 y 9

RBI 725.indd 9 22/04/2016 16:34:19 DIGITAL: BRACKET Retail Banker International

The start-up that’s revolutionising the public cloud

Developments in the use of the public cloud as a tool for financial services are beginning to take off as more and more institutions realise the potential of it. But one major concern is how secure the cloud really is. One start-up is changing this perception with their new computing cell. Alexander Atkins reports

ore and more, large companies are own firewalls, encryption, looking to take advantage of the data management, and servers and infrastructure at Ama- data backup capabilities, zon, Google and others throughout but they want to switch M to Google’s cloud, which the public cloud. But the nature of its security has always been a highly sensitive question. has different firewalls etc, Enter Bracket, a tech start-up in California, Bracket provides an infra- which has developed a new product that can structure that spans across provide this peace of mind, as well as provid- all of these so that you ing users with many other applications. don’t need multiple systems “It’s really focused on allowing large enter- for each. prise companies to have a level of control “It simplifies the opera- that they can’t get from the public cloud on tions for IT and provides their own,” says Tom Gillis, CEO and co- a level of control that they founder of Bracket. “In particular we’ve been otherwise wouldn’t have,” paying attention to security controls but it’s says Gillis. not limited to that,” he adds. Bracket is Gillis’ third In terms of security though, the comput- start-up. His previous ing cell focuses on building logical controls enterprise, IronPort, was around an asset. also focused on security “The way people think about security, and was bought by Cisco many of the principles are manifestations for almost a billion dol - of physical infrastructure. If I have a server lars. After the acquisition, in a data centre, I can put a cage around it Gillis went on to run the security business that, governments are now asking banks to and have guard with a gun in front of it so unit at Cisco for five years before found - run stress tests, in addition to the risk analy- that it appears secure, but recent breaches in ing Bracket. As he puts it himself: “I’m a ses, possibly once a week, maybe more often, companies such as Home Depot, Target and security guy, and I’ve been doing security maybe less, and that might require another Sony show that physical control of an asset for a long time.” 10,000 processors that have to complete this, does not mean you have logical control of an It’s a technology that appears to have Wall but only between market close and market asset,” says Gillis. Street firms and financial companies excited. open.” The system operates in the same way as a Bracket recently closed its series C invest - Bracket, however, offers the opportu- hypervisor, also known as a virtual machine ment round, having raised $45m which, in nity to perform this on the public cloud, manager, a program that allows multiple addition to its previous investment rounds, as through it banks can have the ability to operating systems to share a single hardware means the start-up has now procured over access tens of thousands of CPUs for perhaps host. $130m in total. an hour overnight. This technology then sits on top of any Goldman Sachs, Blackstone, Wells Fargo “That’s what’s got the financial institutions cloud, such as Amazon’s or Google’s or even and Fidelity Management are just a few of excited because they can think differently private clouds, and this becomes the founda- the companies who have signed on. But Gil- about how they calculate risk as they are tion of the computing cell. lis insists that it’s not limited to financial no longer constrained by the limitations of “Think of it as a bubble that you can draw companies as GE and Direct TV, among physical hardware,” adds Gillis. around your app, the data and all that stuff other non-financial companies, have also As for where the cloud is, in terms of devel- that goes with the app and the data to pro- signed up. opment, Gillis admits that for use by the tect them, such as firewalls, authentication, However, it’s not just in security that both financial services, it’s still in its pilot stage. encryption, data management. Now all of the public cloud and Bracket have far reach- “It’s the year of piloting the cloud for finan- that can be moved as a complete stack from ing potential. Risk analysis is another fac- cial services. People are seriously moving one cloud to another,” explains Gillis. tor that banks are interested in, especially production workloads onto the cloud and The technology is all about centralisation in looking at the different ways the market seeing how it works and once we show these and provides one set of infrastructure that might move in. results collectively, I expect the adoption of will run across heterogeneous clouds. This “To run these large scale market risk analy- the public cloud to be fairly rapid,” con - means that if someone is using Amazon’s ses might require five to ten thousand pro- cludes Gillis. “It’s a fairly pivotal year both cloud, for example, which comes with its cessors,” explains Gillis. “But in addition to for us and the industry.”<

10 y May 2016 www.retailbankerinternational.com

RBI 725.indd 10 22/04/2016 16:34:24 Retail Banker International DEBATE: DIGITAL BANKING CLUB

What can UK banks learn from Europe? In the first Digital Banking Club debate of 2016, a panel of banking experts assembled to discuss what the financial sector in the UK could learn from its European brethren. As it turns out, it could be a lot, ranging from digital adoption to dealing with new competition. Patrick Brusnahan writes

ntitled What can we learn about best 780,000 active mobile banking users. It has to turn. Now, we are moving quicker. Even practice from our European col - not neglected the physical aspect of banking though we are an old bank by Polish stan- leagues?, the debate had delegates though with 100 branches across Poland. dards, we have hardly any legacy systems. from across Europe flocking into the Iljin said mBank was in the right place at “Back in 2000, the market was not satu- E the right time: “We were well positioned rated. Even today, there is a stake to fight historic Law Society in London. While certain parts of Europe, usually from the start. It was in our DNA to be for. We knew this was worth fighting for. We the nations described as ‘developing’, are 100% digital from the beginning. Our case have some legacy branches that are simply regarded for their innovative and digital is special. There are not many like us: a digi- too big, but we will still need face-to-face output, Simon Cadbury, director of strategy tal bank that has succeeded. We treat Google contact with customers.” and innovation at Intelligent Environments, and Facebook as our competitors.” Ahmet Ertan Algan, ABank’s unit head for believed the situation to be more complex. As a fairly new bank, mBank was devel- digital banking and card payment systems, He said: “No one country dominates oping in a similar fashion to its market. believed that Turkey was in a good position with respect to innovation. However, there’s Iljin stated that the team behind the bank is to have the best of both. something about developing countries. Is it ‘young with no tradition, only looking out- He said: “Turkey is attractive to the for- a young population? Is it an organisational wards with nothing to lose’. eign market. Its demographic is perfect for culture? Does this embrace innovation? Oliwia Berdak, senior analyst for e-busi- digital banking. Branches are still important Overall though, London is the capital when ness and channel strategy professionals at for banking in Turkey, we have 16 in the big it comes to fintech.” Forrester, believed that the efforts of players cities, but Turkey is getting many more cus- Jacek Iljin, managing director of retail such as mBank forced markets to evolve. tomers online. banking at mBank, had a unique perspective She said: “[I] think there is a cycle in coun- “Generations Y and Z, the younger audi- on the matter. mBank was founded in 2000, tries where one bank does something innova- ences, are demanding more from their banks. with its core banking up and running within tive and others are pressured into it.” New start-ups and smaller digital banks are 100 days, and has since risen to become the Jakub Grzechnik, Head of Mobile and changing the Turkish market.” fourth largest retail bank in Poland with Internet Banking, PKO Bank, Bank Polski, over five million customers, 3.8 million of agreed. As Bank Polski is one of Poland’s old- Inspiring innovation them in Poland. Taking into account that its est banks, and its largest with almost 2,000 The chair, Douglas Blakey, asked where the main focus has been digital, this is even more branches, it needed to adapt. panellists looked to for inspiration in terms impressive and the bank has won several Grzechnik explained: “The effect of these of innovation, whether that is in the financial awards for its online and mobile banking. banks has forced us to be innovative. We saw sector or not. Its success can be seen in figures with over the iceberg on the horizon, but it took an age Iljin states that he looked towards disrup

www.retailbankerinternational.com May 2016 y 11

RBI 725.indd 11 22/04/2016 16:34:27 DEBATE: DIGITAL BANKING CLUB Retail Banker International

tive companies, such as Klarna and PayPal, Berdak warned about focusing purely on that to ruthless targets. It’s hard for some while Grzechnik looked at Spanish banks as innovation without deciphering how it is people to see the value of digital without ‘prime examples of banks digitally innovat- financially viable. that. ing’. Simon Cadbury gave USAA Bank as an She said: “There is a danger on only focus- “People feel uncomfortable investing. example of a player that is ‘constantly inno- ing on functionality; thinking about deliver- Start-ups are showing you can change that vating’. ing customer experience without connecting through digital.”

The panel

Oliwia Berdak, Senior Analyst Serving E-Business & Channel ATM & ITM banking, fraud monitoring and credit & debit card systems Strategy Professionals, Forrester software development at ABank. He studied at Okan University, where he Oliwia is a Senior Analyst at Forrester serving the European consumer obtained a master’s in business administration, specialising in ‘customer financial services sector. Her research focuses on the digital transfor- relationship management’ in 2013. He also holds a bachelor’s degree in mation of banking, insurance, and wealth management, mapping out computer science engineering from Ege Üniversitesi. digital strategies, adoption trends, and best practices. Prior to join - ing Forrester, Oliwia held a number of research positions in both busi- Jakub Grzechnik, Head of Mobile and Internet Banking, PKO ness and academia, working with a variety of methodologies to deliver Bank, Bank Polski insight. Oliwia also worked for six years as a freelance analyst for Jakub Grzechnik is head of mobile and internet banking at Poland’s Euromonitor International, drawing on national laws, macroeconomic largest bank, PKO Bank Polski. Jakub is responsible for the devel - data, and statistics to analyse the latest economic, social, and political opment of the bank’s digital distribution channels, for their sales developments in Europe and explain their significance to businesses. performance as well as integration with other distribution channels of the bank. He also leads the innovation agenda in digital channels Simon Cadbury, Director of Strategy and Innovation, Intelligent and the fintech ecosystem. Jakub was chairman (until the end of Environments 2014) and since then, a member of The Supervisory Board of Polski Simon is a product marketer and strategist with 18 years’ experience Standard Płatności (PSP), the company created by 6 of the largest working for a range of major international brands. Simon’s role is to Polish banks to jointly build the innovative mobile payment standard work with Intelligent Environments’ investors to set and deliver the Blik, based on the IKO app developed by PKO Bank Polski. Jakub led company’s mid and long term strategy, as well as overall responsibility the Blik creation project from the outset in March 2013, interacting for the product development and management of Interact; the com - directly with CEOs of the 6 banks to agree on the system design and pany’s core product offering. Simon joined in 2013 from Lloyds Banking governance. Group where he was responsible for payment technology and also sat on the Credit Card division’s leadership team. Prior to this he worked Jacek Iljin, Managing Director Retail Banking, mBank on the launch of a number of firsts in new technology – the Blackberry Jacek Iljin has been Managing Director Retail Banking, Sales & Processes (BT Cellnet), BT Openzone (BT Retail), 3G Live! (Vodafone Australia) at mBank since January 2014. Prior to assuming his current role, Jacek and Sky HD (BSKYB). spent over 5 years as Head of the Product Management Division at mBank responsible for Core Banking Products Business (Accounts and Cards) and Ahmet Ertan Algan, Digital Banking and Card Payment Systems Analytical CRM. Previous roles undertaken by Jacek at mBank included Unit Head, ABank Marketing and Business Development Director and Head of Business Ahmet is responsible for internet banking, mobile banking, IVR systems, Strategy and Customer Segmentation.

12 y May 2016 www.retailbankerinternational.com

RBI 725.indd 12 22/04/2016 16:34:30 Retail Banker International DEBATE: DIGITAL BANKING CLUB

Iljin saw his goal to be at the ‘frontier of innovation’ and that meant, to him, focusing on mobile. He explained: “We are betting on mobile, but not through a ruthless financial per - spective. We are pushing our customers to mobile. It’s no longer a red light for us. Half of our customers regularly use our mobile solutions. We are making the mobile app a preferred gate to all other channels. “Mobile is much more comfortable for the customer. We have special offers for customers on mobile as well. The only big concern is the onboarding process.” Berdak retorted: “There are still security and trust issues with mobile.” Grzechnik emphasised that there is more to banking than just moving it onto the mobile channel. He stated: “We are betting on a multi-channel scenario. Our branches are part of a legacy, but also an asset. People don’t like bank [branches], but they trust them.” Algan agreed with that perspective and added: “We are trying to implement a multi-channel infrastructure at the moment, but we are also trying to digitise the whole process.” Cadbury remarked that there were other markets outside Turkey and Poland imple- menting plenty of innovation as well. “Germany is a market we will learn a lot from; banks such as Fidor and Number26 particularly. There is more that the UK can do, but it’s not far behind. Online bank - ing adoption rates are above average in the UK.”

The PSD2 shadow One thing that is on the minds of everyone in Europe is the upcoming PSD2 regulation. Jakub Grzechnik talked about why this is a worrying aspect of the future. tional institution, have managed to retain in the foreseeable future. Iljin once again He said: “We are deeply concerned about our market share and remain the top bank stated his belief that mobile technology will PSD2, but at the same time, we are familiar in the country. We are all big banks try - dominate the market in the near future. with the theme of the whole retail bank - ing to create a customer experience, good He purported: “The best camera you can ing revenue stream being cut up by fintechs enough for the customer so that the cus - have is the one you always have with you, that are taking chunks of retail banking tomer is too lazy to go elsewhere.” i.e. your phone. The best bank is the one and building their own businesses on it. It’s Berdak also wondered if the market was you have in your pocket, once again, your just that after PSD2, the fear is we will be truly considering the implications of how phone.” left only with the cost and process of brand expensive being innovative can be. However, Simon Cadbury was not as current accounts and all the profits will be She explained: “The biggest obstacles to convinced. He replied: “I’m not so sure. taken up by the other small fintechs. innovation are running costs. Digital banks 50% of iPhone users actually struggle to “It is a possible scenario, but we are try- that are being created now will struggle to read their screen. In addition, only 20% of ing to create such a strong experience for grow. I am not convinced they will gain a the UK population is prepared to bank only the customer: an integrated, multichannel million customers overnight, or if they will on their mobile.” experience, that the ‘stickiness’ customers even grow beyond 100,000 customers. We Another emerging service is blockchain, have will make it difficult for all the start- underestimate the challenges in being a something quickly shut down by Grzech- up players and all the competitors to get challenger bank.” nik. He said: “I would compare blockchain those profitable opportunities. to QR codes. There is simply no unified “Just look back at our history. mBank Emerging technology customer experience. Being digital is not is a formidable competitor, but even with The discussion moved towards what form good enough to be successful in the mar - mBank, we as an incumbent and as a tradi- of technology would grow within banking ket.”<

www.retailbankerinternational.com May 2016 y 13

RBI 725.indd 13 22/04/2016 16:34:36 EVENT: RBI ASIA TRAILBLAZER SUMMIT 2016 Retail Banker International

The future of retail banking in Asia The RBI Asia Trailblazer Summit 2016 – hosted in Singapore – featured panellists from start-ups and banks operating across the region, who discussed the banking model of the future in Asia. Xiou Ann Lim reports on their thoughts regarding the region and how it is moving forward and what needs to be improved

he increasing popularity of fintech players that are more agile and experimental has altered the land - T scape of retail banking in a major way. Often regarded as agents of disrup - tion and change, there is mounting pres - sure for banks to keep up as consumers expect to receive the same experience when they deal with their banks. How will banks evolve to meet these expectations? What does the banking model of the future look like for Asia? More importantly, why aren’t we there yet?

The new economy The viability of the neo-bank model was heavily discussed at the RBI Asia Trail - blazer Summit 2016. Its low cost of opera- gapore Sopnendu Mohanty added that DNA ... but we’re going to have to share tions – relative to traditional banks – and new banks do not have the burden of leg - with a telco, another bank or a third party.” ability to reach more consumers through acy infrastructure. “The technology that Yoma Bank itself is partnering with Myan- its mobile model might prove to be suc - existing banks are carrying are outdated – mar-based telco Telenor to develop Wave cessful in Asia, where there remains a large they’re heavy and they’re not agile – which Money, which allows users to receive and unbanked population. But John Hogue – takes them a long time to change.” He transfer money using their mobile phones head of Consumer Innovation Labs at Citi pointed out that new banks can source for – without necessarily opening an account FinTech – doesn’t think bank branches are open API platforms and build functionali- with Yoma Bank. going to go away anytime soon: “People ties more quickly. On the same note, Reynold Wijaya – co- will always need that physical connection. Meanwhile, Hal Bosher – CEO of Yoma founder of lending platforms Modalku But how branches operate and the technol- Bank – pointed out the challenges of keep- and Funding Societies – also highlighted ogy that drives them will change.” ing up in emerging economies such as the importance of creating a partnership “Also, physical interaction is what banks Myanmar by adding that the plumbing is between fintech start-ups and banks as this have as a strength when compared to fin - often not in place and that national bor - can leverage off the reach and ease-of-use tech companies. We have a physical net - ders remain one of the biggest constraints offered by fintech start-ups as well as the work that we can leverage on,” added to achieving great cross-border reach in an advantage of customers’ trust that banks Ryan Jonghoon Kim, head of digital industry that’s highly regulated by supervi- have built. and alliance, retail banking at Standard sory bodies that are working independently Speaking on this culture of collaboration, Chartered Bank Korea. So, perhaps bank of each other. Mohanty pointed out that ‘there’s a bit of branches are really here to stay. How can banks then respond to disrup - a myth out there that’s slowly being cor - With so many examples of challenger tion? Mohanty believed that focusing on rected because when we looked at fintech banks and fintech start-ups operating at half being banking-driven rather than bank- growth in 2015, we saw fintech compa - the cost and twice the agility, why aren’t driven is the way forward: “Banks used nies out there trying to disrupt’. But recent banks replicating their models to get ahead? to build loyalty through pricing. The new times have indicated that fintech compa - According to Sanjoy Sen, managing director loyalty is built through experience – if you nies realise that they can’t be out on their of retail banking Asia Pacific at ANZ: “The provide a good experience, customers tend own because they need customers and trust, banking industry is highly regulated, which to stick with you.” Similarly, Sen added he added. “Trust is something that banks is why the development or the Uberfication that banks are very introspective about have built for many years ... and they are of banking is not happening as quickly as what they can give to their customers opening up to bring the outside in through other industries. Banks are also trying to and that consumers should be allowed to collaboration with fintech companies and revolutionise themselves to be technology decide what they want instead. opening of innovation labs,” he concluded. companies and that is not easy.” Apart from that, Bosher weighed in Apart from regulation, chief fintech by suggesting that banks should learn to Innovation and design in banking officer at the Monetary Authority of Sin - share: “Perhaps that’s not in a banker’s While banks have never been traditionally

14 y May 2016 www.retailbankerinternational.com

RBI 725.indd 14 22/04/2016 16:34:38 Retail Banker International EVENT:RBI ASIA TRAILBLAZER SUMMIT 2016

regarded as frontrunners of innovation and design in creating cutting-edge user experience, they are beginning to pick up the pace. Customarily dismissed as being somewhat inconsequential – the importance of design- ing a seamless and intuitive user experience to attract, retain and engage customers is gaining traction within the industry. But how do they recognise a successful design and how is the return-on-investment measured? “No one knows until a quality product is actually produced,” said Steve Monaghan, regional director and head of Edge (Group Innovation) at AIA. “Now, you’ve got the same people who believed it to be a waste “Falsely, we assume that just because we Can this conundrum be remedied with of time saying they wished they executed it set up an innovation team in the bank the introduction of robo-advisors? “I sooner,” he added. we instantly become the most innovative think this particular segment is definitely Jurgen Meerschaege – head of Business organisation tomorrow.” ready to look into robo-advisory for cer - Analytics and Decision Support at DBS tain products, but the future is going to Bank – believes that successful design can Keeping up with a new generation be a combination of both,” said Matthew be measured financially through sales of Although the theme of the summit revolved Read – head of Affluent Banking & Branch individual products. Other forms of meas- around catching up with emerging trends Network, Retail Banking (Asia-Pacific) at urement such as net promoter score, repeat and enabling technologies, one important ANZ. customer rate, retention rates and quali - aspect to bear in mind was the people the Thomas Martin – WW lead of Wealth & tative data can also be put in place, said industry serves – especially the emerging Asset Management Investment Analytics at Todd Kurie – vice president of marketing affluent, which is an increasingly impor- IBM – agreed. “People see technology as a at RedMart. tant segment in fast-growing Asia. distribution channel, but they don’t want But beyond exploring what it means to However, the cost to serve this particular to take away the face of relationship man - have created good design, Monaghan also segment has long been a consideration for agers either,” he concluded. believes that there is a sizeable difference retail banks. Moving away from the high- The face of retail banking has probably between what banks think their customers volume and low-cost model of the average changed considerably over the last five want versus what their customers actually retail segment but also falling short of the years or so. Allowing customers to deter - want. “Our ability to start assimilating high returns banks can reap from private mine the type of services and experiences that information and utilising it correctly banking clients, Choong Wai Hong – head they want from banks is going to ensure is really the challenge,” he said. Dr Koson of Regional Premier & Affluent Banking, that the industry is kept on its toes. Sapprasert – head of innovation at Siam Group Community Financial Services at From bank branches to mobile bank - Commercial Bank – concurs: “We’ve sim - Maybank – said that many of these relation- ing and robo-advisory, the need for inno - ply stopped listening to bank executives ships are managed by relationship managers vation and an intuitive understanding of because they’re not our target customers.” (RMs). This is a challenge in itself as banks what customers want is real. But as long So, the industry really has shifted gears struggle with the competency, consistency as the industry is able to keep up, there is in recent years to catch up in this space. and attrition of RMs. no reason why banks will lose out to other But Rana Peries – director of Innovation “I think the affluent segment is a very inter- players. & Digital Services at Barclays – cautioned esting and profitable segment, but the cost As Mohanty said: “The construct may against mistaking action for success: to serve is an important concern,” he added. change, but banking is here to stay.”<

www.retailbankerinternational.com May 2016 y 15

RBI 725.indd 15 22/04/2016 16:34:45 OPINION: TEMENOS Retail Banker International

Payment Services Directive should be a timely spur

Banks might wake up to the need to leverage their data just in time to embrace an EU move that requires they share customer information with third parties. Ben Robinson, the chief marketing and strategy officer at Temenos, writes on how banks could be motivated onto the right path by PSDII

he digital revolution has moved from access the banks’ data thanks to PSDII banks that is developing a blockchain existential threat to potential survival and fully exploit it, I expect them to protocol for the whole sector. strategy for the world’s retail banks. out-manoeuvre the banks in one fell Meanwhile, newer digital banks such The observation, revealed in our swoop. as mBank and Alior Bank in Poland are T It continues to surprise me that the teaming up with companies to white third annual study into retail banking Retail Banking; in tech we trust , sug- banks didn’t put up more of a fight label projects or set up joint ventures. gests that banks have finally woken up against PSDII. If Google were being The Polish banks are working with to the opportunities that technology forced to share what has essentially Orange and T-Mobile respectively to offers them when it comes to exploiting made it the powerful company it is target mobile phone customers. The one of their biggest assets – customer today – its contextual data such as banks manage the balance sheet and data. cookies and meta data – to increase loans; the telcos bring the distribution Some 25% of respondents said data competition, Google’s lawyers would be and new customers, to whom the banks management was the main focus of their getting rich on fees as the US giant tried can cross sell. digital investment, followed by cross to protect what it would see as part of These co-operation/partnering projects selling capabilities, which are linked to its intellectual property. help banks in the war for talent. Compe - using data well, and delivery capabili- Still, PSDII could prove to be a spur tition from other industries for the best ties. to banks to innovate and operate more graduates was cited by 39% of banks What is interesting, though, is that like their fintech rivals. Countries in the study as a problem, and the fight while our study found banks more within Europe have until January 2018 for talent is hindered too by banking’s aware than ever of the opportunities to to incorporate the directive into their poor reputation, cited by 41%. Fintech use this data, they showed no concern domestic legislation, giving the banks might not be top of the graduate career about the threat posed by the Payment plenty of time to position themselves. list, but is probably higher than banking, Services Directive II (PSDII), which Perhaps this is why data management and it is entrepreneurial. opens up the prospect of them being has become more of a focus as they While the quality and quantity of the forced to share this highly valuable cus - examine digitising their own core plat - banks’ data is a huge advantage it must tomer data with competing third parties. forms. Or perhaps they just haven’t be remembered that it isn’t their only Fintechs have already shaken up the woken up to the threat, which is why advantage. They also are streets ahead banking sector by seizing profitable it didn’t come up in our study. It does of the fintechs when it comes to brand areas such as forex, wealth management seem as if much of the sector is sleep - recognition and distribution channels. and payment services. They have been walking towards its implementation. The fact that no fintech company has able to do so by leveraging data better The more canny banks are digitising become a household name in spite of than the banks and have taken advan - and some are even looking to partner reams of comment devoted to their rise tage of new technology, digitisation and a fintech solution provider. Deutsche speaks volumes about how banks still analytics to automate tasks many of the Bank, for example, recently announced have the edge. banks are still trying to do manually. it was looking for new fintech start-ups Banks still have a very powerful A saving grace for the banks has been to partner on a blockchain solution, proposition, with their data, brand rec - the quality of the data they hold com - rather than come up with one on its ognition and distribution. PSDII should pared with the data collected to date by own. It is doing this despite the fact that therefore be a call to action to get to the fintechs. But once the fintechs can it is part of the R3CEV consortium of grips with their data.<

16 y May 2016 www.retailbankerinternational.com

RBI 725.indd 16 22/04/2016 16:34:52 Retail Banker International NEWS: DIGEST

MOBILE tomers and to allow them to pay, Insurance Corporation (KDIC) of any Indian bank. MasterCard partners control and manage via a simple to assume the management, con- Users of Uphold will be able with buddybank to click on their smartphone their trol and conduct of the affairs to fund their account using bank offer secure payment personal finance and payments." and business of the institution account, debit or credit card, options and to exercise all the powers of and can instantly transfer the DIGITAL the institution to the exclusion of amount onto an Uphold Rupee MasterCard has teamed up with Deutsche Bank its Board of Directors and advise card. buddybank, the Italian digital launches innovation CBK of an appropriate resolu- When ready to withdraw, bank of UniCredit Group, to tion strategy as soon as is prac- users need to provide relevant offer cardholders access to latest lab in Silicon Valley ticable and not later than twelve bank account data, and the technologies and make secure German banking major months from date of appoint - funds will be deposited and payments through their mobile Deutsche Bank has set up a new ment," the central bank said. available on the same or next phones. innovation lab in Palo Alto, Sili- day, Uphold said. Beginning January 2017, users con Valley. PRODUCTS The service will be available can directly manage payments The new lab will help the bank NatWest rolls out new across the country from the sec- through smartphones using the assess and apply emerging tech- savings products ond quarter of this year. No con- dedicated buddybank app. nologies from Silicon Valley to version fee will be charged for The partnership will also offer empower its products, services NatWest has introduced two the transaction. cardholders benefit of addition- and internal processes. new savings products, known as Uphold executive director J. al MasterCard services such as The lab, which follows the the Savings Builder and the Pre- Mehta said: "The Indian land- InControl, to personalise their launch of similar facilities in mium Saver account. scape is rapidly changing, yet payments, ID Protection, to Berlin and London last year, will Savings Builder will pay a 60% are still underbanked and prevent risk of theft of personal enhance its ability to innovate bonus interest rate of 1.50% 90% of SMBs are not serviced and financial information, and and will facilitate its relation- Annual Equivalent Rate (AER) by traditional banks. Here at Pin Change to easily change pin ships with start-ups, the German every month a customer raises Uphold we encourage innova- codes. lender said in a statement. their savings by £100 ($142) on tion, and with our open API, In addition, MasterCard The three labs, dubbed balances up to £5,000, the bank Uphold Connect, anyone can Instalments will enable users Deutsche Bank Labs, are the said. build more accessible financial to control and split payments digital element of the Bank's The product allows withdraw- service applications to help meet before, during or after their pur- Strategy 2020. als and does not have any limited the financial service needs of the chases. Deutsche Bank group COO time period for maturity and clo- Indian population. User will also get the benefit Kim Hammonds said: "The Sili- sure of accounts. "We offer developers the tools of MasterCard advanced debit con Valley lab will help Deutsche Premium Saver offers custom- to deploy transparent, state-of- and credit cards for their online Bank offer clients new and ers with 1% AER every month the-art cloud money applications and offline shopping. They can improved products and services, they do not withdraw. with built in security and compli- also use MasterCard digital ser- strengthen efficiency and deepen Users do not require any ance to offer instant, free global vices such as MasterPass and its relationships with the Valley's minimum deposit to open the money transfers - all for free." MasterCard Digital Enablement innovation and investor commu- account and no maximum bal- The partnership with Yes Bank Service (MDES) that enables nities." ance limit. marks Uphold's second one every commerce device to make Both the offerings are availa- in India. Last month, Uphold payments through industry- REGULATION ble for individuals aged 16 years struck a cross-border remittance standard tokenisation. Kenya’s Chase or more. pact with India's IDFC Bank. Under the terms of the agree- Bank placed under NatWest head of products ment, MasterCard Payment receivership Moray McDonald said: "These DISTRIBUTION Transaction Services Europe will products have been designed to UK digital bank Atom act as the buddybank's fully- Kenyan lender Chase Bank has help our customers achieve their Bank starts operations integrated technology partner been put under receivership by savings goals by rewarding peo- to process debit and credit card the central bank of Kenya due to ple for getting into great savings British digital-only lender Atom transactions. liquidity problems. habits and helping those who Bank has launched banking MasterCard division president The lender recorded difficul- have already saved significant operations after regulatory Italy and Greece Paolo Battiston ties in cash flow amidst inaccu- sums with us make the most restrictions on its licence were said: "I am delighted that bud- rate social media reports and the from their money." lifted. dybank has chosen to partner departure of chairman Zafrullah The bank, which received with MasterCard and believe our Khan and group managing direc- PAYMENTS restricted license in June 2015, shared vision of driving payment tor Duncan Kabui. Yes Bank and Uphold has launched its banking app innovation in new ways through The company was unable to partner over remittance that can be accessed by anyone mobile devices will enable Ital- meet its financial obligations, pre-registering their interest ians to manage their money in the central bank said. service through the bank's website. new, simple and secure ways. Kenya Deposit Insurance has Indian private sector lender Yes The app will be initially sup- "This partnership is a new step been appointed as receiver of the Bank has collaborated with ported on iPhone and iPad, with into the future of payments, to bank for a year. cloud-based financial platform an Android version to follow offer an easier and more secure "In light of the above, we have Uphold to help Uphold users later. shopping experience to our cus- appointed the Kenya Deposit move funds directly into or out The bank also introduced

www.retailbankerinternational.com May 2016 y 17

RBI 725.indd 17 22/04/2016 16:34:53 NEWS: DIGEST Retail Banker International

fixed term savings, as well as will Services Hub. DISTRIBUTION in a strong position to support offer secured lending to SME Also, Worldline will provide African Bank growth." businesses. additional identity verification relaunches in South During the course of 2016, and other issuing-related ser- Africa STRATEGY the challenger bank will launch vices. Barclays concludes more products and app upgrades, Wolf Kunisch, head of the sale of retail, wealth, in a phased roll-out. global business line financial By the end of this year, it will processing & software licens- insurance businesses in offer fixed term savings, current ing and managing director of Portugal accounts, overdrafts, debit and Germany & CEE at Worldline Barclays Bank has wrapped up credit cards, instant access sav- said: "Our agreement with the sale of its retail banking, ings and residential mortgages, Gemalto will allow banks to wealth and investment manage- serviced via the app. get fast access, through exist - ment and a part of its corporate CEO Mark Mullen said: ing connections, to many third African Bank has reopened banking operations in Portugal "This is the start of a remarkable party wallet platforms, thanks its doors in South Africa after to Spain's Bankinter. transformation of the banking to our joint expertise's and remaining under curatorship for It has also closed the sale of landscape for everyone. Atom Allynis Trusted Services Hub, 20 months. its Portuguese insurance busi- aims to offer a genuine alterna- while keeping control and flex- The bank said that it will ness to Bankinter Vida that runs tive to the insidious and self- ibility on the use of the pay - retain its previous name and cor- an insurance joint-venture with interested banks that dominate ment data." porate identity, and has started Mapfre. the UK banking landscape. Our operations with an equity base As part of the deal, 84 branch- approach will be to constantly PRODUCTS of ZAR10bn ($665.3m) and a es along with about 1,000 bank- evolve and extend our offering, US digital bank Simple cash position of about ZAR24bn ing and insurance employees with monthly updates to our app to move accounts ($1.6bn). of Barclay have migrated to and a dedication to providing The new lender will shift away Bankinter and Bankinter Vida. better value, greater transparen- to BBVA Compass from its previous unsecured Barclays co-head of non-core cy and a much more innovative platform lending model. It will now offer Harry Harrison said: "Complet- banking experience. US-based digital lender Simple a range of financial products, ing the sale of Barclays' retail, The digital bank, created has announced plans to trans- while including services such as wealth, insurance and part of in April 2014, is led by Mark fer all its customer accounts to financial advice. the corporate banking business Mullen and chairman Anthony BBVA Compass platform later "About two-thirds of the in Portugal today demonstrates Thomson. The bank raised over in 2016. bank's issued debt is today list- further progress towards our £135m ($192m) in capital since The development will make ed on the Johannesburg Stock target of managing down Risk its creation. Simple the first actual user of Exchange Ltd, the London Stock Weighted Assets in Barclays In November 2015, BBVA BBVA's API in the US. The move Exchange and the Swiss Securi- Non-Core to around £20bn agreed to invest £45m for a will allow Simple to gain access ties Exchange. The remaining ($28.4bn) by the end of 2017. 29.5% stake in Atom, becom- to BBVA Compass' platform, third will be held in the form The sale is also expected to ing the largest shareholder in the provide real-time services and a of unlisted corporate bilateral reduce BNC annualised costs by challenger bank. broader portfolio. deposits," the bank stated. £72m." The digital bank will, however, The bank was placed under The sale of these Portuguese MOBILE retain its managerial autonomy curatorship by the South Afri- non-core assets leads to a fur- Gemalto and Worldline after the integration. can Reserve Bank on August ther reduction in risk weighted join forces on mobile "Simple will continue being 2014, following its collapse due assets of about £1.8bn, the Brit- Simple, but will now ben - to bad debts. Tom Winterboer ish lender said in a statement. wallet onboarding efit from the strengths of BBVA was appointed as the curator. Barclays will however, con- Worldline, a provider of pay - Compass' platform. The integra- PwC chief restructuring advi- tinue to run its Barclaycard divi- ments and transactional ser - tion will further consolidate the sor to the African Bank group sion, as well as investment bank- vices, has partnered with Dutch ties that bind both companies, David Gard said: "The cura - ing and multinational corporate digital security firm Gemalto to allowing them to join forces torship was an essential tool to banking operations in Portugal. work together to make mobile while remaining independent," create operational stability and payment deployment fast and BBVA said in a statement. time to optimise the resolution DISTRIBUTION easy for bank and card issuers. Simple was acquired by BBVA plan. The proposed restructur- Banco Santander The deal will enable the two in 2014. Among its various ser- ing saw over 95% of the senior to shut down 450 companies to provide banks an vices include the Safe-to-Spend creditors accept the proposal in end-to-end ready-to-use and that offers customers knowl- which they agreed to an effective branches in Spain customisable service. edge on what they can safely 10% haircut with 90% of their Spanish banking group Banco Under the deal, Worldline spend today without hurting debt being exchanged for similar Santander is set to shed 450 will provide tokenisation, themselves in the future, and a instruments in the new African branches in Spain in a bid to cut while Gemalto will ensure the built in savings and budgeting Bank. costs and ramp up its focus on highly secured credential deliv- feature known as Goals that The structure implemented digital banking. ery services to embed these helps customers balance regu- ring fences new capital from The affected branches repre- tokens into smartphone mobile lar monthly expenses, lifelong possible historic problems and sent 13% of the bank's 3,467 wallets using its Allynis Trusted dreams, among others. leaves the new African Bank branches in Spain.

18 y May 2016 www.retailbankerinternational.com

RBI 725.indd 18 22/04/2016 16:34:54 Retail Banker International NEWS: DIGEST

"Spain's financial sector is various national policies such European-wide pessimism about ue to take their toll. The UK is an confronting a period of great as Belt and Road initiative, the the sector, has fallen over the last exception, given the more posi- change. The current economic internationalisation of the year as risk, regulation and cost tive outlook in that market, but context, greater regulatory Renminbi and the Going-Global cutting dominate the agenda," pressure continues to be evident requirements and the evolution of Chinese enterprises. the study stated. even in the UK market, especially of client behaviour toward new The bank said that in order to However, 83% of UK bankers in terms of remuneration and technology makes it necessary support greater collaboration, have forecast growth in debt and reputation." to move more quickly in our ICBC's overseas banking arm equity market issuance in 2016. commercial transformation," ICBC (Asia) has inked coopera- Bankers across the UK have also M&A Santander Spain country head tive agreements with the State anticipated increase in capital Poland’s Alior Bank to Rami Aboukhair said in the Development and Investment, markets activity. take over Bank BPH's memo. China XD Group, China Reform Also, corporate and retail The move will mainly affect Holdings, and PowerChina banking are expected to have an core business from GE smaller branches, most of which International Group. improved outlook in 2016, with employ less than four staff. ICBC (Asia) chairman and 68% and 67% of respondents Aboukhair said that shrink- executive director Chen Aip - respectively rating their outlook ing its smaller branch network ing said: "Our parent company, as good or fairly good, the study would enable the bank to focus ICBC, has previously affirmed revealed. on larger and more efficient ICBC (Asia) as the Group's off- In Europe, bankers anticipate branches, adding that plans are shore Renminbi trading centre. lending policies to the majority on to open 350 such branches in Today, we are again acknowl - of sectors to become less restric- 2016. edged and supported by our tive over the course of 2016, Poland's Alior Bank has Following the closure, some parent company, to establish the mainly due to banks' stronger agreed to purchase Bank employees will be reassigned Asia-Pacific Business Depart- capital positions and ongoing BPH's core bank from General while others are expected to be ment specifically responsible for monetary easing by the Euro - Electric (GE) in a deal worth made redundant, the bank stated. coordinating the development pean Central Bank. PLN1.23bn ($331m). In addition, Banco Santander of the Group's related business Further, 47% of UK bank - The core bank comprises is set to slash 1,200 jobs in Spain in Asia, Australia and New Zea- ers have said that they expect of the non-mortgage banking as it shrinks its branch network. land. to see sales of assets, with 32% assets of Bank BPH and associ- About 950 of the layoffs will "This fully reflects the assur- expecting that the assets will be ated employees. affect the bank's branches, while ances and expectations from the purchased, and 21% expecting The price paid by Alior Bank the remaining will affect the cen- parent company on us for the to see joint ventures across the for the acquisition will be 0.93 tral services unit, according to development of overseas mar- market. times the book value of BPH. the UGT union. kets, especially in the Asia Pacific Also, 23% of respondents The combined entity will man- Half of the redundancies will region." believed that collaboration with age PLN60bn in assets. be made through early retire - fintech will be significant for GE will however, retain ment and will get 70% of their RESEARCH their institution. BPH's $3.9bn mortgage port- annual pay. Rest of the employ- European banks’ Managing reputational risk folio and its asset management ees will be offered incentives to overall optimism falls remained the top priority for unit BPH TFI. leave. UK banks, with over 90% of UK Majority of Bank BPH's to its lowest level since bankers citing the same. workforce and branches will 2012 DISTRIBUTION The study also revealed Euro- join Alior Bank as part of the ICBC sets up Asia pean banks placing greater pri- transaction. Pacific Business ority on cybersecurity, with 56% The deal, scheduled to be citing it as important compared completed in the fourth quar- The Industrial and Commer- to 48% last year. Cybersecurity ter of 2016, is subject to regula- cial Bank of China (ICBC) has also remained a major concern tory approvals. launched its Asia Pacific Busi- for over 75% of UK bankers. Alior Bank CEO Wojciech ness to develop its business in Also, 56% of UK bankers pre- Sobieraj said: "Signing of the Asia, Australia and New Zea- dicted headcount reduction to agreement to acquire the Bank land. Overall optimism among banks occur, a rise from 34% a year BPH's core business confirms The new business encom - in Europe has dropped to its ago. earlier announcements that passes 20 countries and regions, lowest level since 2012, a peri- Banks across Europe predicted Alior Bank will actively par - which include the UAE, Qatar, od considered to be the peak of ongoing moderation of pay, due ticipate in the consolidation Kazakhstan, Kuwait, Myan- Eurozone debt crisis, according to weak business performance, of the banking sector. Thanks mar, Australia, Indonesia, Japan, to a survey by EY. regulatory and shareholder pres- to the transaction the Bank Pakistan, Korea, Malaysia, New Only 52% of the respondents sure. will acquire an attractive and Zealand, Philippines, Singapore, anticipated industry perfor- EY global banking & capital complementary to its business Thailand, Vietnam, and the Far mance to improve in the coming markets lead analyst Karl Meek- part of Bank BPH. The merger East areas of Russia. year, which is a fall from 56% in ings said: "It is clear that bank- of the two banks will enable The bank said that the new the prior year. ing in Europe remains in a state the achievement of significant division will look to capitalise "The outlook amongst UK of adjustment, as regulatory and synergies, as well as a further on the opportunities offered by banks, in line with a growing economic developments contin- increase in efficiency."<

www.retailbankerinternational.com May 2016 y 19

RBI 725.indd 19 22/04/2016 16:34:55 GUEST COMMENT: ALLIED WALLET EUROPE Retail Banker International

Making high-risk business models successful

Steve Wilson, Managing Director at Allied Wallet Europe Editor: Douglas Blakey Tel: +44 (0)20 7406 6523 Email: [email protected] rganisations working within what are The short answer is that often they have a clearer Deputy Editor: Anna Milne termed high-risk business sectors typically focus on and understanding of businesses within the Tel: +44 (0)20 7406 6701 find it a particular challenge to secure card high-risk sector. They understand the factors that Email: [email protected] acceptance services from the major banks. raise the risk and that are associated with the busi- Reporter: Patrick Brusnahan O Tel: +44 (0)20 7406 6526 That’s largely because these banks believe that the ness models of these organisations and they have business models of these companies will lead to the experience and expertise to help them deliver Email: [email protected] fraud and reputational damage. payment processing to their customer base while at Asia Editorial: Xiou Ann Lim Email: [email protected] The term, high-risk, is often applied by banks to the same time helping to lower that risk. Group Publisher: Ameet Phadnis businesses in sectors that have historically attracted Enhanced due diligence during the onboarding Tel: +44 (0)20 7406 6561 higher than average problems. More often than not, process will typically be the first step payments Email: [email protected] though, it is not the product or service being offered processing providers take. Generally, this will Sub-editor: Tom Langfield that is the major issue for the banks, it’s the business involve using both automated and manual systems Director of Events: Ray Giddings model. However, if the sales proposition is clear to to analyse the risk history of the merchant in more Tel: +44 (0)20 3096 2585 the consumer, and is supported by the highest qual- detail and using a raft of industry data sources to Email: [email protected] ity customer service and distribution, potential risk on-board merchants more quickly while boosting Head of Subscriptions: Sharon Howley Tel: +44 (0)20 3096 2636 can be kept to a minimum. However, if it is handled their customers’ level of reassurance and comfort Email: [email protected] poorly – if the product offering is vague or mis- with the service provided. Enhanced due diligence Sales Executive: Alexander Koidis leading, for example - it will lead to confusion for may be a one-off process but providers will also Tel: +44 (0)20 3096 2586 customers, complaints and increased risk. need to continually refresh their understanding of Email: [email protected] The risk itself could be financial – a higher inci- the merchant’s business model and the vertical sec- Customer Services: dence of fraud or disputed transactions, for exam- tors it operates in and keep fully up to date with best Tel: +44 (0)20 3096 2636 or +44 (0)20 3096 2622 Email: [email protected] ple, leading directly to more chargebacks, fines and and worst practices in those industries. For more information on Timetric, visit our sanctions. Equally, it could be reputational. This They can be still more proactive, of course, help- website at www.timetric.com. As a subscriber, is typically the case where there are groups which ing to further reduce the merchant’s risk levels while you are automatically entitled to online access to have entrenched issues with the products being sold; also increasing customer trust in a range of other Retail Banker International. For more information, please telephone +44 (0)20 7406 6536 or email where there is the possibility of an unforeseen event ways. This could involve assisting in redesigning [email protected] occurring, or an inability to distribute or make avail- the website to ensure that the service and sales London Office able products already sold to customers. proposition offered is as clear and compelling as 71-73 Carter Lane Banks are likely to shy away from such businesses possible; helping to keep engagement levels high London because of the possibility of being adversely affected and churn levels low, or it could be about increasing EC4V 5EQ by any reputational damage incurred. Fundamen- the amount of outbound calls made to customers to Asia Office tally good businesses that have suffered such issues ensure that any issues are identified early. 1 Finlayson Green, #09-01 Singapore 049246 in the past therefore often struggle to find banks All of this in turn helps to ensure that customers Tel: +65 6383 4688 willing to take them on. Sometimes a specific inci- are getting the products or services they have pur- Fax: +65 6383 5433 dent, a distributor going bust, for instance, leading chased and that they are happy with them, in that Email: [email protected] to delivery problems and customer complaints can way minimising the chances of issues occurring. It Financial News Publishing Ltd, 2012 Registered in the UK No 6931627 result in rejection by the incumbent bank and make also acts as an early warning system, alerting the Unauthorised photocopying is illegal. The contents it difficult for the merchant to find an alternative provider promptly if it does see a problem arising. of this publication, either in whole or part, may not option for their payments processing. A good processing partner will use their many years be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, To minimise problems, the sales proposition of experience to ensure the merchant has ‘best in mechanical, photocopying, recording or otherwise, needs to be clear; the customer should understand class’ service which reduces risk, increases customer without the prior permission of the publishers. For information on additional copies or syndicatedonline what they are paying for, how much, and what to satisfaction and ultimately leads to higher revenue. access to this newsletter, please contact Customer do if they have any questions or issues. This has to be an ongoing monitoring process of Services. The business may be otherwise sustainable but the course. Risk management has to continuously be reputational damage is such that it may nevertheless aware and keep track of emerging threats. There has struggle to find another payment services provider to be a balance between understanding and man- willing to take it on. So what’s the answer - how aging the threats so as to safeguard partners and can these organisations repair the damage caused customers, but also maximising the opportunities by incidents like this and find a legitimate means of for a legitimate sustainable organisation to flourish selling their goods? regardless of the sector in which it operates. If the business is legal, sustainable and transpar- An alternative approach ent, it has a right to trade. At Allied Wallet, before DID YOU KNOW? That’s where pure play payments processing provid- we engage with an organisation, we would typically Your subscription to this newsletter entitles you to access its five-year online archive. Go to www. ers can play a key role. Unlike many of the banks, ask questions like has the company got a genuine retailbankerinternational.com the most flexible and versatile of these organisations market, is it truly transparent and does it have a are often prepared to take on high risk businesses good customer service model set up? If the answer and provide them with payment services. But why is consistently yes then we can work with the busi- is this and how exactly do they achieve it? ness to get the right processing solution for them.

20 y May 2016 www.retailbankerinternational.com

RBI 725.indd 20 22/04/2016 16:34:57 Title Sponsor

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