Retail Banking 2020 Evolution or Revolution?

Powerful forces are reshaping the banking industry. Customer expectations, technological capabilities, regulatory requirements, demographics and economics are together creating an imperative to change. Banks need to get ahead of these challenges and retool to win in the next era. Banks must not only execute on today’s imperatives, but also radically innovate and transform themselves for the future.

www.pwc.com/banking Contents 03 Foreword 05 Executive summary 08 Impact of global macro-trends

10 Rise of state-directed capitalism 11 Technology will change everything 14 Demographics changing priorities and opportunities for growth 15 Social and behavioural change 17 Potential disruptors to this future 18 Evolution and disruption – an imperative for change

19 Six priorities for 2020 22 Developing a customer-centric business model 25 Optimising distribution 28 Simplifying the business and operating model 32 Obtaining an information advantage 35 Enabling innovation, and the capabilities required to foster it 39 Proactively managing risk, regulations and capital

41 Conclusion 42 Contacts Foreword

Bob Sullivan PwC (US) Global Banking and Capital Markets Leader We believe that retail banking will look very different in 2020 To produce this paper, we integrated insights than it does today. from PwC teams worldwide. We surveyed 560 client executives from leading financial institutions across 17 markets regarding the challenges and opportunities of this Many have predicted the fall of the relentlessly against today’s imperatives, but evolving marketplace and their plans to John Garvey traditional bank, as disruptive new entrants will also innovate and transform themselves respond. We developed a point of view PwC (US) win share by offering a better customer to prepare for the future. This future will regarding how mega-trends will impact the US Banking and Capital Markets Leader experience through new products and require institutions to be agile and open, future of banking, using PwC’s proprietary channels. Yet, despite the emergence of new ready to explore different options in an Project Blue framework. And we developed competitors and models, we believe the uncertain world. six priorities for retail banks today to help traditional bank has a bright future – the ensure their future success. fundamental concept of a trusted institution So is this change a revolution, or an acting as a store of value, a source of evolution? In truth, it is both. All the We look forward to engaging in a provocative signposts for change are here. Many players finance and as a facilitator of transactions dialogue with you and your colleagues, Justo Alcocer is not about to change. However, much of are innovating and experimenting with new going forward. We would be pleased to PwC (Spain) the landscape will change significantly in products, delivery channels and analytics. share additional points of view, information EMEA Banking and Capital Markets Leader response to the evolving forces of customer The industry has historically changed slowly and insights, as appropriate. Feel free to expectations, regulatory requirements, – evolutionary change. And the changes reach out to one of us or your existing PwC technology, demographics, new competitors we envision are less about imagining contacts to start the dialogue. and shifting economics. some unknown future, and more about implementing and integrating all the things Banks need to choose what posture to adopt we know today (see the sidebar on the next against this change – whether to be a shaper page). Yet the pace of change is increasing Antony Eldridge of the future, a fast follower, or to manage rapidly – banks that fail to shift gear risk PwC (Singapore) Asia-Pacific Banking and Capital Markets Leader defensively, putting off change. Staying being left behind. And if any institution could the same is not an option. We believe that truly master all the priorities we set out in the winners in 2020 will not only execute Section 3, it would be revolutionary indeed.

PwC Retail Banking 2020 3 Retail Banking Anna, 56, boards a high-speed train for her She then watches a message from the bank’s The next day, Anna accepts an invitation for commute to one of the world’s emerging leading education expert, suggesting it is a video conversation with her bank business 2020 – Evolution megacities. She settles in and blinks twice, time to set up a university savings account adviser. The bank had been monitoring activating the display in her glasses. She is for her 13-year-old son. The adviser asks the favourable social media coverage Anna or revolution? Will authenticated by retina scan, and reviews her whether Anna expects her son to attend the has been receiving and concluded that her you be ready to serve messages. new flagship online university, or a much business might need additional services. more expensive residential programme The business adviser has already arranged this customer? A message from her financial adviser notes overseas. She quickly outlines the estimated for a commercial estate agent and loan they sold her holdings from a recent IPO and costs and benefits of each, taking into account officer to join them, and they discuss Anna’s transferred the proceeds into a new African Anna’s age and planned retirement at 70. questions and offer advice on a range of high-tech fund. She made this decision after She recommends the flagship, and suggests small business topics. She shares that she consulting with her financial adviser and supplementing her son’s education with less is thinking of expanding her business into reviewing recommendations from several expensive summer programmes in Mumbai, additional locations, and they explain the independent investor analytics engines San Francisco and Beijing. Anna agrees, and difference between the bank’s products and she reached through her bank’s wealth the adviser seamlessly sets up the savings the government small business facility, which management platform. account and the auto-deposit. offers less service, but a lower rate of interest and longer repayment periods. Also, Anna is At lunch, Anna browses the local electronics passionate about environmental protection. display, where the latest holovision catches The bank recognises this, and through its her eye. A quick scan from her glasses returns own programmes and partnerships, is able customer recommendations, coupons and to present an offer where Anna’s use of the financing offers from multiple providers bank’s products results in direct donations to including her own bank (which itself has Anna’s favourite charity. She accepts – happy instantly reviewed the returns from the she has found a bank that really seems to scan to ensure their offering is competitive). understand her. She makes her choice and completes the purchase, using a new peer-to-peer lender that offers a more competitive rate, due to a lower cost structure, thanks to a lack of legacy infrastructure and a less stringent regulatory regime.

4 PwC Retail Banking 2020 70% of global bank executives believe it is very important to consider how macro trends will impact the banking industry in 2020 Executive summary Powerful forces are shaping the industry

Powerful forces are transforming the retail banking industry. Against this background, 70% of global Executives also differ in their views by Growth remains elusive, costs are proving hard to contain and ROEs banking executives believe it is very geography. For example, fewer US executives important to form a view of the banking think it important to form a view of the remain stubbornly low. Regulation is impacting business models market in 2020 – to understand how industry in 2020 (61%) than executives in and economics. Technology is rapidly morphing from an expensive these global trends are impacting the the emerging markets (79%). And many challenge into a potent enabler of both customer experience and banking system in order to develop a more US executives view non-traditional effective operations. Non-traditional players are challenging the winning strategy. new market entrants as a threat (71%), than executives in Asia (42%), where more view established order, leading with customer-centric innovation. New Executives are divided as to who will be the them as an opportunity (44%) for partnering service providers are emerging. Customers are demanding ever higher primary beneficiaries of these trends. Just and prospering together. This divide between levels of service and value. Trust is at an all-time low. over half (54%) believe that large banks will developed and emerging market thinking is a be the winners in 2020. The other half (46%) theme throughout the survey. see smaller banks capturing share through increasing differentiation. Executives are In Section 2 we address these questions also divided as to the threat posed by non- and concerns, and consider how global traditional new players: 55% believe they macro-trends will impact the retail banking pose a threat to traditional banks, while industry. 31% believe they present innovative Fewer than 20% of executives partnership opportunities. feel well-prepared for the future 55% of bank executives view non- traditional players as a threat to traditional banks

PwC Retail Banking 2020 5 Figure 1: Importance of considering the banking market in 2020 Today’s challenges Bankers tell us they are working harder than Unsurprisingly, nearly all bankers surveyed ever before to address these challenges, and view attracting new customers as one of are consistently being asked to do ‘more their top challenges over the next two years with less’, given the continued cost pressure – banks are hungry for growth, and finding facing the industry. ‘Execution, execution, Emerging Markets new customers is the first response of a execution’ is the mantra, particularly for USA Europe 79% good product banker. However, banks also banks in the US and Europe. 61% 67% recognise the need to deepen their customer relationships and focus more on specific Priorities for 2020 Asia-Pacific customer outcomes. Hence, enhancing However, the pace of change is increasing 71% customer service is the number one and banks need to do even more to ensure investment priority for banks, globally. they are well-positioned to succeed in the future. Through our proprietary research The impact of complying with growing and and insights from client engagements, we changing regulation remains a top challenge have identified six priorities for success in – indeed the number one challenge for US 2020. They are: and European banks. Unsurprisingly, this Source: PwC Banking 2020 Survey is a top investment priority for banks in 1 Developing a customer-centric business these regions. Bankers also tell us informally model that they are still struggling to get ahead Figure 2: Non-traditional players – Threat or opportunity? of this challenge and develop a proactive 2 Optimising distribution stance with their regulators – to stop seeing  regulation as a burden and start weaving 3 Simplifying business and operating US regulatory compliance into the fabric of  models their operations.

Europe In the more rapidly developing Asian and 4 Obtaining an information advantage emerging markets, where big, established Emerging Markets banks have less dominance, bankers report 5 Enabling innovation, and the that attracting talent and retaining existing capabilities required to foster it Asia-Pacific customers in face of fierce competition and new market entrants are also top 6 Proactively managing risk, regulations challenges. R&D, innovation and new  0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% and capital product development are the top investment n Threat n Threat, only if inferior technology n Opportunity priorities in these regions. Despite broad agreement that they are all very or somewhat important, fewer than Source : PwC Banking 2020 Survey 20% of executives feel that they are very

6 PwC Retail Banking 2020 Figure 3: Top 3 challenges Figure 4: Top 3 investment priorities prepared against these priorities, and only a similar percentage report that USA USA they are making significant investments 90% of in these areas. Regulatory compliance 47% Regulatory compliance 56% executives Banks universally agree that they are hindered from addressing these priorities believe that Attracting new customers 35% Enchancing customer service 46% by financial, talent, technology and each of these organisational constraints. Banks need Implementing new Increasing customer profitability 33% 30% priorities is technology to take aggressive action to ease these constraints, and manage themselves in a important; Europe Europe more agile manner to enable innovation and transformation, while preserving only 20% of Regulatory compliance 40% Enchancing customer service 56% their optionality to capitalise on market opportunities and address unexpected executives feel challenges. Attracting new customers 33% Regulatory compliance 36% very prepared To succeed in this rapidly changing to address them Implementing new Loss of trust 31% technology 27% landscape, banks need to have a clear sense of the posture they wish to adopt – whether Asia-Pacific Asia-Pacific to shape the industry, rapidly follow the leaders, or manage defensively, putting Attracting and retaining talent 38% Enchancing customer service 51% off change. And they need to have a clear strategy to deal with these challenges

Attracting new customers 34% R&D and innovation 40% and address these priorities, including considering partnerships with third parties and applying lessons from other industries. New market entrants 25% New product development 34% Of course, the level of focus on each of them depends both on a bank’s starting point, Emerging Markets Emerging Markets and its unique strengths and challenges. However, each priority is important, and Attracting new customers 47% Enchancing customer service 47% success will come from a balanced execution across them – and a balance of tactical Attracting and retaining talent 43% R&D and innovation 36% initiatives and longer term programmes, all coming together as an integrated whole.

New market entrants 29% New product development 32% We discuss this further in Section 3.

Source: PwC Banking 2020 Survey Source: PwC Banking 2020 Survey PwC Retail Banking 2020 7 Impact of global macro-trends on retail banking

To help frame the discussion of what banks should do (see Section 3, ‘Six Priorities for 2020’), we first consider the macro-trends that are shaping the global financial landscape, building upon PwC’s substantial research effort in this area, Project Blue*. We framed this research around the following seven trends: global instability, demographic change, technological change, social and behavioural change, the rise and interconnectivity of the emerging markets, the rise of state-directed capitalism and the war for natural resources.

* For further information on Project Blue, please visit www.pwc.com/projectblue

8 PwC Retail Banking 2020 Figure 5: Project Blue – Framework and impact on banking landscape Of course, each of the macro-trends has a different impact on the retail banking industry, as well as on each specific institution. In this section we consider, Global Instability in depth, the following four mega-trends

Adapt Regulatory environment Fiscal pressures Political and social unrest we consider to have the greatest impact, although our thinking is informed by them all: • Population growth • Changing family structures Demographic discrepencies • Belief structures • Rise of state-directed capitalism – change • Ageing populations regulation reshaping the industry and dictating business models. • Disruptive technologies • Technological and scientific Technological impacting FS R&D and innovation change • Technology will change everything – • Digital and mobile becoming a potent enabler of increased service and reduced cost; innovation is • Urbanisation • Changing customer Social and behavioural imperative. • Global affluence behaviours – social media change • Talent • Attitudes to FIs • Demographics – changing priorities and

Plan opportunities for growth. Rise and interconnectivity • Economic strength • Capital balances of the emerging markets • Trade • Resource allocation

Project Blue Framework (SAAAME) • FDI • Population • Social and behavioural change – rising customer expectations and the need to • State intervention • Investment strategies regain public trust. Rise of state-directed • Country/city economic • SWFs/development banks capitalism strategies We also consider potential disruptors to those trends, and their implications. • Oil, gas and fossil fuels • Ecosystems War for natural • Food and water • Climate change and resources • Key commodities sustainability

Source: PwC Project Blue

PwC Retail Banking 2020 9 Nation-states are seeking to better control • More local markets will close to • Regulated banking assets will be Rise of state- their financial systems and the institutions outsiders. Traditionally restricted significantly smaller than today directed capitalism – within their borders, as they learn that a markets such as China, India and Korea (adjusted for inflation and GDP), due to global banking system becomes local in a will be joined by others that limit market the regulatory attempt to significantly regulation reshaping crisis. Stability is paramount, and central share for foreign institutions through reduce ‘sovereign risk’ through stronger the industry and banks are heavily involved in managing local regulation and subtle preferences capital requirements. The shadow banking markets. Regulation is increasingly favouring domestic institutions. This, in industry – absent changes to the rules – dictating business prescriptive and local in nature. At the same turn, will limit the ability of emerging will continue to grow to fill as much of models. time, governments are seeking greater market financial institutions to penetrate the gap as it can, perhaps merely pushing influence over the financial system to markets outside of their home countries. future problems outside of the regulated advance various policy objectives including The exception to this will be that regional industry. The pressure on the regulated the fight against terrorism, promoting and bilateral trade pacts concluded industry will be particularly intense lending to certain favoured sectors (e.g. over the next five years will drive select in those markets with growing students, housing, small businesses, opportunities for certain institutions appetites for credit. national champions), financial inclusion where financial services are included in and supporting the housing markets. These the scope of the agreements. • Banking sector size will be more closely trends, in our view, have a number of correlated to GDP than today. By 2020, years to play out and impact the nature • Governments will influence through smaller countries with large institutions of the industry in 2020. Specifically, we regulation rather than ownership. They will have shrunk their banking sectors, predict that: will move to privatise state-owned banks relative to GDP, through a combination of as the impact of politically driven credit asset reduction efforts, business sales and • The playing field shifts from global to decisions in the aftermath of the financial subsidiarisation. At the same time, there local. National and regional institutions crisis is more fully exposed. Schemes will be significant growth will dominate. Developed-world banks, for lending and government-owned of domestic banks, particularly in especially in the EU, have been in retreat financial institutions that channelled emerging economies. to their home markets since the crisis, credit largely based upon policy objectives and we expect this to continue. Historical will have absorbed significant losses on • Leading institutions will practise perceived advantages of global banks, such non-performing loans by 2020, with proactive regulatory management. as economies of scale (oft sought, yet rarely negative impact on both capital levels and Thirteen years after the financial crisis, captured), will become outweighed by political support for continued aggressive the relationship between banks and local regulatory constraints. Local lending expansion. At the same time, banks their regulators will have reached a new activities will need to be matched more will be increasingly pressured on various equilibrium as banks more fully integrate closely with in-country deposits. Global social responsibility fronts, including the policy objectives of governments and banks will be forced to compete on a local fees, affordable housing, and their regulators into their day-to-day basis – they will focus and double-down on anti-money laundering. business. fewer markets where they can gain scale, and they will exit markets where they 10 PwC Retail Banking 2020 are subscale. In the last few years technology has rapidly management businesses. In 2020, we predict will start to struggle, due to structurally Technology will evolved – big data, cloud computing, the following: uncompetitive economics. In heavily change everything smartphones and high bandwidth are all now banked markets such as the US, we expect commonplace – and we’ve reached a tipping • Every bank will be a direct bank; at least 20% fewer branches by 2020, and – becoming a potent point. Analogies with other industries (e.g. branch banking will be undergoing that this trend will continue to accelerate. enabler of increased music and video distribution, print media) a significant transformation. As Emerging markets will continue to suggest that ‘digital’ will drive huge shifts technology enables every aspect of develop their physical footprints, using a service and reduced in industry value – compressing revenues, banking to go online, and as cash growing range of points cost; innovation is enabling new attackers, redefining service usage falls away, traditional branches of presence. and crippling the laggards. are no longer necessary. Given their imperative high-fixed cost, branches will need to • Competitive reach is no longer We are in the middle of a multiwave become dramatically more productive, determined by branch networks, trend where digital is first focused on or significantly less costly. Banks have rather by banking licences, technology optimising current products and services. already reduced staff levels, closed the and advertising budgets. When every The second wave, where enhanced data most uneconomic branches and started aspect of banking can be done online, capture and analysis drives more targeted experimenting with new branch concepts. a bank’s target market and competitive customer offerings and improved services is We expect these trends to accelerate, as arena is no longer defined by its physical underway. Mobile banking will increasingly customer expectations and behaviours footprint, but by its technology, regulatory disrupt distribution models (e.g. instant evolve. Branches will remain, but take boundaries and marketing budget. New videoconferences with product experts) many forms, from flagship information, entrants will no longer have their pace of and the payments industry (e.g. P2P mobile advisory and engagement hubs (offering expansion constrained by the availability payments). Advances in security and education, financial advice, full-service of acquisition targets and/or prime retail verification will enable all aspects of sales, capabilities and community offerings) locations. In developed markets such as service and delivery to be conducted online. to smart kiosks (offering service, sales, the US, for example, top regional banks Technology is making it easier for customers cash and video contact with a range of could become viable national players to switch banks, making relationships much specialists). Leaders will rapidly improve and ambitious foreign entrants with less sticky. This will drive the third wave, their footprints, reducing branch size resources but without footprint could where banks and their partners develop and costs, introducing new models and finally compete on a larger field. New sophisticated profiles on each of their migrating transactions to low-touch entrants could grow rapidly, potentially customers. digital channels. Digital capabilities creating dozens of new competitors and will improve, so that branch service refragmenting the landscape. Further, we The pace of innovation will continue to officers and bank customers use the will see ever-more competition from non- increase, and leading banks will need to same platforms, with the same look and bank players. Branding and marketing will enable or leverage this innovation. All of this feel. The human touch will always be be more important than ever before. will accelerate the evolution of leading banks available, just much more through digital into customer-centric information and risk- channels. Banks that are behind this trend

PwC Retail Banking 2020 11 • Surviving banks will be low-cost • The smart device will grow in • Industry utilities will arise in nearly producers, with nearly every product importance, and take its place every area of infrastructure (similar Technology will profitable on a stand-alone basis. alongside cards as the primary to the US ‘bank in a box’ vendors change everything Conventional wisdom suggests banks medium for consumer payment. The such as Fiserv), as cost pressures and that engage certain customer segments customer will be able to select between technological advances force banks – becoming a potent holistically with targeted offerings, account providers (e.g. credit providers, to focus on customer service and enabler of increased advice and solutions will maintain high deposit accounts) or locally stored risk management, rather than the margins. We agree. There is a premium value. Acceptance will be universal development of undifferentiated and service and reduced customer segment that will find this (with common cross-network payment expensive processing and payments cost; innovation is holistic approach very valuable. However, protocols) and value-transfer instant. infrastructures. A number of large banks new entrants will be offering similar Multi-currency capabilities will become with processing scale and efficiency imperative high-value services, unencumbered by the normal. Customers will be able to make will commercialise all or part of their massive legacy cost bases of traditional contact payments or send funds to operations and technology departments banks. So, even those banks targeting any other unique identifier (e.g. email and offer services to other banks. Groups the highest-value customer segments will address, phone number, bank account, of banks might partner to achieve scale need to restructure their cost base, while credit card number, etc.). Transfers of and find best practices, combining at the same time investing in areas such as locally stored value may be both traceable their infrastructure into joint ventures. customer analytics and compliance data. or untraceable, depending on service Existing technology service providers And needless to say, those banks targeting provider, as a result, removing removing will significantly expand the services mass-market customers with simple the last powerful incentives to use cash they offer. Likely examples of processes products will also be dependent on their – privacy, tax avoidance, lack of access provided by utilities include customer ability to compete on cost. As the pain of to banking services. Cards will remain authentication, fraud checking, payments’ switching providers continues to decrease, popular, as they are quick, effective, allow processing, basic account infrastructure customers will become even more mobile easy compartmentalisation of spend and and KYC processing. – intensifying competition across all don’t run out of power. segments. Every traditional bank needs to become the lowest cost producer, and • Biometrics (e.g. fingerprints, voice (nearly) every product needs to have recognition) will become commonplace acceptable returns. Moreover, the lowest in transaction authorisation, but will cost in 2020 will be up to 50% lower on a remain tied to a replaceable physical per transaction basis than today, as banks device (e.g. smartphone). Biometrics redesign their processes and systems for are unique and unchanging, yet can be the digital age, structurally changing their captured and replicated, so two-factor cost base and instituting more aggressive authentication (e.g. my fingerprint and ongoing cost management processes. my phone) will always be required.

12 PwC Retail Banking 2020 • Most cross-border knowledge transfer of capital, best practices and innovations will take place through new market entrants, third-party partnerships and intermediaries, rather than through cross-border banking institutions. We see a significant rise in cross-border banking partnerships and the increasing development of cross- border service providers and advisers to fill the intellectual property gap caused by the shrinking of cross-border banking. This movement is a direct response to the localisation of the global banking system, and the constraints on deploying capital across different jurisdictions. More specifically, we predict a growing mismatch of excess deposits in the developed world and banks unable to satisfy consumer credit demands in the developing world.

PwC Retail Banking 2020 13 Demographic changes will provide The global middle class is projected to grow • Cities will continue to grow in Demographics – opportunities for growth and will require by 180% between 2010 and 2040, with Asia attractiveness – as urban migration changing priorities innovation to develop new products outpacing Europe by 2015. Over the next 30 creates 1,000m new banked customers, and services. years, some 1.8 billion people will move into as well as 800m new urban unbanked and opportunities cities, mostly in Africa and Asia, creating one by 2040. for growth Developed-market populations are ageing, of the most important new battlegrounds for driving focus towards savings and investment financial services businesses. • Banking the unbanked (urban and and away from credit and consumption. The rural) will become a primary policy developing world is more mixed. China has By 2020, we expect: objective in both developed and a similar demographic profile to much of emerging markets, as governments the developed world, for example, which • Wealth management will move seek to reap the economic benefits of explains the reluctance of the Chinese state alongside deposit-taking as a baseline broader access to financial services for to create more of a credit-based ‘consumer service for retail banking. Banks without their populace. This push will drive culture’, despite internal and external a strong wealth offering will lose share, as new products and business models, pressures. Brazil, however, has a much customers take increasing responsibility and will become the primary focus younger population, and a rapidly growing for their lifelong financial well-being of governmental or state-sponsored appetite for consumer credit. and planning in both the developed and institutions, particularly where the private emerging worlds, and look for their bank sector is unable to fulfill the need. Individual life expectancy is rising, to meet this need. lengthening expected retirements. For example, a man born in the UK in 2020 is • Fee-based revenues will increase as expected by the government to live for 92 a percentage of total in developed years vs. 87 years for a man born in 1990; markets and China, as consumers use and the changes are far more dramatic in longer working lives to save more and emerging markets. take out less (pay down more) debt, and as banks favour growing business such as Public and private pensions will be wealth management and retail brokerage. restructured, cutting benefits and indexing In developing markets with economic and retirement ages to life expectancy. social stability, we will continue to see rapid credit growth.

14 PwC Retail Banking 2020 Customer expectations are being shaped By 2020 we expect: information and opinion (good or bad) Social and by their interactions outside of the banking can be amplified, creating new risks and behavioural change industry – they increasingly want the type • Banks will organise themselves around opportunities. Mastery of social media and quality of service they receive from customers instead of products or will be a core competency. – rising customer industries that place significant focus on channels. They will offer a seamless expectations and customer experience (e.g. the ease of use customer experience, integrating sales • Customer trust will be returning. of Baidu, the seamless integration of Apple and service across all channels. They will Some banks will benefit significantly the need to regain products across products and channels). develop the ability to view customers from taking a leadership role in the as a ‘segment of one’, recognising their public debate. The leading firms will public trust Customers are also increasingly connected uniqueness, and tailoring their offerings have reclaimed at least some of the high to others across social, geographic and so that customers view banks as ‘meeting ground they lost in the financial crisis and demographic boundaries. This ‘social world’ their needs’ not ‘pushing products’. begin to reshape public opinion. They will augments close friends and family as the inform and educate – from mass offerings primary source of information, opinion and • Banks (in most countries) will evolve on basic financial skills (imagine a bank- recommendation. The smallest piece of noise their customer experience to be more led MOOC on finance topics with high can be amplified massively and instantly. female-friendly. In one US survey, 73% school accreditation) to financial history, Everything from reputation to purchasing of women said they were dissatisfied with culture and economics, reminding us of decisions to sales channels is impacted. the financial services industry. Complaints the fundamental benefits of banking to range from a lack of respect, to being society. All major banks will incorporate Further, unprecedented numbers of women given contradictory advice and worse consumer education as part of their sales are heading households, controlling wealth terms than men. Winners tomorrow will process. For customers to trust their banks and spending, and becoming the primary address this through a combination of they need to feel that banks are acting in earners. In the US, for example, women branding, product and service solutions. their best interests – common practices control 50% of private wealth, head one- We expect many more bankers to be such as teaser deposit rates that reset after third of households, are the primary women in 2020, and many more banks to one year go against this, while the ability breadwinner in 40% of families and are publicly state this as an ambition. to design your own mortgage and control increasingly more educated than men. the flow and timing of paperwork is in line • Social media will be the media. Globally, women control 65% of consumer with this thinking. In any case, we see Today, we view social media as co- discretionary spending, and this is set to rise conduct risk moving from a largely Anglo- existing alongside traditional media. By in the coming years. Saxon concern to a global requirement 2020, social media will be the primary from an increasingly educated and Customer trust is at an all-time low, and medium to connect, engage, inform and empowered customer. they want their banks to be more socially understand your customers (from the responsible. They are also concerned about mass ‘social mind’ to the minutiae of privacy and security, as more of their each and every individual), as well as personal information and financial life the place where customers research and migrates online. compare banks’ offerings. And, as today, PwC Retail Banking 2020 15 • Cyber security is paramount to intervening – witness Waking Shark II, rebuilding this trust – winners will the Bank of England-led cyber-attack Social and have invested significantly in this area. wargame, simulating an attack on the UK behavioural change Recent high-profile security breaches financial system. But simply following and media commentary surrounding regulatory rules won’t allow the business – rising customer cyber attacks have generated fear and to keep pace with the constantly growing expectations and uncertainty, further eroding stakeholder and changing cyber threats. A proactive trust. There are now higher expectations response is vital. Key priorities include the need to regain about security of information and privacy identifying and focusing resources public trust among clients, employees, suppliers and on the ‘crown jewels’ most in need of regulators. Risks range from internal protection. By 2020, leading banks will misuse of social media to organised have developed cyber-security strategies cyber-crime (e.g. mass information theft, that are aligned with their business or denial-of-service attacks). In our recent objectives, risk-management protocols 17th Annual Global CEO Survey, we found and regulatory requirements. Many banks that 71% of banking and capital markets lack the resources to tackle these issues on CEOs consider cyber insecurity as a threat their own, and will have partnered with to their business prospects, more than third parties. any other sector. Regulation on cyber security is increasing, and regulators are

71% of Banking and Capital Markets CEOs see cyber insecurity as a threat to their business, more than any other sector. A proactive response is vital. PwC 17th Annual Global CEO Survey, Feb 2014

16 PwC Retail Banking 2020 Potential disrupters It is always easier to take the trends we see Healthcare and demographics bank model and accelerate the movement today and model their impact on the future. Do technological advances in health towards national vs. cross-border banks? to this future However, a number of ‘big things’ could create quantum leaps in longevity that Does it spur a new era of innovation in some happen between now and 2020, which could completely change the world demographic countries and regions where alternative risk reverse or accelerate existing trends or even map? With the possibility of working and management and regulatory approaches create new ones. living productively for another 20 years (or allow for banks to safely increase lending longer), do countries with declining fertility and economic growth, or does this simply Shifting global resources rates have a distinct advantage? What if begin the process of creating the next For example, what happens if the US those advances dramatically cut the cost of financial crisis. becomes energy self-sufficient? Or, more care and, by extension, the current health radically, if technological developments bills and projected health benefit obligations Financial crisis in shale gas, solar and other clean energy that are constraining economic growth What if the next financial crisis occurs means that nearly every country could be today? What would this mean for savings between now and 2020? One can see a self-sufficient? What would that do for rates, demand for products and financial number of potential areas of risk: from the economic development and how would it institutions themselves as they seek to potential break-up of the Eurozone, the change trade flows and economic activity? manage their workforces? slowdown in emerging markets, and the Does this stop or slow the relative rise of sovereign debt crisis impacting most of the the East and decline of the West or does Regulation governments in the world. Even more than this allow China to grow without importing We said before that regulation is the most the last one, another financial crisis could be energy? What do oil-rich, but undiversified important factor shaping banks today. What truly game-changing, not only for financial economies do when the world doesn’t buy if the regulatory burden on the financial institutions around the world, but for the their oil and gas? How would financial sector becomes so great that it is impossible post-World War II geopolitical order that markets react and evolve? Would this simply for the financial system to function efficiently has underpinned the world for the last accelerate the likely next battle for and effectively? This, in turn, say, constrains 70-plus years. resources: water? the supply of credit and risk management tools to the real economy at levels that The bottom line is that the more agile and War or terrorism support economic growth in some countries innovative institutions will be those best able Could a war or a terrorist strike with and allow for the payment of sovereign to navigate any significant disruptors. weapons of mass destruction cause the debt. Do nation-states begin to pull out of isolation of a significant country or region international agreements such as Basel III and create two or more blocs of financial and ‘go it alone’ for economic survival, so systems in the world? Could a financial they can loosen the constraints and gain institution operate in both? Would they be short-term economic advantage? Does this allowed to by their home governments? begin to unwind the improvements in global regulatory cooperation and consensus- building, post the financial crisis and further fracture the cross-border universal PwC Retail Banking 2020 17 So let us take stock. ROEs, while improving, Much has been written about the current In short, banks need a clear strategic vision, Evolution and remain at or below the cost of capital in banking competitive landscape and the and they need to do things differently. disruption – an much of the world. Growth remains elusive. models that successful banks are following Regulatory reform, from liberalising rates or should adopt in the future. For example, In the next section we discuss how. imperative for in China, to capping card fees in the US, is should one focus on wealthier sophisticated change impacting revenue streams. Efforts to cut customers and offer a complete and high- costs have not been transformative and margin complex product set? Or perhaps compliance costs have risen. Bankers admit concentrate on delivering simple banking that today’s execution will not be sufficient products at the lowest cost, leveraging direct (even as it is necessary), and that much more distribution channels? Or seek the benefits of needs to be done. being the largest scale player?

The industry is at an inflexion point. In 2020, we expect to see new models and Changing customer expectations require fiercely disruptive competitors. For example, significant investment. Technology may what if a leading social network chose to set render much traditional infrastructure up a banking and payments business? Or if obsolete while enabling superior service, a leading search engine was to emerge as growth and new competition. Bankers a global crowd-sourcing platform, raising understand that the operational complexity funds and then voting on which competing of the past needs to be addressed to provide enterprises should benefit? the efficient, effective platform for the future. We don’t believe the future is clear enough to present a complete and detailed analysis Banks need to get ahead of these challenges of business models, market shares and and retool to win in the next era of margins of all players. In a way, that isn’t competition. This is imperative, and also the point – particularly given the high levels a tremendous opportunity. Banks need to of uncertainty. Rather, we encourage banks make hard choices about which customers to be thinking today about this disruptive to service, how to win and where not to play. future, and developing their own plans for They need to rebuild their organisations success, plans that include developing agility around the customer, simplify and and optionality – the characteristics that structurally reduce cost. They need to learn create value in times of uncertainty. These to be agile, innovative and adaptable in order plans should address today’s imperatives, to execute effectively. contain a clear vision of the bank in the future and be adaptable enough to change as the world continues to evolve.

18 PwC Retail Banking 2020 Six priorities for 2020

Each bank needs to develop a clear strategy to deal with this transforming landscape. They need to decide whether to lead, to follow fast, or to manage defensively, putting off change. They need to create agility and optionality, to adapt to rapid change and future uncertainty. Yet, whatever the chosen strategy, success will come from successfully executing the right balance across the following six priorities.

PwC Retail Banking 2020 19 From our work with leading players Yet, whatever the chosen strategy, it will Figure 6: Six Priorities: Significant gap between preparedness and importance worldwide, from our research into the involve executing a balance across these macro-trends impacting banking and from six priorities. our survey of global banking executives, we Customer-Centric Business Model have identified the following six priorities for Banking executives agree that these retail banks to win in 2020: priorities are very important, with each Optimised Distribution of them scoring between 4.3 and 4.5 (out of 5) in our survey. However, we found a Simplification 1 Developing a customer-centric business  striking gap between those ranking these model. Information Advantage priorities as ‘Very important’ (46%–64%) and those stating that they saw themselves Enabling Innovation 2 Optimising distribution.  as ‘Very prepared’ (11%–17%) and/or that Proactively Managing Risks they were making a ‘Significant investment’ and Regulation 3 Simplifying business and operating  (18%–25%) in these areas. Technological, 0% 10% 20% 30% 40% 50% 60% 70% models. organisational, talent and cost constraints were viewed as the greatest obstacles n Very prepared n Significant investment n Very important 4 Obtaining an information advantage. to success. Source: PwC Banking 2020 Survey Below, we discuss each priority in turn. 5 Enabling innovation, and the capabilities required to foster it. In this short paper we can barely scratch the surface of these complex issues. We welcome the opportunity to have a deeper 6 Proactively managing risk, regulations  conversation with you on these topics, as and capital. well as on crafting your overall strategic Every bank needs to develop a view of the response. future landscape, and the uncertainties surrounding it. Every bank needs a clear view of its own unique strengths and challenges. And every bank needs to develop its posture against this evolving and uncertain future. Every bank needs a clear strategy.

20 PwC Retail Banking 2020 Our Fiercest Competitor Workshop is a powerful and practical tool to rapidly craft an integrated strategic response to these evolving forces

Part 1: Fiercest Strategy Discuss industry perspectives, gain insights on Designing your It’s hard to take big-picture trends and • Design your fiercest competitor(s). market challenges and potential disruptions priorities, and translate them into tangible We ensure participants take an end- Result: Quickly get past biases that may Fiercest Competitor. actions. It’s even harder to be unreasonably to-end perspective, and define their distort your market view and cause you to miss aspirational, yet realistic in what can be fiercest competitor – a competitor with potential competitors Mastering change achieved. Designing your fiercest competitor disruptive strengths that ruthlessly by making it real. is a concrete way to tackle these abstract exploits your weaknesses. We design this ideas – and identify how and where you need competitor in a variety of different future to change, to thrive in 2020. scenarios. We define a fiercest strategy (value proposition, sources of sustained Part 2: Fiercest Business Model PwC has worked with dozens of clients to advantage, where to compete) and a Design the Fiercest Competitor and strategies re-imagine their companies in a practical, fiercest operating model (organisation, for a new business model results-oriented way. In a way that leverages processes, technologies, culture), so that Result: Rapidly assess impacts to your the ambitions and insights of your top team, you fully understand how these new business model, and determine the best strategic and helps build real alignment as to the players will win. path forward path forward. In a way that doesn’t take six months and millions of dollars. • Make it real. Finally, we translate the insights gained from designing the Imagine a series of facilitated workshops fiercest competitor into tangible actions where your business and functional leaders for your own business. First, teams gain Part 3: Closing The Gap are asked to think differently, to move a heightened sense of priority – and beyond the incremental and imagine what Make the organisation become the Fiercest decide to accelerate existing initiatives Competitor could be. And then translate these insights and abandon others, so as to focus into realistic actions. Actions that have Learn to quickly work through business model scarce resources in the most critically challenges been debated and agreed across business competitive areas. Second, teams Result: Avoid polarising viewpoints while quickly and functional silos. This is ‘Designing your imagine new third-party partnerships. identifying and resolving the root causes of fiercest competitor’. And finally, teams begin to develop ideas problem areas for disruptive business designs – ways • Catalyse provocative thinking. We to change their own strategy (where to analyse industry trends and drivers, compete) and operating model (how to and assess their importance – to ensure Part 4: Prioritised Path Forward compete) – to attack the market in similar a shared understanding of the industry Turn the discussion takeaways into action items ways to the fiercest competitor. landscape. We develop aggressive and Gain expertise in roadmaps, mobilisation, and disruptive scenarios – and then use them execution to provoke your leadership team into re- Result: Work through challenges and prioritise imagining the business. the solutions as part of a long-term go-to-market strategy

Developing a 1 customer-centric business model Much has been written about the need to Banks struggle to join the dots internally use. They want to feel like their bank is develop a more customer-centric business and prepare bank-wide views of a customer anticipating their needs, not bombarding Banks today have a simplistic model. And many banks have been relationship, let alone integrate external them with product offerings. They want understanding of their customers investing in improving the overall customer sources of data. And, as such, risk and credit transparency and no surprises in terms of and a vastly complex product experience. But few (if any) have attempted decisions are typically taken at the product fees. Today’s definition of first-class service, the sort of wholesale transformation of their level, not at the customer level. which most banks are a long way from set. The winners of 2020 will operating model which we believe necessary delivering, is rapidly becoming a baseline turn this on its head. They will to win in 2020. Many banks carry vast product sets, with expectation. And banks know that better develop a much more complete subtle differences, frequently not appreciated customer experience leads to greater loyalty, Our survey indicates a growing awareness, by customers. This comes with a consequent advocacy and revenues. understanding of their customers but a significant gap in preparedness. cost in operations, technology, service and, and dramatically simplify their Sixty-one percent of bank executives say that at times, risk and regulatory challenges. The winners of 2020 will develop a much product set, and so deliver a a customer-centric business model is ‘very Systems are not modular in design, so that deeper, holistic understanding of their significantly enhanced customer important’, and 75% of banks are making each variant adds to this complexity and customers. They will need to acquire, investments in this area (this pattern is cost. Legacy products, no longer offered integrate and analyse multiple sources of experience with lower levels of consistent globally). Yet only 17% feel for sale, are rarely discontinued. And every internal and external data. They will be able operational risk. Begin with ‘very prepared’. bank customer has experienced the thrill of to understand their customers’ needs, and be understanding customer needs, being passed from call-centre operator to present with a relevant solution at the time Banks today typically do not know their call-centre operator in the vain hope that of need. They will simplify their product sets. not with products and pricing. customer very well. Now, at the product one of the them can solve the problem, And they will redesign their core processes level, many banks have invested significantly that is if they can figure out how to talk to from a customer point of view. in customer analytics – plenty of credit a real person at all. No wonder customers card providers, for example, understand are frustrated and regulators are concerned Further, they will (re)answer the most a customer’s value potential, can track about fair customer treatment. fundamental questions of who are their spending patterns and make targeted target customers, what is their value offers. Yet, many still send customers Yet, even as banks invest today to address proposition to those customers and what multiple product offers in the hope that these issues, the bar just keeps on rising. competitive advantages will distinguish them something will stick. And few can analyse Customers are redefining their expectations, in the marketplace. A bank does not need to a customer’s deposit account, see that his taking their cues from other industries that be all things to all people to succeed. salary deposit has increased, and send a offer multichannel access, product simplicity, note congratulating the customer on his seamless integration and ‘segment-of- or her promotion together with an offer of one’ targeting. They want convenience, a premium card and a higher credit limit. personalisation, accessibility and ease of

22 PwC Retail Banking 2020 Figure 7: Areas of significant effort over next 5 years

Enhancing customer data collection 54%

Evaluating bank performance metrics and best practices from 53% customer viewpoint Allowing for increased customer choice in configuring product features, 50% including pricing

Using social media to monitor 48% customer preferences Conducting customer segmentation using a dedicated group that supports 44% strategy development across Offering a mix of self-directed and personal interaction channels 41% to customers

Creating a flexible and agile product 38% portfolio adapted to customer segment

Creating and filling an executive-level 15% Customer Strategy Officer position

0% 10% 20% 30% 40% 50% 60%

Source: PwC Banking 2020 Survey

PwC Retail Banking 2020 23 In our paper ‘Experience Radar 2013 • Help your story get told. Customers Executing on today’s – Lessons from the U.S. Retail Banking can become your best marketers. Look imperatives. Industry’, we describe the actions banks to your staff to make this happen. Fifty should take to ensure a memorable customer percent of recommendations are due to Better customer experience. We see these lessons as broadly good experiences, not to rates or products. applicable across the globe. Identify key influencers among customers service is rapidly to serve as brand advocates – promoters becoming a baseline • Win the fee war. Fees and rates dominate account for 80–90% of positive word of the banking experience – they are the mouth. Manage social media exposure – expectation, yet most number one driver of customer purchases, one in four customers share experiences and two in five bad experiences touch this way. banks are far from on rates and fees. Frequent changes delivering it. Here’s have frustrated customers. Mitigate this • Go digital. Customers want to interact frustration with better communication whenever, wherever. Give them the how to do better. and more customer-friendly fee strategies. convenience they seek through digital tools. Sixty-one percent of customers • Fix the bad, fast. Customers want to feel want to research on their own, and 42% like their bank is working with them, not buy on their own without help from against them. Don’t let customers walk representatives or experts. Experience away with a sour taste in their mouth. Radar 2013 Two in five customers leave banks after • Balance automation with the human Lessons from the U.S. Retail Banking industry a bad experience, and 45% of those will touch. Sixty percent of great experiences

Locating the sources of value behind truly actively discourage others from using that are due to great staff. Twenty-five percent exceptional customer experience

November 2012 bank. Turn issues into opportunities to of customers rely on staff to do research, build loyalty. Empathy and an apology go 46% to select products and 63% to resolve a long way towards satisfactory problem their problems. Create a multichannel resolution. Identify these negative strategy that balances cost and service. volume 1 experiences and work to remove Encourage self-service for routine matters, the causes. and refocus branch and contact centre staff on higher value-added activities like relationship building and sales.

24 PwC Retail Banking 2020 Optimising 2 distribution

Historically, banks with the best The coming revolution in branch banking and Figure 8: Optimised distribution the need to optimise distribution networks branch footprint have dominated is clearly top of mind for banking executives. their markets, gaining outsized Eighty-five percent of respondents see Global Banks share. By 2020, all banks will be optimising distribution as important, 71% are direct banks, and branch banking making investments in optimising distribution National Commerical Banks (with an additional 22% expecting to do will be changing fast. Leaders so in the near future). Globally, 82% of State-Owned Banks will offer an anytime, anywhere respondents feel that their organisation’s Regional Banks service, fully utilising all banking distribution model needs to change (90% in channels in an integrated fashion. emerging markets). Community Banks/ Credit Unions Non-Traditional Retail FS They will be re-imagining their Fifty-nine percent of respondents expect the Providers physical footprints, introducing importance of branch banking to diminish 20% 10% 0% 10% 20% 30% 40% 50% new branch formats, expanding significantly as customers migrate to digital channels, and 48% expect branch banking to n Most threatened n Benefit most physical points of presence change significantly by 2020. Yet, only 16% Source through third-party partnerships, of respondents viewed themselves as ‘very : PwC Banking 2020 Survey driving sales and cutting costs. prepared’ for this shift. Respondents globally As transactions and sales shift view the largest banks as benefitting most from these changes, and smaller regional and aspects of banking to be conducted online. reduced staff – from 13 FTE per branch in to digital channels, branches community banks being the most threatened. And customers’ expectations are evolving 2004, to an average of less than 6 today). that cannot create incremental Banking was once all about real estate – banks in tandem. They want to transact at their New, digitally focused, competitors are not value will need to close, or be were located in prime locations and built to convenience, with information and advice at so encumbered. transformed. project strength, stability and safety. ATMs, their fingertips. Even many of those who value Quite simply, distribution is ripe for digital telephone banking and then the internet – all the privacy and face-to-face interaction you disruption. The transformation of the music, provided added convenience and expanded find in a branch, will soon demand this from film and print publishing industries provide a bank’s reach. But real estate still rules their office or home. They do not want to be chilling analogies for those banks unable to supreme, and many products still require forced to travel nor wait in line. get ahead of this trend. customers to transact through a branch Further, branch network costs are very high,

We are now at a digital tipping point, with with few easy ways left to reduce them

rapid technological advances enabling all (for example in the US, banks have already PwC Retail Banking 2020 25 The vast majority of banks aren’t there yet. The value of a branch will need to be though many transactions will continue to But the leaders understand these dynamics redefined. There will be different models, be ‘in store’, just conducted through smart Optimising and are moving fast, experimenting with tailored to specific purposes – for example, ATMs, tellerless kiosks and touchscreens. distribution new concepts. By 2020, banks will manage flagship stores, community centres and distribution holistically. Products will not be expanded ATMs. ‘Flagship’ branches will In developed markets such as the US, leading built-into, or serviced through, the channel: offer information, education and advice to banks in 2020 are likely to have a far greater rather, banks will develop shared platforms drive engagement, loyalty and sales. We number of physical points of presence and that distribute products across all channels. would expect them to host events, such as far fewer ‘traditional’ branches – perhaps Future in-branch advisers will use the same a seminar on ‘The challenges of growing a as many as 20% fewer across the industry, technology and infrastructure available to small business’, with small business advisers with the trend accelerating through 2020 as bank customers. “Let me help you open an and product specialists on hand for questions leases roll off. account sir? You want to do it yourself? Sure, and drinks after. They will be in high- In developing markets, where branch just go online – you can borrow my tablet, or value high-traffic locations. ‘Community’ networks are thinner, physical distribution use one of the touchscreens. You have your branches will be smaller in scope, focused will continue to evolve, and banks are own? Terrific, take a seat and let me on community outreach and engagement more likely to partner with new entrants to get you a coffee.” Every bank, whether in (e.g. offering financial education and create alternative distribution channels (for the developed or developing world, will wealth-management advice). ‘Expanded example, M-PESA in Kenya, handles deposits be a direct bank. ATMs’ will be in-store or in other well- and payments using a network of agents and trafficked sites, and as valuable as marketing, customers’ cellphones and is used by two- sales, transaction and cash-handling thirds of the adult population). points – perhaps even with dedicated staff. Partnerships with third parties will enable These trends are inevitable, and banks banks to further expand their reach with today need to choose what path they want Distribution is ripe for digital significantly lower real estate costs. to follow. What is your future distribution vision? At what pace do you want to change? Advisers and product specialists will be disruption. The transformation of Do you push aggressively to precipitate this present in all types of branch – in person, or change and capture advantage, through by video from centralised advisory offices – the music, film, and print publishing digital optimisation, alliances, partnerships, expanding sales’ reach. Tellers will need to spin-offs, closures – or manage defensively to industries provides chilling analogies evolve into financial advisers, fluent in all postpone the inevitable. for those banks unable to get ahead bank products – a massive transformation of skills. Banks will likely need to simplify of these trends. their product sets – for the benefit of both employees and customers. Transaction processing will be almost entirely digital –

26 PwC Retail Banking 2020 In our paper, ‘Rebooting the Branch: • Design an optimised distribution Executing on today’s Reinventing branch banking in a multi- network that supports the needs of the imperatives. channel, global environment’, we discuss local markets and scales to the density of the evolution of branch banking in detail. market opportunity – meeting customer High-cost branches needs and minimising the cost of delivery. Leading banks are moving away from cannot survive in ‘managing branches’ and instead are • Develop intuitive, experience-driven ‘managing distribution’ across all the bank’s individual branch designs, based upon their traditional channels including evolving branch models a deep understanding of customer needs, form. Evolving the to balance local-customer needs with the behaviours and usage. high cost of branch delivery. They are network today to designing their branch strategies to deliver a • Redefine the operating model including align with changing differentiated experience, based on customer the organisational structure, branch needs, the competitive landscape, brand processes and infrastructure – to support consumer behaviours promise and internal capabilities: the branch model and network design. and economic • Begin by focusing on the customer • Develop cross-channel enablers realities can help experience, answering the question: Who to deliver a seamless and consistent are we and what kind of bank do we want customer experience – regardless of banks position to be? Consider customers, competitors, branch model mix. themselves for the brand and capabilities. future. Here’s how. • Choose an appropriate mix of branch models to support the desired customer experience. We see various models being experimented with today – assisted self- service, in-store branches, full-service branches, community centres and flagship stores.

PwC Retail Banking 2020 27 Simplifying the 3 business and operating model Banks have developed staggeringly complex Figure 9: A majority of executives believe they need to simplify and costly operating models. Often, each Banks have developed staggeringly product has separate operations, technology and risk management processes. And banks complex and costly business and Products operating models. Now they typically have a multitude of products, many not even offered to new customers, all of Channels must simplify. Rising customer which require some kind of operational expectations, increasingly customisation to serve. In several cases we Prices/Rates active regulators and stagnant have found that only 5% of products deliver Technology shareholder returns demand over 80% of revenues and an even larger percentage of profits. Further, many banks Processes it. Efforts to date have not been have been built over decades of acquisitions, Back Offices enough. Start with the customer and new product and channel development, and work backwards – simplifying typically with each development adding 0% 10% 20% 30% 40% 50% 60% 70% the experience requires that additional systems, processes and costs. Few have tackled the difficult and expensive work n From a customer perspective n From an internal perspective products, channels, organisation, of integrating, optimising and simplifying Source: PwC Banking 2020 Survey operations, all simplify and their platforms. change. This is a big deal – but A majority of banking executives (53%) getting it right can deliver an believe that simplification is very important, This complexity and redundancy drives poor Since the crisis, banks have been fighting improved customer experience, and 70% are making some level of customer experience, high cost, operational hard to cut costs. Headcounts have been structurally lower cost and reduced investment in simplification. Yet, only 17% risk, employee frustration and regulator significantly reduced, belts tightened. feel well-prepared. Taking a customer levels of operational risk. unease. And the traditional separation Every bank has launched re-engineering perspective, a majority of executives between customer-facing activities, and efforts with some considerable successes. believe their banks must simplify products, operations and technology means few Yet, expense ratios remain stubbornly in channels and prices/rates. Taking an internal business leaders are strong end-to-end line with pre-crisis levels as regulatory perspective, a majority of executives believe managers who understand sales through implementation costs continue to rise. they must simplify their technology, their delivery. Indeed, we frequently hear of And with higher capital charges, ROEs processes and their back offices. Bankers business leaders complaining about their remain depressed. Customer demands and believe that simplification will lead to operations and technology cost allocations, competitive intensity are both increasing. better service, lower costs and increased instead of managing them. Banks need to do something different – more profitability. of the same is not enough. 28 PwC Retail Banking 2020 Figure 10: Bankers believe simplification will... processes and their technology platforms. Redesigning the bank operating model requires a fundamental shift in how retail Financial banks think about their operations – product institutions simplification; integrated distribution; Improve service 69% shared service infrastructure; risk globally believe management at a customer not product level; simplification streamlined compliance processes. will deliver Improve profitability 59% Finally, banks need to arm their executives with information and tools to continuously a myriad of manage costs, once the new models are benefits. put in place. Too often there is insufficient Decrease costs 58% transparency around unit costs, cost drivers and what is best in class.

The most successful banks are learning from other industries. Many consumer products Increase customer base 46% companies (Adidas, Apple) do not own the entire value chain. They focus on what makes them distinctive – product design, marketing, distribution – and contract out Improve time to market 42% much of the rest to third-party specialists. Leading banks will know their customers intimately; they will design solutions to meet their needs, provide advice and capital, and Source: PwC Banking 2020 Survey manage risk. Much of today’s infrastructure is not a source of competitive advantage. We expect the continued rise of industry- wide or multi-bank utilities – with more A strategic redesign of bank business and Banks need to start with the customer banks outsourcing processing activities. operating models is needed – a major and ensure they truly understand what We expect leading banks with scale to simplification and automation – to enhance customers want, and what they are unhappy insource effectively from others, or create customer experience, structurally reduce with. They need to consider their business independent utilities to do so. If customer costs, reduce operational risk and prepare for models in light of this – the package of and risk skills are the core of future banking, the next era of banking. products and services they offer. They then the entire manufacturing process is a need to consider their organisational candidate for outsourcing. capabilities and alignment, their operational

PwC Retail Banking 2020 29 Leading banks will make simplification a Banks that get this right will achieve priority. They will strategically redesign dramatic results. In our experience, by Simplifying the their business model, end-to-end. They will taking such an end-to-end perspective, we business and develop multi-year change programmes. have seen clients realise 50% performance And they will ensure that they have the enhancements on key customer metrics, operating model organisational capabilities necessary to together with 25%+ cost reductions and achieve the change. reduced levels of operational risk.

Figure 11: Banks that move towards solution-oriented integrated operations will be the winners in 2020

Current State Current State Product-oriented, siloed operations Solution-oriented, intergrated operations

Need 1 Need 2 Need 3 Need 1 Need 2 Need 3

Products Products Products Products Solution 1 Solution 2 Solution 3 Channels

Channels Channels Channels Integrated Compliance

Market, Credit, Reputational and Operations Risk Risk Risk Risk Operations Operations Operations

Shared Operations Regulations Operations Operations Operations Applications Applications Applications System System System Applications Applications Applications Shared Applications

Source: PwC Banking 2020 Survey

30 PwC Retail Banking 2020 Our client, a global provider of financing This tried and true approach yielded real, • Managed the deployment to success. Executing on today’s solutions, was facing the familiar pressures rapid benefits. And it realised sufficient Developed critical programme imperatives. of rising customer expectations, increased savings to enable our client to then reinvest management, change management and cost of capital, growing competition and in transforming the underlying technology continuous improvement infrastructure. Banks need to ongoing pricing pressure. Like many players, platforms – so enabling even greater savings. Created a detailed incentive structure they were highly siloed by functions, to align the performance framework dramatically simplify businesses and products. Turnaround The critical elements of our approach with strategy. Established performance their business and times and error rates were higher than included: management, monitoring and reporting – they desired, driving too many customer with KPIs and detailed information. Built • Developed a detailed current state operating models complaints. Their cost-to-serve was higher organisational capabilities – trained over understanding. Conducted voice-of-the- than the industry average. Processes were 50 client leaders on internal continuous to enhance customer customer analysis to align customer needs, non-standard and involved multiple hand- improvement, to facilitate empowerment value proposition and service delivery. offs. Employee satisfaction was low. and build culture of improvement. service and Leveraged lean to identify current state structurally reduce Over an 18-month period we helped issues and opportunities. Analysed spans, cost. We leveraged them design and deploy an innovative layers, location and headcount to identify new scalable and sustainable operating gaps and opportunities. Conducted our battle-tested model, in this case without touching the competitor benchmarking to inform and underlying technology platform. It achieved underscore case for change. Conducted Strategic Business results. They reclaimed 50% of sales team stakeholder readiness analysis – to inform Design approach time to focus on revenue generation. They change management strategy. Developed reduced cost-to-serve by 25%. Processing robust and realistic business case. to help one client performance improved 45%. Turnaround • Designed and tested the revised times and error rates have reduced achieve precisely operating model. Leveraged lean to significantly. Processes were standardised, redesign and optimise processes, and that. and handoffs reduced (from an average 20 to develop a revised operating model. 3). Customers and employees are happier. Streamlined processes, and functionally aligned the organisation. Conducted ‘wargame’ simulations to test the new processes and provide baselines and targets for the revised operating model.

PwC Retail Banking 2020 31 Obtaining an 4 information advantage Customers (and banks themselves) now customers grow accustomed to forgo some Banks will use these capabilities to create generate exponentially more information degree of privacy for proven value. an enhanced and connected customer Getting this right will be a game- than ever before. Leading players will experience – to understand a customer’s changer. Fast movers will create harness both structured and unstructured Leading players will develop advanced need and be present at the time of need with analytics capabilities to integrate this competitive advantage in every information – from traditional sources (such a relevant offer. For example, spotting that as credit scores and customer surveys) and vast library of data, analyse it and create a current bank customer is walking into a area of the bank – customer from non-traditional sources (such as social actionable insights. 57% of bank executives car showroom, and sending a message that experience, underwriting media, and cross-channel bank customer consider these capabilities to be very the customer has been pre-authorised for and pricing, operations, risk interaction data). They will ‘wire’ their important (with 92% considering them very financing (based upon analysis of existing or somewhat important). Three-quarters management and financial/ own operations to build the information accounts and spending behaviours). rigour more typical of the manufacturing of institutions are making investments. cost management. Few banks industry. And they will collect and purchase Yet, only 17% believe they are very well- Banks will enhance their credit, risk and will be able to master the skills other behavioural data (such as mobile prepared. pricing models (adding, for example, social to integrate, analyse and act location and purchase data) – particularly as media reputation scoring). For example, a bank may be able to detect the beginnings upon the insights from the ever- of trouble at a small business, well before increasing mass of data. Executives receivables and turnover start to show signs expect the largest banks to be the Figure 12: Advanced analytics – Who will benefit, who will be most threatened of weakness, by identifying negative trends in social media – enabling a much higher winners. We expect third-party quality of risk management and customer providers to emerge to help Global Banks service. the others. National Commerical Banks Finally, banks will develop a much more State-owned Banks sophisticated view of their cost structures Regional Banks and the key drivers of that structure. They will use analytics and benchmarks Community Banks/ Credit Unions extensively to constantly measure Non-Traditional Retail FS Providers performance with defined metrics and ‘best- in-class’ competitors. Banking Platform Providers

30% 20% 10% 0% 10% 20% 30% 40% 50% 60%

n Most threatened n Benefit most Source: PwC Banking 2020 Survey 32 PwC Retail Banking 2020 Bank executives (54%) expect only the largest global and national banks to master this capability – in line with their capacity to invest. We expect those players to gain significant competitive advantage, until these capabilities are available to all. Other banks will need to forge partnerships with third parties to match this advantage. We expect innovative service providers to emerge and assist smaller banks in competing with larger institutions. Among others, we expect today’s technology services providers to develop these offerings – it will not be enough in the future to provide technology and processing platforms, without information and analytics. This will enable the rest of the banking industry to catch the leading players and reduce their early advantage.

To master these capabilites, banks will need to learn how to create an open, agile and innovative organisation. They will need to attract and retain a new sort of talent (seen by executives as the biggest barrier to success). They will need to pay more attention to foundational data management and data governance.

Building these capabilities will create significant advantage in the near/ medium term, and be critical to successful competition in 2020.

PwC Retail Banking 2020 33 Social media has created both opportunities One client wanted to capture these • Peer benchmarking – allowing volume Executing on today’s and risks. Opportunities include greater opportunities and manage these risks and sentiment comparisons across a series imperatives. engagement and proactive risk management. – developing actionable insights and of categories, and enabling focused issue For example, 90% of customers trust recommendations well beyond their existing identification. recommendations posted on social media capabilties. We helped them, leveraging our Understanding websites, and 71% are more likely to make a SocialMind toolkit. This combines best- • Trend and control analysis – allowing purchase based upon social media referrals. in-class social, web and text listening, and identification of anomalies and variances and Leveraging Banks can gather customer feedback to analytics capabilities, leveraging both project- from the normal range of volume mentions Social Data. Social generate leads, tailor products, improve based analysis and ongoing tools. and sentiment ratings, and enabling customer experience and spot trends earlier. identification of root causes. Our client identified loan modification issues phenomenon, along And leading indicators can enable banks • Early warning radar – allowing to spot operational risk breaches, and at competitors, enabling its own proactive operational management. They identified identification of emerging issues and topics with other trends, proactively address reputation issues early. ranging from regulations to customer However, social media also brings greater a fake bank website scam, and took steps to proactively manage complaints and experience to operational risk, as measured has shifted the risks – lower bargaining power and influence, by acceleration in volume or sentiment. and greater risk of brand damage. Customers their reputation. They identified customer balance of power are empowered to voice grievances widely, complaints about loan transfers, and used to consumers, and have much greater transparency to these inputs to enhance their product. They features and price. set up the following new capabilities: accelerating the need for greater PwC’s Integrated SocialMind Platform engagement. PwC’s Data Aggregation Analysis & Synthesis Actionable Insights SocialMind can Social Data Emerging Trends Once upon a time deliver actionable Once upon a time Once upon a time Once upon a time insights from social Once upon a time media. Natural Language Processing Taxonomy Model Peer Benchmarking

Electronic Data

Monitoring & Alerts

Customer Sentiment Scoring PwC SME Insights

34 PwC Retail Banking 2020 Source: PwC Enabling innovation, 5 and the capabilities required to foster it Innovation will be the single most important Figure 13: Open innovation – importance and preparedness factor driving sustainable top- and bottom- Innovation is the single most line growth in banking over the next five important factor driving years. Innovation is doing things differently. Emerging markets sustainable top- and bottom-line Not just new products or a new customer experience, but doing things differently USA Europe growth in banking. But banks across the entire business model including 18% 62% today are not known as places transforming the business model itself. where innovation thrives, nor 7% 28% 6% 40% Innovation within the banking industry are they the favoured destination is considered to be somewhat or very for top software engineers and important by 87% of respondents, yet in Asia-Pacific other innovators. Banks need to stark contrast, only 11% believe they are very organise and manage differently prepared. And there are significant regional differences – over 60% of executives in Asia- 14% 61% – protecting and enabling Pacific and the emerging markets view open talent, becoming agile in their innovation as very important; however, only development processes and being 40% of European executives and 28% of US executives agree. We believe developed open to partnerships with outside world executives need to take more of an institutions. Developed market emerging markets view of the importance n Very prepared n Very important executives will need to take more of innovation, particularly once the new Source: PwC Banking 2020 Survey of an innovative mindset. regulatory framework stabilises. Executives believe that the large global and national banks will benefit most and that smaller community banks and credit unions and core platforms (52%). In Asia-Pacific, place more focus than other markets in every will be the most threatened. there is much less focus on interfaces and area (all above 64%), with the greatest focus channels (44%), likely reflecting the greater being on innovating their core platforms Executives report that their main focus penetration of mobile banking, and much (67%). areas for innovation are customer interfaces more focus on customer need identification and channels (57%), followed by customer (59%) – to help create that enhanced need identification (53%), products (52%) customer experience. The emerging markets

PwC Retail Banking 2020 35 Banks are not today known as hotbeds of Figure 14: Area for innovation Enabling innovation, innovation. While the sector has had its fair share of innovation over the years, today, US and the capabilities banks tend to be cautious, bureaucratic, Products 43% required to foster it and subject to multiple layers of process and stifling levels of oversight. Executives Customer Interfaces/Channels 60% recognise they need to do things differently. Over 50% are planning to enhance their Core Platforms 50% internal capabilities to foster innovation, and to create innovation management Customer Need Identifications 40% teams across business units. Perhaps most importantly, there is a recognition that Europe partnerships and third-party relationships Products 54% may be the best way for banks to reap the benefits of innovation. Customer Interfaces/Channels 54%

To succeed as innovators, banks will need to Core Platforms 44% organise and manage themselves differently. Customer Need Identifications 50% Talent. Banks need a new type of talent and a new way of managing it. They need Asia-Pacific to attract people who think big and who Products 48% challenge the status quo, people who are obsessed with the customer and not with Customer Interfaces/Channels 44% the process. Banks need to enable them to succeed. These people need inspirational Core Platforms 46% oversight and cultivation, not check-the-box management. They may need to be managed Customer Need Identifications 59% outside of the existing corporate structure – with different reporting lines, different Emerging markets measures of performance and even different Products 64% office space – asking people like this to report to the typical bank IT project manager or Customer Interfaces/Channels 65% embedding them one by one in the business is likely to lead to failure. Many banks have Core Platforms 67% set up dedicated innovation labs outside of Customer Need Identifications 64% their head offices to accomplish just this.

Source: PwC Banking 2020 Survey 36 PwC Retail Banking 2020 Agile development. Banks need agile product and technology development skills – to bring new products and capabilities to market much quicker than today. This requires continual iteration, real-life pilot testing and rapid learning from customers. This does not require writing and rewriting business requirements documents, 12-month product release cycles, or technology organisations far removed from the customer.

Partnerships. Major innovations are taking place outside traditional banks. Banks might foster partnerships and create new ecosystems for innovation – ranging from technology start-ups to academic institutions, or even with non-bank players.

Senior sponsorship. Because of these challenges, the entire innovation effort will need very senior sponsorship. When people are asked to do things differently, they need to believe they will be rewarded, not penalised, for doing so. People look to the actions of senior leadership to set their priorities. The tone needs to come from the top.

PwC Retail Banking 2020 37 Only 10% of CEOs see their companies as innovation leaders

The importance of Innovation has become a major C-level Respondents do not only see innovation as Figure 15: Innovation is a critical concern. Ninety-seven percent of CEOs a product-level concern. Rather, they see C-level topic innovation. consider innovation as a key priority for top- innovation throughout the entire business and bottom-line growth, but only 10% of model as critical to drive performance – PwC’s Global CEOs view their organisations as innovation innovation in technology, the customer 60% +62.2% leaders. Further, 64% of CEOs agree experience, in systems and processes, in The most innovative companies are Innovation Survey: that neither innovation nor operational services, in channels to market and in predicting growth of Breakthrough effectiveness are dominant – and are looking supply chains. 50% 62.2% over the next to succeed at both. five years Innovation and They recognise that innovation requires a There are good reasons for this. Our results new management discipline; that innovation 40% Growth highlights suggest that the most innovative companies activities need to be coordinated and +35.4% Against the global the importance are expecting to grow much more rapidly managed for maximum efficiency, and not average of 35.4% than the market – they are predicting 62% left to evolve by chance within individual 30% of innovation in growth over the next 5 years vs. a market business units. driving growth and average of 35%, and only 21% from the least +20.7% innovative companies. This is a big deal – for They also highlight some of the challenges 20% The least innovative the challenges of a $10bn company this creates a $2.7bn gap with driving successful innovation. The companies in our challenge of taking new innovative ideas to survey are expecting in 5 years. growth of 20.7% achieving success. market in a rapid and scalable way, of finding over the same period the best talent to make innovation happen, 10% of establishing a culture within which innovation can thrive and of finding the right external partners to help make it happen. 2014 2018

PwC’s Global Innovation Survey: Breakthrough Innovation and Growth 97% of CEOs see innovation as a key priority for growth 64% of CEOs see neither innovation nor operational effectiveness as being dominant – they are looking PwC’s Global Innovation Survey: Breakthrough Innovation and Growth to succeed at both!

38 PwC Retail Banking 2020 Proactively 6 managing risk, regulations and Executives in all regions, unsurprisingly Given the enormity, complexity, and inherent • Multinational universal and commercial given the last five years, consider this the linkages and interdependencies of regulation banks will need to ensure a balance of capital biggest priority, with 64% stating this as very and supervisory expectations in each of deposit-taking and lending in each country The post-crisis flood of regulations important. Again, however, very few (only these respective areas, there are tremendous in which they operate, typically requiring 22%) consider themselves very prepared. The challenges as well as opportunities to address new deposit-raising strategies. Moreover, signals a major mindset change biggest obstacles to addressing these issues this in a manner that drives for long-term these banks will have to rely on local for regulators. In the past, are the level of financial investments required efficiencies and sustainability. sourcing of capital rather than relying on regulation was just one of many and technology constraints. their foreign parents. Banks that are taking a proactive approach to considerations. Capital was Enhanced capital and risk addressing these challenges in a systematic • Requirements for all forms of non-common plentiful and not a significant management and disciplined manner will see tremendous equity (‘going concern’) capital to now business constraint. Conduct Global regulation of capital, liquidity and benefit driving both operational efficiencies have equity conversion triggers in order to issues were thought to be few related stress-test requirements, as well as as well as bottom-dollar benefit. be counted as capital will further increase enhanced prudential standards, will continue the cost of capital for banks. Additionally, and far between. Today, not Establishing a common thread of consistency to evolve and eventually force globally active the requirement of bail-in debt, a form to support a sound, robust and integrated only are the rules much more and/or systematically important banks to of (‘gone concern’) capital, which is also enterprise risk framework will be key to meet even higher stringent and binding required to convert to common equity complex, but regulators are meeting regulatory expectations from standards. at resolution, further underscores the more suspicious, and less flexible both micro- as well as macro-prudential unwillingness of regulators to ever having in their demands to improve These requirements are making a compelling perspectives. to use taxpayer money to bail out failed case to seek alignment of risk appetite, banks in the future. compliance, reporting, and the These new capital requirements and capital planning and adequacy assessment, underlying business processes and restrictions will impact bank structures and recovery and resolution planning, liquidity • These capital requirements will ultimately business models in the following ways: data. Leading banks are taking a risk management, stress testing and overall lead to an environment of ‘ring-fencing’, where the ability for multinational banks different and more comprehensive enterprise risk management activities. • Banks that manage their funding most to move or repatriate capital freely approach to managing their effectively, leveraging securitisation Moreover, this should ultimately lead to between different jurisdictions will be structures such as covered bonds where regulatory obligations. This capital and liquidity optimisation, which restricted. possible, will have a competitive advantage approach is pragmatic, proactive would become a competitive advantage for over those whose strategies are primarily banks competing in a highly capital-burdened and increasingly integrated into driven by their level of deposits. ‘business as usual’. environment.

PwC Retail Banking 2020 39 • In their quest to chase yields in order ensure the proper payment of taxes, Additionally, banks have built a labyrinth of to justify these incremental capital compliance with KYC/AML laws, compliance processes as regulations have Proactively requirements, banks may seek riskier sanctions, FATCA, etc. changed – a new regulation, a new process assets and strategies, especially in bolted on. This creates high cost and poor managing risk, • Increased regulatory requirements such environments where banks lack pricing customer experience. as stress testing and Basel III drive greater regulations and power to pass the capital costs on to the operational and reputational risk. Banks Banks should embrace regulation, and embed consumer, given they may be more of capital will need to be able to report detailed it in their core business processes – it is not price-takers than market-makers. information on portfolio metrics and just the responsibility of the compliance • We expect to see an increased premium trends, and be able to rapidly model group. They should bring analytical rigour, on wealth management and other lower alternative scenarios. and need to tackle the existing high-cost capital-intensive businesses. complexity. • Risk management will expand and • Capital management will need to be interact more closely with every area of The challenge is that so many of these considered as part of individual business, the bank including marketing, product initiatives are being led by different groups customer and pricing decisions. Capital- development, business analytics and across the businesses, and regulatory and intensive products will need to be compensation. This requires a more risk functions, and so they lack effective priced higher. This will add complexity robust end-to-end view of the business, coordination, leading to inconsistent to credit risk and pricing functions, and an expanded skill set within the risk understanding of regulatory implications, which are already undergoing change organisation. lack of clarity around firm-wide decision- to ensure customer-centric pricing and making, and inefficiency and duplicative underwriting. We discuss this further in Proactive regulatory processes around the bank. our paper ‘Look Before You Leap’. management Underpinning truly proactive regulatory Beyond maintaining a strong, independent As we discuss above in ‘Rise of state-directed management is a strong global regulatory risk management function that is focused capitalism’ and as we know from recent lead and team, overseeing and coordinating on the core financial risks that banks face, events (e.g. admissions of wrongdoing and bank-wide activity. Done right, this provides sufficient oversight of operational and record fines related to LIBOR, US mortgages, clear accountability, consistent messaging, reputational risk will be critical. and others), governments and regulators integration of regulatory strategy and change are increasing levels of scrutiny and are management, proactive communication • Cyber security is now top of mind as new increasingly penalty-minded. internally and externally, and ensures technologies like mobile expose customer regulatory considerations are consistently data to greater risks. Regulators do not want banks just to be correcting mistakes, nor to be ticking considered in other corporate initiatives • Vendor risk will need to be managed boxes. Rather, they want banks to embrace and projects. This core team can ensure more closely. Banks have hundreds of regulatory intent, and create sound, secure, connectivity and oversight of business-level partners, and are seen as responsible and unbiased businesses, where regulatory initiatives, corporate initiatives, as well as accountable, end-to-end. compliance and sound conduct is embedded acting as the core office of regulatory affairs – proactively leading the bank’s interactions • Banks have become both information in the processes and values of everyday with all regulatory bodies and stakeholders. hubs and potential targets as governments operations. 40 PwC Retail Banking 2020 Conclusion

Much is changing in the banking landscape – with regulation, technology, demographics, changing customer expectations, greater competition and issues with banks’ own legacy business and operating models. The challenges are clear, even if the ultimate endgame is not.

Banks need to get ahead of these challenges and retool to win in 2020. They need to make hard choices about which customers to serve, how to win and where not to play. They need to rebuild their organisations around the customer, simplify and structurally reduce cost. They need to learn to be agile, innovative and adaptable in order to execute effectively – and deal with uncertainty as the future unfolds. They need to do things differently.

Each bank’s unique response will depend upon the bank’s current position, aspirations for the future, desired customer focus, organisational capabilities, brand promise, regulatory situation and capital constraints. Banks should consider the posture they wish to adopt. Do they want to shape this future, rapidly follow, or manage defensively, putting off change? Staying the same is not an option.

Every bank needs to develop a strategy to tackle these challenges. One that transcends the status quo and considers all possibilities. One that can adapt to an uncertain future. And one that takes an end-to-end view – integrates the changes in markets, customers, risk, regulation, operations, technology – and the challenges of implementing real-world large- scale change.

We hope this perspective has been provocative and provides insight as you consider both your own strategy to thrive in 2020 and the tactical actions you need to take today.

PwC Retail Banking 2020 41 Contacts

If you would like to discuss any of the issues raised in this report in more Justo Alcocer Jeremy Fox-Geen detail, please contact one of the following names or your usual PwC contact. Partner Managing Director PwC (Spain) PwC (US) +34 915 684 044 +1 646 471 6398 [email protected] [email protected]

Steve Davies John Garvey Partner Principal PwC (UK) PwC (US) +44 (0) 131 260 4129 +1 646 471 2422 [email protected] [email protected]

Antony Eldridge Graham Hayward Partner Partner PwC (Singapore) PwC (Bahrain) +65 6236 7348 +973 17 118888 [email protected] [email protected]

Louise Fletcher David Hoffman Partner Partner PwC (UK) PwC (US) +44 (0) 20 7804 1594 +1 646 471 1425 [email protected] [email protected]

42 PwC Retail Banking 2020 Werner Horn Dr. Holger J. Kern John Shipman Acknowledgements Partner Partner Partner PwC (South Africa) PwC (Germany) PwC (Australia) Retail Banking 2020 was a +27 11 797 4876 +49 89 5790 5939 +61 2 8266 0198 global effort. We would like to [email protected] [email protected] [email protected] thank the following people for Manoj Kashyap Dean Nicolacakis Robert P. Sullivan their contributions: David Schiff, Partner Principal Partner Nathan Perry, Cathy Stahlmann, PwC (India) PwC (US) PwC (US) Annabel Dennison, Eileen Perrin, +91 22 6669 1401 +1 415 498 7075 +1 646 471 8388 Stephen Baird, Nathan Fisher, [email protected] [email protected] [email protected] Alison Blair, Alejandro Johnson, Anthony Klick James Quinnild Alvaro Taiar Brandon Von Feldt Partner Partner Partner PwC (Canada) PwC (Hong Kong) PwC (Brazil) +1 416 815 5257 +852 2289 3422 +55 11 3674 3833 [email protected] [email protected] [email protected]

Miles Kennedy Peter Seethaler Stephen Whitehouse Partner Partner Partner PwC (UK) PwC (Germany) PwC (UK) +44 (0) 20 7212 4440 +49 69 9585-3436 +44 (0) 7718 339 554 [email protected] [email protected] [email protected]

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. For more information on the Global Retail Banking 2020 Marketing programme, contact Lara De Vido at [email protected] www.pwc.com/banking © 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.