Banking As a Living Business Driving Hyper-Relevance and Vitality Beyond Industry Boundaries

BANKING AS A LIVING BUSINESS DRIVING HYPER-RELEVANCE AND VITALITY BEYOND INDUSTRY BOUNDARIES

PART OF THE ACCENTURE LIVING BUSINESS SERIES THE NEXT CHAPTER IN WINNING IN THE DIGITAL ECONOMY Contents

PART I PART II WHAT’S AHEAD: HOW TO MAKE DRIVING HYPER-RELEVANCE AND VITALITY BANKING A LIVING BUSINESS ...... 11 BEYOND INDUSTRY BOUNDARIES ...... 3 Target a “North Star”...... 12 Now Comes the Age of Hyper-relevance...... 4 Design for Human Interaction ...... 14 Ready, Set, Jump to Future Banking...... 4 Build/Iterate Intelligent Platforms...... 15 Bank Vitality: Choice of Organization or Organism, Stagnation or Growth...... 5 Connect to Diverse Ecosystems ...... 16

Fit for Contact in a Contactless Future...... 6 Sustain a Liquid Organization ...... 18

Being Relevant Beyond Banking Boundaries. . . . . 8 The Potential Value at Stake...... 19

What Banking as a Living Business Looks Like. . . . .9 Where Banks Have Not Gone Before...... 19

Thanks to the digitization of everything, every customer interaction is an opportunity for traditional retail and commercial banks to create a compelling experience. Playing to win means being hyper-relevant within and beyond banking to equal or exceed GAFA* services, capturing consumer Now playing in the attention at all touchpoints. It means * operating or participating in a portfolio banking industry is an of platforms as engines for continuous ever-expanding host of creation of new products and services—thus, creating vitality. It also means managing alongside a diverse journey to help transform and expand DIGITAL the core business while growing new capabilities. The business model that can handle NATIVES, such industry shifts and thrive is a Living Business—one that evolves including Google, Apple®, itself quickly and often to adapt Facebook®, Amazon®, Baidu, to changing customer needs and behaviors. It is both an incremental and Alibaba, Tencent/ WeChat, a transformational change for banks. Those that choose to make it (this is not and OTHER large platforms an option for all) will transform beyond like Uber and Airbnb— today’s “adding more” (more products, channels, apps, and so forth) and referenced collectively evolve to the new model. in this paper as “ ” This report discusses the age of for simplicity. GAFA, relevance and vitality coming upon the industry, and the Banking as a Living Business model as a valid and proactive response. It also offers five no-regret interventions banks can start to make now toward becoming a Living Business and position themselves for growth in a boundary-less digital economy.

of banking, Over the past five decades, banking Consumers’ fluid xpectatione for 79% insurance, has evolved from a strong product personalized, best-in-class, relevant and fintech CEOs believe orientation to centering around interactions is being fueled by their customer experience. Now, the experiences with GAFA. Consider that customer expectations are industry is entering a new business consumers spend 50 minutes a day shaped by hyper-relevant, battleground (Figure 1) where on Facebook platforms,2 or that for real-time, and dynamic connected intelligent sensors experiences encountered and fluid consumer expectations NEXT ERA across any industry.1 meet to create a new basis of competitive advantage: full-on relevance to customers across EXPERIENCE any interaction, on any channel. RELEVANCE

CUSTOMER CHANNEL LOYALTY RETAIN PRODUCT LIFETIME DISTRIBUTION GROW REACH VOLUME • Many unpredictable • Switching economy ACQUIRE brands • Big Bang innovation • Engagement • Nonstop dynamics • Few brands • More brands • Many brands innovation • Feature innovation • Channel innovation • Proposition • Cloud, mobile, and • Mass production • Enterprise IT innovation social • Product push systems • Online and Internet • Customer pull • Moment of sale • Channel push • Customer push Figure 1. • End-to-end journey • Place of sale • Linear path to Banking’s Evolution • Digitization of purchase everything to the Era • Fluid expectations of Relevance 1960s 1980s 1990s 2010s 2020s Source: Accenture

READY, SET, JUMP TO FUTURE BANKING

Leading retail and commercial banks recognize today’s Best Version of fatal threats to their traditional business and are hard at Traditional Bank work to shift to modern, more digitally fit business models • Optimized distribution that reposition them to compete effectively. Banks that • Operational efficiency hope to thrive a decade from now will need to jump to the • Regained advisory trust next “S” or growth curve. Whether that jump is to a model • Creation of fuel REINVENT for growth BANKING optimizing a bank into becoming the best short-term AS A LIVING version of itself or one expanding a bank’s business edges BUSINESS and capabilities to win in the digital economy, the most compelling curve for growth and sustainability is now Business Performance Winning Digital Bank coming into view: Banking as a Living Business. Smart • Embrace value chain fragmentation banks will take a good look at the Living Business agenda • Broader business perimeter now to influence their business model choices today and • Clear business model choices get them to the future ahead of the pack. Time

4 | BANKING AS A LIVING BUSINESS Copyright © 2017 Accenture. All rights reserved. GAFA Fintech Bank Bank BANK VITALITY: Digital Digital 49% Leader Laggard CHOICE OF 40% ORGANIZATION Figure 2. Banking Future Growth OR ORGANISM, 20% Value Analysis STAGNATION (As percent of enterprise value) OR GROWTH -11% Source: Accenture Research Leading companies recognize that to Analysis on Capital IQ Data, March 13, 2017. be hyper-relevant to customers, they need more than just good customer data and technology, more than just strong each dollar riders spend on UberX, shows that consumer behaviors and marketing, sales, and service. They know about $1.60 of consumer surplus is expectations are shifting, with as they need a new customer-centric mindset generated.3 Customers now decide many as 78 percent of consumers that inspires fundamentally different when, how and through which we categorize as Banking Nomads behaviors. It means being equally relevant device to engage with their bank willing to bank with a tech firm, and inspiring to their employees, partners, across a wide range of activities— like Amazon or Google.5 About leaders, and external stakeholders. As from searching for products and 46 percent of all U.S. banking, such, leaders exhibit and continuously services to publicly rating services, insurance, and wealth management shape four vital properties typically to generating new data that customers say they would switch to associated with living things: powers the next experience. Their GAFA giants, up to half of the market ideal “me-centered” interactions currently served by traditional • Personality – Unique pattern, or DNA, are becoming reality. They are financial institutions.6 Globally, of distinguishing traits that are reflected being enabled by “digitization of modern business models could by the provider’s people and valued everything” products with built- impact up to 80 percent of existing by its customers. Both customers and in smart technology. They are banking revenue pools by 2020.7 employees feel empowered by it. connected via a vast network, The reality is reflected in future • Craft – A deep set of collective skills creating a new breed of intelligent, market valuations, as shown in specific to the company that are real-time, “living services” (with Figure 2. The future growth value of continuously nurtured. It is what the built-in and invisible payments, financial institutions lagging in their company shows and talks to customers credit, and other financial service digital transformation is discounted about. It is the topic of conversations the transactions) that can respond to at -11 percent while that of digital company has with its customers and is consumer behavior. Banks’ typical leaders (financial institutions that expressed in every touch point. response to “add more”— more have launched aggressive digital channels, apps, smart-lab branches, transformation programs and are • Instinct – The way in which the company some “experiential” products perceived of having done so) is makes decisions, behaves, and adapts (say, home buying assistance), 20 percent. Compare this to to change. It comprises the flow of work and so forth—is not enough to fintechs at 40 percent and AFAsG that rallies and empowers people across compete with living services, at 49 percent. the enterprise. retain customers, and return the • Relationships – How it feels to interact predictable results they need to The question, then, is with the company as a customer and, survive. Few of the world’s top transformation to what? How can crucially, as an employee or a partner. banks are sustaining a return on banks capture market attention and The ease that new collaborations equity of greater than 12 percent make money amidst the pursuits are forged across all stakeholders is and a cost-income ratio of less of GAFA, fintechs, and other fierce essential to how corporate organisms than 45 percent.4 Banks require newcomers? We believe that develop and change over time. true transformation to regenerate banks need to position themselves their business models at the speed to become a Living Business, Through these four traits, innovators of fast change to consistently and embedding vitality to morph in ultimately shift their business from simply efficiently deliver hyper-relevant sync with a fast-changing real-time being organized (often rigidly so) to service—what we call embedding customization and hyper-relevance being a fluid, highly adaptable organism vitality. Those unwilling or unable of financial and non-financial that grows and responds as part of a to do so gamble their market share products and services that contiguous, open living system. and revenue growth. Our research measure up to the GAFAs.

Banking as a Living Business is about That is what Banking as a Living two things: hyper-relevancy and Business is all about. It is distinguished vitality (Figure 3) to adapt to and by the way it “walks and talks” in very thrive in the future world. human-like ways (Figure 3). Much like how you would describe a friend, it is: The reality is that simple, fast, convenient, cashless, contactless • Engaging, to always be there as the scenarios are accelerating and will “north star” for customers’ financial inevitably arrive in most industries well-being. It means looking ahead and markets. A danger for banks is and providing valuable financial when consumers no longer have to and non-financial advice (both in take a physical card from their wallet the physical and digital worlds, to pay for goods and services, thus and beyond the bank’s channels, weakening banks’ brand visibility. such as on GAFA channels) that Already in London, for example, helps customers navigate life’s millions of commuters pay for public choppy waters and course-correct transport by tapping their contactless to safe sailing. It requires the bank cards or mobile pay service (like to be truly trusted, relevant, and Apple Pay® or Android Pay™) every empathic. day at train stations’ entry and exit gates, at bus or tram fare readers, • Intelligently personalized to even on river buses.8 Three out of four know the customer, proactively retailers accept contactless payments understanding and anticipating throughout Canada, and 66 percent his needs and preferences to of cardholders in Australia have a deliver contextual interactions and contactless card that allows them to value-curated experiences. Nearly tap and pay.9 In the future, people will half of customers want relevant not be contacting the bank except advice and product information at when they need or want advice about their fingertips as they go about 10 their financial well-being around their daily lives —for example, and throughout life events—college, information about preferred marriage, new baby, new house, mortgage deals when they are in divorce, retirement, illness, and death. the process of buying a property, or Advisory and problem solving are even being able to discern whether core strengths for banks and their they are already covered in terms of most promising areas for continued Life or P&C insurance products. The competitive advantage in customer hyper-relevance challenge for banks engagement. Yet in the contactless is two-fold: personalization of the future, that engagement will need standard experience based on data to present itself in a hyper-relevant, about a customer and metabolism trustworthy, engaging, and appealing to change offerings and evolve way. Banks will want to position platform features on a regular basis themselves to consumers as a friend in sync with customer engagement and confidant who looks out for them at the aggregate level. and is available as their go-to source • Credible, to be trusted by in times of high-emotion decision enhancing brand perception making, operating in both a digital and through effective moments of physical (“phygital”) continuum.

Source: Accenture Generous

Engaging Credible

BE HYPER- EMBED RELEVANT VITALITY Intelligently Consistent Personalized

truth (such as account opening, • Generous, offering a wide range of consumer loans, and home buying); strategic gestures to prove advisory ® social conversations and feedback trust in the shadow of the industry’s Carnival loops (such as crowd-sourced past scandals and questionable Adapts in ratings, opinions, and reviews, and conduct. Consider that just being able to take the feedback 29 percent of consumers in the UK Real-time to and do something about it); and consider banks to be trustworthy.11 enablement of employees to exhibit A gesture to build advisory trust Vacationers’ brand values. may be to offer bots and other tools to generate visible customer Place and • Consistent, designing and value. For example, a subscription- Penchants13 delivering the same branded based personal bot could manage experience anytime, anywhere customers’ accounts, conducting Imagine that your cruise ship room across all channels and devices— transactions that increase return sensors detect your approach and from the chairs in a branch to the (such as moving funds to higher by the time you arrive, the lights buttons on an app to “powered by” interest-bearing accounts) and are on and the air conditioner branding for experiences beyond avoiding unnecessary costs is cooling the room to your the bank’s own channels. It keeps (such as overdrafts by activating preferred temperature. That’s just an eye out for any outliers (such a lower-interest loan). Other one example of what Carnival as third-party partner activities examples include more traditional Corporation is doing through its within digital ecosystems) that merchant-funded reward Ocean Medallion technology, a could jeopardize its customer schemes; financial and business small wearable that provides a truly service or diminish its brand and education for small businesses seamless experience at sea. Each stays prepared to mitigate them. and budding entrepreneurs; and, Medallion is synced to a specific Physical (“human powered by in true consumer-to-business guest and interacts with 7,000 digital”) plays a key role in creating fashion, recognizing new ideas sensors connected by 72 miles of and maintaining trust, particularly and advocacy, and consequently cable distributed throughout the in high-emotion situations such as rewarding customers. According ship’s 19 decks to track a guest’s advisory and service recovery. We to a Bank of America survey, location, current activity, and what believe the physical network will 90 percent of CMOs experienced he or she might want to do next. It still be relevant as part of a Banking revenue lift from their card-linked optimizes ship operations, energy as a Living Business, but possibly marketing programs though usage, staff performance, and assuming new forms and looks. 62 percent have never implemented vacationer experience. such a program.12

of banking, Being relevant beyond banking than competing head-on with GAFAs, insurance, boundaries opens new markets banks should see and interact with 76% for banks. By connecting with and GAFAs as new and additional channels and fintech CEOs say that promoting their offerings on third- to connect with customers for it is more important than party-owned channels and platforms— cross- and up-selling. This will move ever to provide products, what we call “on GAFA”—banks go banks’ Future Growth Value closer to services, and experiences to where consumers are likely to be the 40 percent mark (Figure 2). that are very relevant to their and have a chance to convert them into customers. Whether placing While some traditional banks are customers across different already offering their customers 14 finance on a platform, providing times and contexts. an algorithm, activating Know Your some GAFA-like interactions and Customer (KYC), vouching for digital services, Banking as a Living Business identifications, making APIs available, is revolutionary for most. That said, enacting subscription-based services, market dictates for such a strategic and so forth, banks can trigger and, concept are very near and even over time, migrate revenues from already here. Banks can start now to traditional transaction-based streams make the rotation toward being highly to new experiential streams. They can adaptable with vitality on the inside make money “on us” via the bank’s to be hyper-relevant to customers on own channels, and “on GAFA” services the outside. run by other digital natives. Rather

Imagine David, a young cycling and not just from the bank’s product enthusiast. He is streaming a cycling range. David chooses a loan from race on a GAFA platform when he a bank-vetted, peer-to-peer player. sees the bicycle of his dreams. He With just one click, the purchase is is in the process of upgrading his initiated. As David completes the current bike for his daily commute purchase, he is asked if he would like and wishes to buy it then and there. an extended warranty. He asks the bot Through the platform, David connects to check if he truly needs it; the bot to his bank’s personal bot (the always- finds that David is already insured as everything connected with the bike there “north star”), as well as to tools part of his credit card’s terms. As he purchase, including the maintenance, with data on other aspects of his life completes the transaction, he notices is included in the bank’s satisfaction (such as a wellness account on cycling a special delivery service where large, guarantee. performance that gives him real-time particularly valuable items can be readouts of his vital signs). This helps collected from a bank branch at a time David’s experience is based on the David bring all the important parts of of his choice. On the day of purchase, bank acting as a new type of banking his life together. as he browses the branch displays platform with a set of business before picking up his bike, he notices a propositions to serve multiple niches David engages his banking bot to promotion for a cycling club in his area individually—a young cyclist, an see if he can afford the bike. The bot that caters to his age group and riding affluent golfer, or even a high-net provides a 360-degree picture of ability and that wellness points earned worth customer who wishes to invest David’s financial health, connecting to on his ride can be added directly to in real-estate in a specific location. all his bank accounts, credit and store his bank’s loyalty points system. On The difference is being able to cards, student loans, and products he his way out, David is offered a thank- orchestrate and call upon (in real- has with other financial institutions. you reward from his bank that grants time) different sets of API services to The bot confirms that David can afford him access to a cycling pro who can address the specific needs of the niche the bike, and recommends the best help him set up the bike and give him served, within and beyond the bank’s way to finance it. The bot then offers maintenance tips. He is assured that traditional channels. him the best finance deal available

Getting to Banking as a Living Business Accenture experience suggests requires transforming and growing five no-regret interventions to set banks’ cores, as well as growing new the course for Banking as a Living capabilities. For traditional banks, it is Business: target a “north star,” design much easier said than done. for human interaction, build intelligent platforms, connect platforms to diverse ecosystems, and sustain a liquid organization (Figure 4).

Figure 4. Five No-Regret Interventions to Nurture Banking as a Living Business

Source: Accenture

Target Design Build/Iterate Connect Sustain A “North Star” For Human Interaction Intelligent Platforms Diverse Ecosystems A Liquid Organization

TRANSFORM THE CORE BE HYPER-RELEVANT GROW THE CORE EMBED VITALITY GROW THE NEW

Banks will need to define their initiatives and fragmented programs “north star” positioning for the Living scattered across their business to Business. This should map to brand only focus on priority items that values and bring the clarity to prioritize promise to unlock the greatest trapped areas for intervention and identify new value. Doing so lowers complexity, business drivers. Success dictates accelerates speed to vision, and frees that banks cut through their typically up critical resource capacity to bring EXPANDINGvery THE long list BANK’S of customer-oriented REVENUE POTENTIALthe Living Business to life.

R A T E R E L E V N E A N C G E E FS* REVENU NAL ES “O TIO N G DI AF A • Strategic partnership A” TR with GAFA/fintech platform (financing, go-to-market, embed in Customer Experience)

• “Packaged” • Payment services services/products L FS REVENU NA ES IO “O IT N D • Customer acquisition A U R S • Cross-selling, up-selling ” T • Monetize, • Experiential services license platforms

• Third-party FS products N

” • Monetize brand O

• Algorithms-as-a- • Personal bot S U to “power” Service — KYC, N subscriptions • Bundling of third-party -

credit risk N F FS + non-FS • Advertise on digital bundled offers O N S

“ channels/portals O R • Merchant- ” S A N E funded rewards • Value-added services E F G V - for SMBs, corporates C A F E E E I S N G • Space V N • Aggregator C * U R monetization N E R E services E N O R E S A S (Open Bank, “

A V “ L V O PSD2) S E A E T N IT • Customer E N U L E IG analytics C U S E ” D I R E insights V R

E S R E L “ E O S T E N L A V • Offer value-added • Digital identity R A G A A services through verification, IT E N F N C A Bank’s APIs guarantee IG E E ” D G

Figure 5. Expanding the Bank’s Revenue Potential *Financial Services Source: Accenture

ON US ON GAFA Within Bank boundaries Beyond Bank boundaries GAFA/fintech partnership platform revenues

12 | BANKING AS A LIVING BUSINESS Copyright © 2017 Accenture. All rights reserved. What is critical here is to clearly out on an online retailer, bundled, customer acquisition opportunities) identify where and how the bank for example, with the purchase of will need to revisit their operating wishes to engage customers, partners, a large home appliance, mobile and pricing models, such as focusing and competitors. phone, and so forth. on experiences and introducing Banks will need to: – Placing finance directly with a subscription-based services (Figure 6). Barclays operates a subscription- • Transform the core, such as GAFA, such as Uber or Airbnb, for them to provide individually based Features Store where operating digitally enabled financial customers can enhance their current platforms to manufacture and to prospective drivers to buy a car, prospective hosts to account with a range of packs and distribute products (accounts, credit features.15 mBank’s mAccountant services, payments, investments, conduct home improvements, and so forth. service is an integrated, intelligent, and so forth). This means digitizing online banking and accounting journeys end-to-end and creating – Other areas for opportunity solution offered to small- and new, compelling user experiences. include the ability to “monetize” medium-sized enterprises on a • Grow the core, “opening up” to data, platforms, algorithms, and subscription basis.16 Opening such partners and going “beyond the even brand. revenue streams is likely to give a bank” through APIs. Particularly, Banks that pursue new income bank more consumer interactions and this means partnering with streams from a mix of highly relevant data to nurture greater relevance that, alternative financial services and “on us” and “on GAFA” propositions in turn, will expand cross- and up- non-financial services providers to (and, in return, benefit from new selling opportunities. design and create new experience layers and offer bundled services Figure 6. (financial and non-financial) that Banking as a Living Business Models address customers’ primary That Drive Revenue and Growth needs—everything from the home, Source: Accenture travel, and leisure to wellness Digital customer and business. Examples include “On-us” and acquisition ®USAA®’s bundled insurance offers “On GAFA” revenue streams Insight-driven that cover home and car, or Vitality’s (Customer Analytics draw on its extensive ecosystem Portfolio and Customer platforms and BUSI Genome) of non-financial services retailers propositions and professionals that team NESS with the insurer to foster health MODEL improvements and help people lead Cost-income ratio of 40% healthier lives. Vitality embedded to change quickly BANKING ECON • Grow the “new,” focusing on AS A LIVING OMIC creating and nurturing new, Customer and employee BUSINESS MODEL sustainable, and adaptable revenue design thinking streams of the future, tapping into and doing ROE well above COE, working GAFA platforms to serve existing consistently across customers and prospect new ones OPER revenues and costs (Figure 5). This means rethinking Robo-augmented ATING Focus on Future workforce MODEL Growth Value financial services produced today, as well as identifying new ways to Dynamic, open ecosystem, enabled create viable revenue streams. Two by API architecture Blockchain data examples of this are: connection – Packaging loans to make them available “off-the-shelf” at check-

For banks to better deliver a easy access to a branch is the third personalized consumer lifestyle- biggest driver of loyalty, they want driven experience consistently digital tools readily there: 59 percent across all channels, both “on us” and want advanced ATMs and 55 percent “on GAFA,” they will need to design want devices in branches to access for human interaction. This includes their online banking.19 Banks could rethinking and designing physical add features like pop-up branches spaces to reflect digital; a task to be where consumers need them, particularly important for big banks a magic wall in a stadium or a gym that have huge physical spaces, many where customers congregate or a which are languishing. virtual or augmented reality branch that is accessible through virtual Digital and physical (“phygital”) reality devices (such as Oculus Rift® channels blended together with data- and PlayStation® VR). Virgin Money’s driven insight improve the potential concept lounges in London, for of all channels to engage consumers. example, feature reclining airline seats, For example, Accenture analysis of overhead lockers, and authentic real data from a large European Bank aircraft directional floor lighting. shows that an omni-channel approach Rather than selling traditional banking surpasses a branch-only approach products or services, the lounges aim by 2.1 times in average revenue, 1.3 to increase advocacy and lower new times in average cross-selling, and 66 customer acquisition cost by offering 17 percent reduction in churn. members a place to relax or work before satisfying their banking needs Nearly 90 percent of consumers in in a Virgin Money branch. The bank North America will use their branches has seen 200 percent growth in sales in the future, and they want human at branches located near one of its interaction when they go there.18 innovative customer lounges.20 While 40 percent of consumers say Some customers will interact with their bank over GAFA channels, beyond the bank’s boundaries. As such, Banking as a Living Business must also clarify its brand values and design services to apply those values effectively at all opportunities anytime, anywhere, and on any device. Ecosystem participation will present banks many opportunities to sell third-party experiences with the financial peace of mind of being “powered by” the bank—a brand value opportunity not to be overlooked. It also means managing the reputational risk of selling through channels for which the bank has limited control.

Underlying Banking as a Living infrastructures to deliver the Business is an intelligent, open experience, such as accessing platform fit for the digital economy. voice recognition assets like Building, iterating, and operating Amazon’s Alexa® or Apple’s Siri®. such platforms is about connective • Embracing radical security to innovation, drawing on a set of new reduce exposure to and defend cloud-based technologies to enable against cyber-risks, as well strategic actions. These include: as being the “north star” for • Opening APIs, both in response customers’ “well-being” by creating to new regulation and voluntary mechanisms to protect customers’ industry initiatives, such as Open digital personas. Banking in the UK and Payments • Implementing change and Services Directive 2 in Europe. It augmenting capabilities in “Agile.” means making APIs more available Banks can seek to achieve this by on three different levels: integration creating operational environments of internal APIs to re-wire the and change/configuration business toward new platforms and management processes that data primacy; sharing APIs with support and guarantee fast and partners for greater collaboration continuous development of on customer relevancy; and software. giving outsiders access to APIs to cultivate fertile ground for Chase® and Intuit®, for example, innovative services. recently launched an API for secure 21 • Adding robotics, robo-advisory, customer data sharing. Goldman and artificial intelligence Sachs, Bank of America, Mastercard®, capabilities across the back, and others have patents pending on 22 middle, and front offices. This blockchain-based innovations. OCBC addresses burning platforms, such Bank just became the first bank in as the need to connect legacy Southeast Asia to pilot a robo-advisory with real-time systems (Robotic service, offering customers guided Processing Automation) and investment with regular rebalancing incorporate algorithms (voice of investments portfolios, without interfaced, machine learning having to interact with a relationship 23 and cognitive computing) to manager. Fintechs from across the create robo-advisors that support products spectrum like Betterment and customers 24/7. Key to this will Trim are offering robo-advisory or bots be to use off-the-shelf GAFA that sweep accounts for inefficiencies.

A cornerstone of Banking as a • Value-added service providers— EFFIFUEL™ Living Business is its open banking from existing ecosystems (think platform architecture that welcomes Intuit’s QuickBooks™ for small BY Michelin® plug-n-play partners and providers, business bookkeeping and intersects with as many industries as accounting) to MOOCs (Massive Overhauls needed to satisfy customers’ needs, Open Online Courses) that offer Drive and is interoperable with other third- distance learning online. party-owned ecosystems—all to • Device manufacturers to which 24 Management offer consumers even more hyper- Banking as a Living Business may relevant services. This is about strong want to connect and co-create Aiming to create a value-added relationships that the bank cultivates services and experiences. service for large commercial vehicle with ecosystem partners, thus linking fleet operators, Michelin drew on it to broader capabilities and services, • Existing living services, such as Citymapper, Strava, and IFTTT, the Internet of Things to launch including: among many. effifuel. It is an ecosystem that • New or alternative financial uses sensors inside vehicles to products of value to customers, Open banking and APIs are the golden collect data, like fuel consumption, typically powered by fintechs and threads for weaving together diverse tire pressure, temperature, speed, other technology innovators. ecosystems, as illustrated in Figure 7. and location. This data is then • Off-the- shelf GAFA assets that offer Models of sharing tend to pivot on processed in a cloud solution and new modes of interaction through creating new user experiences through analyzed by Michelin experts, who tools like plug-n-play access, voice a service or product, or access to data. provide recommendations and recognition, cognitive computing Some APIs will be made available for free in accordance with regulatory training in eco-driving techniques. modules, proprietary robots, and mandates; others will be offered By shifting from selling tires-as-a- more. Under the new business voluntarily on a fee basis as part of a product to offering a service that model, GAFAs are likely to be enablement for the bank and serve bank’s revenue growth strategy. Though guarantees performance, Michelin as showrooms for banking products APIs are not the only connective gained higher customer satisfaction, and services that are repackaged tissue for diverse ecosystems (other loyalty, retention, and profits. For and ready for their channel. technologies like blockchain and customers, the service reduced fuel smart contracts apply), they represent consumption 5.3 pints every • Bundled financial and non-financial a readily available starting point for experiences, including living 62 miles, representing annual banks. The key will be banks’ ability services and the Internet savings of US $3,591 for long-haul to orchestrate real-time access to the of Things. transport traveling over 74,564 miles. right partners and APIs to address the • A wide range of content providers, needs of target customer segments and such as those providing up-to-date niches, such as millennials who enjoy news on current events, weather, cycling or affluents who want to invest stocks, analyses, and so forth. in local market real estate.

Uber Google Wallet™

Airbnb SHARING ECONOMY Rakuten PAYMENTS Alibaba.com ripple

RETAIL PLATFORMS Amazon BLOCKCHAIN BUSINESS TECHNOLOGY PARTNERS PARTNERS Google amazon web services CUSTOMER AND IBM BLUEMIX™ SOCIAL PLATFORMS Google facebook Compute Tencent Engine™ Azure Microsoft Baidu vodafone at&t ® NTT TELCO PLATFORMS

claritymoneyPERSONAL FINANCE MANAGEMENT STORAGE

CLOUD SERVICES,

YNABtradeo facebook TRADING ®

Messenger ChelseaBrook FINTONIC etoro QUICKEN WhatsApp® CUSTOMER CHANNELS

monese MyDigiTrade VOICE RECOGNITION ™

® Google Home Google Google AdWords Ayondo OVERSEAS OnDeck Prosper® TARGETED CUSTOMERS BingAds Funding Circle ™ MONEY ® P2P CREDIT FOR SME Infolinks TRANSFER Viadeo Transferwise AUTOMATED Xing INVESTMENT RECRUITING MANAGEMENT banktivity ™ IBM Watson™ Google Google MACHINE LEARNING Betterment AdSense

Amazon Mint

Atom Bank Atom Schwab Lending Club Lending Amazon AlexaREWARD ADVOCACY Associates

Figure 7. How Illustrative Banks Might Activate a Diverse Ecosystem

Source: Accenture

A resilient, tightly integrated culture For banks, achieving such agile with built-in vitality that embraces organizational traits calls for radical change fearlessly is what will keep changes—for example, breaking old Banking as a Living Business in sync habits and structures, such as natural with the fast-paced digital economy. silos, that hinder new ideas. It means As business models evolve from being blending a right-sized set of core skills transactional and manual to more with freelance talent and employing experiential and technology-led, four intelligent automation (bots and aims are important: robo-advisors) to augment people and • An exceptional employee processes. Bankers Accenture recently experience, engaging and surveyed said that 16 percent of their empowering employees with workforce is independent freelance organizational structures, digital workers, and 30 percent expect their tools, and meaningful motivations organization’s use of independent to address customer needs, shifting freelance workers to increase more 25 to high-value advice, and creating than 51 percent over the next year. service distinctions. With a workforce of human and • A customer-first approach, non-human (algorithms, AI, machine pointing organizational strategies learning, cognitive computing, toward high ideation and powering bots, robo-advisers, and collaborative contributions that so forth) skills, banks will need to view foster competitive business the workforce operating model from advantage. two angles: • A more project-oriented • Knowing which resource type will organizational structure that serve the customer and when to aligns time, talent, and investment address customers’ type preference to “change the business” while delivering value. Under what activities while most “run the circumstances will bots serve business” activities are conducted customers most effectively? How automatically. do you draw customers back into a • A culture that encourages human interaction when they want innovation at every level, guiding or need it? the bank’s organizational change • M anaging the workforce toward and talent development efforts. an optimum balance by product line, segment, experience, or other criteria.

Such innovative cultures give traditional banks the flexibility to operate like start-ups with the fortitude to regenerate their business models and customer propositions on a fast cycle and continuous basis.

100 23 123 5 118 12 106 12 130 Δ between leaders and As a result of being hyper-relevant laggards 24 and having vitality, Banking as a percentage 48% points Living Business will be positioned for 15% 45% 43% Organic GAFA and Digital 34% Revenues improvement in revenue and cost-to- growth fintech leader “on us” and serve. Accenture analyses indicate (Δ 17-22) disruption competition “on GAFA” that digital leader banks that take on (Δ 17-22) (Δ 17-22) (Δ 17-22) the position can increase revenue 85% a minimum of 30 percent by 2022 55% 57% 66% 52% (indexed at 100 in 2017, per Figure 8). Such growth is soundly achievable, notwithstanding revenue-eroding competition from GAFAs Banking Banking Banking Banking Total Revenues Revenues Revenues Revenues Revenues and fintechs. 2017 2022 After Disruption After Disruption 2022 (Leaders) (Laggards) (Leaders) Conversely, digital laggard banks unable to achieve Banking as a a Living Business alone is significant. Revenues through digital channels Living Business can expect revenue Depending on the profile of a bank’s Revenues through traditional channels growth of six percent over the next starting point—market maturity, five years. This slower growth results business objectives, and so forth— from more disruption coming from it can reduce distribution costs by GAFA and fintechs as well as digital 10 to 30 percent. With distribution Figure 8. leader banks. Additionally, growth for traditionally comprising up to 60 Revenue Uplift Potential for laggards will be hampered by their percent of total bank cost, this Banking as a Living Business in debility in generating digital and non- contributes to a minimum 6 to 18 Mature Markets financial services “on us” revenues percent reduction in total costs. Source: Accenture Research and capturing the full spectrum of Overlaying a 6 to 18 percent cost “on GAFA” revenue opportunities reduction atop 30 percent revenue (including the ability to monetize growth yields a value improvement data, algorithms, platforms, and of 30 to 50 percent, according to even their brand). Accenture Research analyses. It is Regarding cost-to-serve, the “phygital” an advantage that few, if any, banks transformation inherent in Banking as can ignore. WHERE BANKS HAVE NOT GONE BEFORE

As bank boundaries are becoming its operations and a human-plus-robot more porous, being relevant beyond workforce, the bank itself becomes a banking becomes more critical. liquid organization. It quickly learns, Banking as a Living Business provides decides, responds, and continuously a basis for banks to both help bolster regenerates its business model to their core high-value advisory business be hyper-relevant to ever-evolving and give new markets access to their customer needs and behaviors. Bank services “on GAFA” in trustworthy leaders can begin to revisit their ways. The time to look toward this market positions and mobilize their model is now, when digital disruption people and resources to redirect their is compelling significant bank change. journey to the future and reap With vitality and resilience built into the resulting rewards.

Piercarlo Gera 1 Accenture Vitality Pulse Survey for Financial Services 2017 (publication targeted for October 2017) Global Managing Director 2 mediakix, “How Much Time Do We Spend on Social Media?”, December 15, 2016. http://mediakix. Accenture Distribution & Marketing com/2016/12/how-much-time-is-spent-on-social-media-lifetime/#gs.dp=cr_g [email protected] 3 The Wall Street Journal, “Uber’s Pricing Formula Has Allowed Economists to Map Out a Real Demand Curve,” September 19, 2016. http://blogs.wsj.com/economics/2016/09/19/ubers-pricing-formula-has- Alex Secchi allowed-economists-to-map-out-a-real-demand-curve/ Offering Development Lead 4 Accenture analysis on Bloomberg data, 2016 Accenture Distribution & Marketing [email protected] 5 Accenture Global Financial Services Distribution & Marketing Consumer Study 2017

6 Accenture, “Beyond the Everyday Bank: How a GAFA approach to digital banking transformation will Alan McIntyre change everything,” 2016. https://www.accenture.com/us-en/insight-digital-banking-beyond-everyday- Senior Managing Director bank Accenture Banking 7 IBID [email protected] 8 UK Government Transport for London, “Mobile Payments.” https://tfl.gov.uk/fares-and-payments/ Richard Benson contactless/other-methods-of-contactless-payment Creative Managing Director 9 The Payments Review, “Will contactless payment cards catch on in the United States?,” August 4, Allen International 2016. http://www.thepaymentsreview.com/will-contactless-payment-cards-catch-on-in-the-united-states [email protected] 10 IBID Mark Curtis 11 Accenture 2016 UK Financial Services Customer Survey, https://www.accenture.com/us-en/insight-driving-customer-engagement-trust-satisfaction-uk Chief Client Officer and Co-founder Fjord 12 Bank of America, “Survey Shows Card-Linked Marketing Programs Are Highly Effective, but Rarely Done,” April 22, 2014. http://newsroom.bankofamerica.com/press-releases/consumer-banking/survey- [email protected] shows-card-linked-marketing-programs-are-highly-effective-rar

Robert Wollan 13 Wired, “Carnival’s High-Tech Cruise Wearable Knows Your Every Need,” January 5, 2017. https://www. Senior Managing Director wired.com/2017/01/carnival-ocean-medallion-wearable/ Accenture Advanced Customer 14 Accenture Vitality Pulse Survey for Financial Services 2017 (publication targeted for October 2017) Strategy 15 Barclays, http://www.barclays.co.uk/FeaturesStore/BarclaysFeaturesStore/P1242627664183 [email protected] 16 SME Banking Club, “mAccountant – integrated banking and accounting solution by mBank.” https:// www.smebanking.club/portfolio/maccountant/ About Accenture 17 Accenture analysis of real data from a Large European Bank, 2016. Accenture is a leading global professional services company, providing a broad 18 Accenture North America Consumer Digital Banking Survey, 2016. https://www.accenture.com/us- en/insight-consumer-digital-banking-survey-2016 range of services and solutions in strategy, consulting, digital, technology 19 Accenture Global Financial Services Distribution & Marketing Consumer Study 2017 and operations. Combining unmatched 20 Campaign, “‘Come bank with me’: is cross-selling brands the future of finance?,” August experience and specialized skills across 24, 2015. http://www.campaignlive.co.uk/article/come-bank-me-cross-selling-brands-future- more than 40 industries and all business finance/1361173#w8mLALvJZFebrLsP.99 functions – underpinned by the world’s 21 Bank Innovation, “Chase and Intuit Launch API for Secure Customer Data Sharing,” January 25, 2017. largest delivery network – Accenture http://bankinnovation.net/2017/01/chase-and-intuit-launch-api-for-secure-customer-data-sharing/ works at the intersection of business and 22 Bloomberg, “Big Banks Are Stocking Up on Blockchain Patents,” December 21, 2016. https://www. technology to help clients improve their bloomberg.com/news/articles/2016-12-21/who-owns-blockchain-goldman-bofa-amass-patents-for- coming-wars performance and create sustainable value for their stakeholders. With more than 23 OCBC, “OCBC Bank is First Bank in Southeast Asia to Pilot Robo-Advisory Service,” March 7, 2017. https://www.ocbc.com/assets/pdf/media/2017/march/media%20release%20-%20ocbc%20is%20 411,000 people serving clients in more first%20in%20sea%20to%20pilot%20robo-advisory%20service.pdf than 120 countries, Accenture drives 24 Harvard Business Review, “Michelin: Tires-as-a-Service,” November 17, 2016. https://rctom.hbs.org/ innovation to improve the way the submission/michelin-tires-as-a-service/ world works and lives. Visit us at www.accenture.com. 25 Accenture Technology Vision for Banking 2017 www.accenture.com/ LivingBusinessBanking

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