Bold Australian banks prepared to be hyper-relevant, are set to save millions 2 BANKING AS A LIVING BUSINESS Banks in Australia must adapt to and meet the needs of consumers who demand personalised, “in the moment” and relevant interactions from any service. New apps and payment platforms alone won’t be enough: they need to evolve to make banking a Living Business.
BANKING AS A LIVING BUSINESS 3 EXECUTIVE SUMMARY
Accenture research shows the rise of a new type of Australian banking consumer: the Nomad. Nomads are savvy and adventurous, keen to shop around and open to banking on “GAFA”* platforms. Nomads demand information and services “in the moment”, on demand wherever they are, and whenever they need them.
Nomads make up a significant 30% of Australian banking consumers: mind you, banks still need to service the other 70% of customer types; “Hunters”, on the lookout for great deals and who resist online-only services, and “Quality Seekers”, who prefer traditional service channels and the human touch.
This means banks need to be responsive to customer needs to gain market share across all consumer groups, with a focus on relevance and vitality. “Nomads” are the least well-served, satisfied and understood group currently but represent a major potential prize, controlling liquid assets worth up to AU$2 trillion.1
The way to win this prize is to transform banking into a Living Business, demonstrating hyper-relevance and vitality. This means making banking services intelligently personalised, engaging, generous, credible and consistent.
In this paper, the first in a series on Australian Banking as a Living Business, we will explore the customer trends driving the need for change and outline the components of Banking as a Living Business that industry leaders can benefit from developing. Future reports will explore each of these components, arming Australian banks with the strategic tools to win in an era of living services and constantly evolving consumer demands.
* An ever-expanding set of digital natives are now entering the banking industry. These include Google, Apple, Facebook, Amazon, Baidu, Alibaba, Tencent and other large platforms like Uber and Airbnb—referenced collectively in this paper as “GAFA” for simplicity.
4 BANKING AS A LIVING BUSINESS THE AUSTRALIAN BANKING CONSUMER IS CHANGING
Digital disruption has been a fact of life for years, but we are reaching a point where consumer expectations of an “always on” digital world are spreading, blurring the lines between what were once distinct industries and changing expectations about the nature of service delivery.
Accenture research shows that around 30% of older. Of course, as those who grew up in Australian banking consumers can be considered an everything-digital world age, the number “Nomads”: a group that is much more open to of Nomads will grow. digital channels than other consumers, willing to consider banking on GAFA platforms, and, For now, though, they are still a minority: our crucially, demanding of convenience. They are research shows two other groups of Australian used to getting information and services “in banking consumers of equal importance: the moment”, whenever they want them and “Hunters” and “Quality Seekers”. These groups wherever they happen to be, in a convenient prefer traditional banking providers and value and user-friendly way.2 human advice and interaction; the former is highly driven by value for money while the Nomads aren’t just millennial “digital natives”: latter demands responsive customer service while 43% are aged 22-34, the majority are and high trustworthiness.
Figure 1: The three types of Australian banking consumer
N A S UN E S UALI SEEKE S IG L DIGITAL SEARC ING FOR LOO ING FOR IG ACTI E GROUP, READ T E BEST DEAL UALIT , RESPONSI E FOR A NEW ODEL ON PRICE SER ICE AND DATA DELI ER PROTECTION
appy to use Ama on or Google ighly driven by value for money Want FS providers who will put for financial services their best interests first N S B alue digital innovation alue human advisors Comfortable with online-only Demand a high quality and V Resistant to online-only responsive customer service Want to use traditional FS providers Cost does not drive them N
BANKING AS A LIVING BUSINESS 5 Why does this matter? Figure 2: Banking Future Growth Value Analysis So what should banks be taking stock of? Banks need to be aware of the different GAFA Fintech Bank Bank Digital Digital demands and expectations of each type 4 Leader Laggard of consumer if they want to win—and retain — their business. Currently Hunters and 4 Quality Seekers are better served by Australian banks than the Nomads, and it is A the last of these three that is likely to grow 2 fastest. Already, Nomads control liquid assets of an estimated AU$2 trillion, a prize that is up for grabs by banks who can adapt their services to meet Nomads’ expectations. But they must be able to do so while also -11 retaining and growing market share among Source: Accenture Research Analysis Hunters and Quality Seekers. on Capital IQ Data, March 13, 2017
Apart from the opportunity costs of missing out on the Nomads’ growing wealth, a more Rebuilding trust urgent issue is that without strategies to meet the evolving demands of all three groups, For one thing, they can start with rebuilding banks will start to lose business to new trust. Fintechs’ popularity is based partly in entrants to the industry. the fact that they aren’t traditional banks, the reputation of which has taken a beating in Taking a GAFA-type approach has enabled recent years owing to global crises and local new fintech providers to cherry-pick services scandals. In an August 2017 survey by the where it is easy to disintermediate the customer Australian Bankers’ Association only 31% of relationship, in areas like payments, mortgages customers said they had a positive view of and money management. Barriers to entry are the country’s banking industry.5 falling, with regulators like ASIC willing to allow experimentation in areas that were once open This is another crucial reason why banking only to large, licensed organisations.3 in Australia needs to adapt. Regaining lost trust through transparent processes and Fintechs’ influence and impact is growing fast: technologies, like blockchain, is one of Australian fintech start-ups have increased Accenture Innovation’s annual Fjord design from fewer than 100 in 2014 to over 575 in and innovation trends (for which the theme 2017, attracting more than US$670 million in in 2018 is “Tension”).6 investment.4 They are defined in part by their agility, able to pivot to exploit new trends, As the rest of this report shows, many deliver services on new platforms, and react to of these trends underpin the concept of new regulations faster than traditional banks. becoming a Living Business—the path banks must take to ensure relevance and So what can banks do to interrupt and competitiveness in a rapidly changing world. compete with this fintech boom and devise a more agile way of working? This is literally a multi-million dollar question.
6 BANKING AS A LIVING BUSINESS WHAT IS A LIVING BUSINESS, AND IS AUSTRALIAN BANKING READY FOR IT?
What does it mean to say that banking must become a Living Business? It revolves around two core concepts: being hyper-relevant and embedding vitality.
Capturing the business of the consumer groups variety of channels (including beyond described above means banks must engage those owned by the bank). them at all touchpoints, equal to or exceeding • Intelligently personalised: banks need to GAFA services, thereby demonstrating relevance know the customer and proactively anticipate in age of fluid demands and expectations for personalised, instant service. It also means their needs and preferences (for instance, operating or participating in platforms that act providing appropriate mortgage deal as engines for the continuous creation of new information when they are buying a property). products and services, demonstrating vitality • Credible: banks need to be trusted, in part in everything the bank does. through delivering honest and timely advice and feedback, via a range of channels. This is easy to say, less easy to achieve. Yet banks can leverage Australian consumer • Consistent: banks should deliver the trends to determine their new direction. same branded experience everywhere, Consumers are already on a journey: across all channels, from the branch to 63%, for example, are prepared to share the smartphone to the third-party app. personal data with banks in return for new benefits. Some 39% of millennials would • Generous: To prove and rebuild trust consider banking with Amazon or Google.7 banks should use technology for strategic gestures that protect and benefit The keys to hyper-relevance consumers, e.g. providing an AI subscription service to move money between accounts and vitality automatically to gain higher interest rates Banking as a Living Business means going or avoid overdraft fees, or by providing far beyond the prosaic digital conveniences advice and incentives to entrepreneurs. of contactless payments or account balance Ultimately, being a Living Business means checking: it requires banks to be engaging, a bank positioning itself to consumers as a intelligently personalised, credible consistent trusted advisor and confidant who looks out and generous. for them and is available as their go-to source • Engaging: banks need to position of advice in times of high-emotion decision themselves as the “north star” for clients’ making, operating in both a digital and financial wellbeing, always present via a physical continuum.
BANKING AS A LIVING BUSINESS 7 It also means using the latest technology Figure 4: Defining Banking to deliver a holistic picture of consumers as a Living Business and clients to embed hyper-relevance in everything the bank does. To take just one G example—as outlined in Accenture’s recently E published Technology Vision 2018 report —“Extended Reality” technologies could BE HY ER EMBED be used to help inject vitality and personality RELEVANT VITALITY into what could otherwise be cold and I impersonal interactions.8
Source: Accenture
Figure 3
DATA AS GAFA ODEL AUTO ATED SUPPORT CURRENC APPEALS IS WELCO E G A A GA A
3 3 A G
I 62 GA A 5
PERSONALISATION A NEW ROUTE BRANC ES T AT BE OND BAN ING TO TRUST ADD ORE ALUE I A A
3 42 3
B 56 52 6 63
8 BANKING AS A LIVING BUSINESS Building on Australian Of course collaboration and openness are Living Business requirements, and many banking’s digital leadership fintechs are connecting with banks through Australian banks are far from laggards in the an open API infrastructure (Pocketbook was global context of digital transformation; there the first to integrate with Macquarie’s open 13 is good evidence that they are well placed to API platform in January 2018 ), something be leaders in the next stage of the evolution that sooner or later is likely to become 14 towards banking as a Living Business. a regulatory requirement. This gives Australian banks all the more incentive to Certainly, the issue of payments convenience take their innovations to the next stage: from has been well addressed: already by 2016 simpler transactions to built-in and invisible two-thirds of Australian cardholders had a payments, credit, and other financial services contactless card to allow tap-and-pay.9 that can respond to consumer behaviour. Apple Pay is also supported by several banks, while proprietary innovations such While many banks are toying with aspects as Westpac’s Paywear10 and Bankwest’s Halo of digitalisation, only those that take the bold Payments Ring11 demonstrate the ubiquity step to commit to designing and delivering all of contactless technology. the aspects of a Living Business will succeed in the Australian market. How can Banks There has been broad collaboration on achieve Living Business status? In the next infrastructural innovation, too. PayID, a section we show how they can do it. jointly developed system in which unique numbers are assigned to customers to enable Figure 5 the quick transfer of money without involving bank account details, is one example.12 This is BEST ERSION OF being rolled out in 2018 on the New Payments TRADITIONAL BAN Platform, a national system to enable • real-time transaction settlements, together • with Osko, a platform that enables smart • • and secure funds transfer.
Despite such initiatives, Australian banks REIN ENT BAN ING haven’t yet adopted the Living Business AS A LI ING model. It is currently easy for Nomads in BUSINESS particular—but actually all three consumer segments—to switch providers for other Business Performance WINNING DIGITAL BAN services. Money management, for instance, • E has been a rich vein that third party fintechs • B have tapped: consider the success of • Pocketbook, moneybrilliant and moneysoft, Time to name just the most popular. Source: Accenture, Banking as a Living Business
BANKING AS A LIVING BUSINESS 9 HOW TO MAKE BANKING A LIVING BUSINESS
Accenture has identified five “no-regret interventions” Australian banks can enact to set the course to becoming Living Businesses:
Figure 6: Five No-Regret Interventions to Nuture Banking as a Living Business
1. Target 2. Design 3. Build/Iterate 4. Connect 5. Sustain A N S I A L I E
Transform the Core BE PER-RELE ANT Grow the Core E BED ITALIT Grow the New
Source: Accenture
1. Target a “North Star”
Banks need to identify their “north star”, digitising journeys end-to-end and mapped to brand values, bringing clarity to creating new, compelling user experiences. the areas in which to prioritise intervention A good example of this kind of prioritisation and identify new business drivers. Focusing on is Westpac’s Service Promise, which includes priority items will help simplify and accelerate eliminating outdated levies like ATM and the process, freeing up resource capacity to transaction fees, as well as simplifying help realise the living business strategy. credit card charges.15 Many other aspects This step encompasses the of the plan apply the five principles of following processes: hyper-relevance and vitality, outlined in the previous section, to core business areas. Transforming the Core: including operating digitally enabled financial platforms to Growing the Core: including “opening up” to manufacture and distribute products partners and going “beyond the bank” through (accounts, credit services, payments, APIs, as well as offering bundled services to investments, and so forth). This means financial and non-financial service providers.
10 BANKING AS A LIVING BUSINESS Growing the New: creating and nurturing new, ones—for instance placing finance directly with sustainable, and adaptable revenue streams a GAFA service, or finding ways to monetise of the future, tapping into GAFA platforms to data, platforms, algorithms and even brands. serve existing customers and prospect new
2. Design for human interaction
Being a Living Business doesn’t mean going Another Fjord trend is that the physical wholly digital or relinquishing interactions is fighting back against the wholly digital.18 to faceless AIs: while 60% of Australian As well as occupying a combined banking consumers would be open to entirely physical/digital (“phygital”) presence, computer-generated support for account banks need to better deliver a personalised, opening, a majority (57%) would seek advice consumer lifestyle-driven experience about complex products from a human in consistently across all channels, designed for a branch—and 37% cite easy access to a human interaction. This includes rethinking branch as a driver of loyalty.16 A key Fjord and designing physical spaces to reflect trend is the recognition that AI and robotics digital; a task particularly important for big work best when deployed in complementarity banks that have huge physical spaces, many to human skills and aptitudes rather than as which are languishing. replacements for them.17
3. Build/iterate intelligent platforms
Underlying Banking as a Living Business is Adding robotics and AI capabilities: across an intelligent, open platform fit for the digital the back, middle and front offices, including economy. This includes: by accessing GAFA infrastructures and ready-developed assets like Amazon’s Alexa Opening APIs: both voluntarily and as result and Apple Siri voice recognition technologies. of regulatory pressure to do so. While Australia lacks (so far) the equivalent of the EU’s Payment Embracing radical security: to reduce Services Directive, which came into force in exposure to and defend against cyber risks, 2018, some banks have started to implement and reinforce trust among customers sharing open API architectures. As well as the personal data. Macquarie/Pocketbook example cited above, Implementing agile change and augmenting NAB and ANZ have made a limited number capabilities: in management and operational of APIs available via developer portals.19 environments to support fast development and implementation. A number of Australian banks, most recently ANZ, are in the midst of implementing agile management structures.
BANKING AS A LIVING BUSINESS 11 4. Connect to diverse ecosystems
Being a Living Business means One prevalent example of an ecosystem that welcoming plug-n-play partners and is thriving today is WeChat, the Chinese social providers, intersecting with as many media platform. It is known as the ‘everything industries as needed to satisfy customers’ app’ and functions beyond the traditional needs, and being interoperable with other definition of an app or a browser, with a third party-owned ecosystems—all to offer plethora of third-party apps hosted within it. consumers even more hyper-relevant services. WeChat has eliminated the need to toggle between apps, allowing users to do almost This could encompass initiatives as diverse as: everything they need to do in one place. • producing new or alternative From an Australian perspective banks financial products; should consider the needs and interests of • using off-the-shelf GAFA assets that different local ecosystems—e.g. national and offer new modes of interaction; local government, academia, agriculture and rural communities, as well as vibrant fintech • bundling financial and non-financial and startup hubs—and how these relate and experiences (including through the map to each group of banking consumers, Internet of Things); from Nomads to Hunters to Quality Seekers. • partnering with a wide range of content Doing so will help them identify how to providers to ensure customers have all embed banking as a vital Living Business the information relevant to their financial in those ecosystems. decision making at hand; or
• joining with value-added service providers and device manufacturers, such as fitness wearables and lifestyle tracking apps.
5. Sustain a Liquid Organisation
A resilient, tightly integrated culture • A customer-first approach with built-in vitality that embraces change • A project-oriented organisational culture fearlessly is what will keep Banking as a Living Business in sync with the fast-paced • A culture than encourages innovation digital economy. at every level • Breaking old habits or silos This encompasses: • Ensuring intelligent automation augments • An exceptional employee experience people and processes
12 BANKING AS A LIVING BUSINESS WHAT’S AT STAKE, AND WHAT’S NEXT
It’s easy enough to see what’s at stake if banks fail to transform themselves into Living Businesses.
Just look at examples from other industries: This report has set out the roadmap for Blockbuster, which in 2004 was valued at Australian banks to become Living Businesses, US$5bn and had over 9,000 stores, filed too, but mapping the route is easier than for bankruptcy six years later as its business making the journey. In future papers in this model collapsed under pressure from new series, we will explore each of the “No-regret entrants.20 Kodak, founded in 1880, did the interventions” by way of relevant pressing same in 2012 having failed to adapt to the challenges against which banks need to equip digital imaging era.21 Toys ‘R’ Us is the latest themselves to reach the destination. casualty, having stuck too rigidly to physical stores in the e-commerce era.22 To be sure, many have already begun and, collectively, Australian banks are well It’s also easy to contrast these with the positioned to show their counterparts in the success stories of disruptors like Netflix and rest of the world the benefits of the Living Amazon. But Living Businesses aren’t just Business approach. It is a journey that all new companies; many established brands must make, given the penalties of staying still. have transformed themselves. Take Qantas: Accenture research has shown that globally, facing major structural challenges it launched digital leader banks can increase revenues by a turnaround effort that focused in part a minimum of 30% from 2017-22. Laggards, on on transforming digital touchpoints with the other hand, can expect revenue growth customers.23 And in banking, too, examples of just 6% over the next five years, as they abound: for instance mBank in Poland struggle with disruption from GAFA, fintech (considered the EU’s banking laboratory), which entrants and digital leader banks. by 2015 had rolled out smartphone-based loan and account management businesses for a predominantly under-40 “Nomad” clientele.24
1 23 123 5 11 12 1 12 13 24 15 45 43 34 4 GA A 1 22 GA A 5 55 1 22 5 1 22 1 22 52
B B B B 2 1 2 2 A A 2 2 Leaders Laggards Leaders
Source: Accenture, Banking as a Living Business
BANKING AS A LIVING BUSINESS 13 With such a lot at stake, the imperative for banks to become agile, liquid, hyper-relevant and vital Living Businesses has never been stronger. If they choose not to take this step they may not have a place in Australia’s banking market in five years. So which Australian banks will embrace the opportunity to get ahead of the pack and become Living Businesses?
14 BANKING AS A LIVING BUSINESS References
1 Accenture, Australian Banking Consumer 12 https://payid.com.au/ Survey, February 2017 13 CIO, “Pocketbook app first to integrate 2 Ibid. with Macquarie open banking platform”, January 2018: https://www.cio.com.au/ 3 In the 2017-18 budget, for example, plans article/632262/pocketbook-app-first- were announced to expand the scope integrate-macquarie-open-banking- of ASIC’s Fintech “regulatory sandbox”, platform/ originally launched in December 2016, extending the exemption period and 14 See, for example, the Government broadening the categories of eligible Review into Open Banking in Australia products and services. See Clifford – Final Report: https://treasury.gov.au/ Chance, “Growing the Sandbox”, November consultation/c2018-t247313/ 7th 2017: https://www.cliffordchance. 15 https://info.westpac.com.au/200/service- com/briefings/2017/11/growing_the_ promise/ sandboxaustraliasenhance.html 16 Accenture, Australian Banking Consumer 4 Source: Accenture internal research Survey, February 2017 5 ABA, “Banks set trust benchmarks”, 17 Ibid: https://trends.fjordnet.com/a- August 2017: https://www.ausbanking. machines-search-for-meaning/ org.au/media/media-releases/media- release-2017/banks-set-trust-benchmarks 18 Accenture, 2018 Fjord Trends: https://trends.fjordnet.com/physical- 6 Accenture, 2018 Fjord Trends: fights-back/ https://trends.fjordnet.com/in- transparency-we-trust/ 19 CIO, op cit
7 Accenture, Australian Banking 20 http://www.ibtimes.com/sad-end- Consumer Survey, February 2017 blockbuster-video-onetime-5- billion-company-being-liquidated- 8 Accenture Technology Vision competition-1496962 2018: https://www.accenture.com/ t20180227T215953Z__w__/us-en/_ 21 https://dealbook.nytimes.com/2012/01/19/ acnmedia/Accenture/next-gen-7/tech- eastman-kodak-files-for-bankruptcy/ vision-2018/pdf/Accenture-TechVision- 22 https://www.reuters.com/article/us-toys- 2018-Tech-Trends-Report.pdf#zoom=50 r-us-bankruptcy/toys-r-us-seeks-to-halt- 9 The Payments Review, August 2016: vendor-payments-ahead-of-liquidation- http://www.thepaymentsreview.com/will- idUSKCN1GR0E6 contactless-payment-cards-catch-on-in- 23 https://www.cio.com.au/article/629420/ the-united-states qantas-fast-evolving-into-digital-business- 10 https://www.westpac.com.au/personal- says-cto/ banking/mobile-wallets/paywear/ 24 https://www.ft.com/content/0522912e- 11 https://www.bankwest.com.au/personal/ c261-11e4-ad89-00144feab7de payments-services/wearables/halo-nfc-ring
BANKING AS A LIVING BUSINESS 15 ABOUT ACCENTURE
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 442,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.
CONTACTS
ALEX TROTT Managing Director, Financial Services Banking Lead, Accenture Australia and New Zealand [email protected]
ALEKSANDRA GREEN Senior Manager, Financial Services Distribution & Marketing [email protected]
The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, these ideas should not be viewed as professional advice with respect to your business.
Copyright © 2018 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. 181092