APARANA MITTAL

FORE School of Management

Hunt for the Lions – The ING way

Digital Banking OutlookConsumer Survey and

SWOTRoad Map

Objectives

Analysis

Insights

Recommendations

To study the digital banking industry, growth drivers, trends and challenges

Digital banking is registering a steady growth but the adoption rate is still poor

Growth Drivers – Rise in young population, high internet and smart phone penetration.

To understand the demographics of digital banking users and non-users and segment them.

The average age of digital banking users is fairly young and security tops the concerns of non-users

Large number of respondents are still not using digital banking channels, it is advisable to target them. Tablets are seen to be emerging.

To suggest a suitable roadmap for the enterprise as well as product offerings.

Cross-channel collaboration and use of analytics to predict consumer preferences is an area of interest.

Bank-end CRM systems have to be in place to integrate data from various channels. Market ING as the safest bank to work with.

Advisable to educate the branch visitors and alleviate their security concerns and get them to adopt digital banking channels. Work towards cross channel optimization strategy.

353430

464 458

2001 2011 2021 2026

Youth Population (in millions)

• By 2020, the average age of India will be 29 years .

• 64% will be in the working age group

68.5

99

130.4 137 141158

56.5

80

108116 120

136

Jun-11 Jun-12 Jun-13 Oct-13 Dec-13 (est)

Jun-14 (Est)

Overall Internet Users (in millions)

Claimed ActiveWhat does young India want? Real time online information Convenience Ease of engagement

Digital Banking –Growth Drivers

Penetration rate = 17%

48

91110

130

349

Jun-12 Jun-13 Oct-13 Dec-13 Jul-14

Social Media Apps11%

Youtube16%

Game Apps11%

Location based Apps

5%

Banking or Finance Apps

7%

Others50%

Smart Phone Usage

Mobile Phone Penetration – 28%Smart Phone Penetration – 13%

Mobile Phone Users (in millions)

Internet Banking - Growing

35

17.5

10

35

20

11

Public Domestic Private Foreign

Increase in registered users in %

2012 2013

32 31

90

68 69

10

Public Domestic Private Foreign

Internet Banking - Active v Inactive Users in %

Active Inactive

But the active users are still very less.

95.2

3.8 0.5 0.5

82.7

13.90.9 2.5

97.8

1.8 0.4 0.1

Branch Banking Online Banking Mobile Banking Phone Banking

Average daily number of requests services in %

All banks Private PublicAs per industry researches the key reasons cited for low adoption rates are :

Deep rooted faith in paper transactions Belief that branch is where all banking happens Fear of transacting online.

There exists a significant opportunity to migrate more customers to the digital

banking channel.

Demographic

Gender – 62% Males, 38% FemalesAverage household Income – Rs 6.5 LPAAverage Age – 22.5 yearsEmployment Status – 50% employed, 50% studentsEducation Level – 75% Graduate, 25% High School

Top 3 uses of digital banking

#1 – Account balances tracking (48%)#2 – Transaction history (23%)#3 – Funds transfer (14%)

Importance of security feature

71 23 4 2

Highly Important Important

Somewhat Important Not Important

Security of digital transactions is a major concern among banking customers.

Deterrents to Digital Banking Usage

Lower Transaction Fee

for other payment option

3%

Lack of Knowledge

7%

Interface not user friendly

15%

Security of Transaction

25%

Prefer other options such as

debit card/credit card50%

Tablet v Smart phones

42% - Tablet 32% - Smart phones

Disinclined Conservatives

Aspiring Bloomers Liberal Users

Ardent Affluents

Cautious Senior

High LowIncome-level

Rel

ativ

e-u

sage

of

dig

ital

b

anki

ng

Hig

hLo

w

Aspiring Bloomers : Digitally inclined, use digital banking atleast a month, willing to try and adoptadvanced features like e-wallet Ardent Affluents : Highly engaged with mobile devices, seek value-added services such as spendingpattern analysis, rewards/points. This segment will respond strongly to tab-banking. Liberal Users : They use digital banking but not extensively. Cautious Senior : Value seekers, interested in products offering tangible rewards, highly sensitive tosecurity concerns Disinclined Conservative : Serious concerns about safety and security. Rely more on branchbanking, banks can gain from informing them about the benefits of mobile banking and alleviatingtheir security concerns. This could encourage this segment to try mobile banking.

Who to target ? (Highlighted in Red)

Size of the circle denotes the number of respondents identified to be from that segment

Strengths

Online

- No limit about time and domain (89% of the respondents prefer 24*7 fulfillment of

their banking needs)

-Reach Globally

-Economies of Scale

Branch

- Strong Management

- Higher sales

Weakness

Online

- Technologically efficient staff shortage.

- Lack of Security (64% of those who do not use digital banking cited security as the

biggest concern)

Branch

- Lack of scale

Opportunity

Digital

- Use of social networking sites (77% of respondents would like to use social

networking portal to carry out banking activities)

- Tab–banking (64% respondents said they prefer using tabs to mobile)

- Increased demand for financial products (72 % Customers use Internet as the source

of information about financial products)

Branch

- Expanding value added services

Threats

Digital

- Law is not sufficient

- Lack of follow up supervision

- Foreign Banks hit

Branch

- Political Risk

Online v Digital

Marketing and Sales Customer On boarding and account opening

Servicing

Cross-channel collaboration and sales force enablement

Cross-channel customer, 360-degree, lead and insight capture and delivery

Cross-channel marketing and sales enablement

Insight – driven organization

Status-tracking, status-reporting and customer communications

Cross-channel application management

Personalization and self service

Customer experience management

Cross channel service management

Cross channel Process, Case and Data Management

Multi-mode channel listeners

Analytics modeling and insight delivery

Reporting and Dashboarding

A cornerstone channel optimization strategy is critical as it will create :• Seamless, integrated customer experiences

ING should leverage analytics for changing customer behavior across all touch points.• Fortify ING brand and reinforce ‘Safest Banker’ and ‘Top 5 trusted brand’ image

Key Partners :1. Digital

Partners2. Merchants3. Payment

Networks4. Telcos5. Technology

Partners6. Logistic

Partners

Key Activities:1. Payments2. Lending3. Deposits

Key Resources :1. Capital2. Sales Channel3. Branches4. Employees5. Sales brokers

(Lending)

Cost Structure1. Credit pricing/Lower credit volumes2. Cost of compliance3. Cost of capital (lower interest rates

so lower deposit volumes)4. Broker Fees

Value Proposition:1. Convenience2. Self-service3. Trust4. Liquidity

Customer Relationship1. Customer lifetime

value2. Improved customer

engagement3. Loyalty4. Repeat transactions

Channel Value to BankSales Service

Branch H LWeb H HMobile H HChat L LSocial H LATM H L

Customer Segment1. Convenience2. Self-service3. Trust4. Liquidity

Revenue Structure1. Subscription (Annual Fee)2. Bait and hook (free checking, debit card-

based payments, transactions using checks)3. Free channel services promoting bill

pay, etc.4. Merchant-funded offers.

Digital Banking – Multi dimensional Attributes for ING

H=High, L=Low

Online

Mobile

SMS

Phone

Social Media

Why should ING leverage the digital channels?

Digital Banking will offer the best of two worlds

Fair price with transparency and

comparability

Immediate high quality interaction

Fast and secure processing

Rich Spectrum of Products and Services

Lean channel and organization structure

Streamlined Governance and agile

culture

Integrate IT infrastructure

Enhanced revenue model

Best of Both

Worlds

Outside – New Customer Experience

Inside – Efficient and effective operating model

11% of total population is using social media

platforms.Facebook is the most

frequently used platform. Integrate the data

with bank-end CRM systems

Tablet

Product CurrentSituation

Proposed Channel to beleveraged

OtherComments

Preferred Banking Relies uponthe branchstaff –RelationshipManagers(RMs)

• Use of Skype/Facetime toget in touch with the RM.• Through Decision SupportSystems, ING can usepurchase decisions of peersto help customers make adecisions, give automatedproduct recommendations,etc.• Add demos to help ineasier access.

• Internet – bycreating adedicatedplatform.

• Mobile –through INGMobile App

78% of thesurveyedpeople preferself servicerather thansomebody attheir disposalall the time.

Forex Solutions 6 currencies –1 cardTC – ValidityboundSinglemerchantpartner (VISA)

• Increase number ofcurrencies of the card (AED,SGD, SEK, CHF)• Unlimited TC validity.• Partner with master card.• Make the card virtual,create a world e-walletservice of the 23 currencynotes to make paymentsworldwide.

• Mobile – AddForex Solutionsto the INGMobile App.• Give rewardpoints formaking apurchaseabroad throughe-wallet.

62% of thesurveyedpeople preferto use mobilephones fornet bankingwhentravellingabroad.

Product CurrentSituation

Proposed Channel to beleveraged

OtherComments

FD Digitalizedthrough SMSand phone.

• Add “Book FD option” to the INGmobile App.• Nomination facility through NetBanking, Mobile App.

Both internetand mobile

--

BillPayment

150+ BillersRemindersCan addregistered bills

• Make a suite of bill-managementactivities.• Provide capabilities to organizebills as a dashboard, ING App willwarn customers of unusually largebills or insufficient funds.

The suite to bemadecompatiblewithcomputers,tablet as wellas mobile.

32% of therespondentsuse digitalbanking topay theirbills.

Contd..

Other Suggestions :

Link Accounts : Complete control and seamless access to loan, demat and credit cardaccounts held with ING Bank by linking them with the one account accessible viamobile and internet platform. Create an App which specifically uses facebook credentials to log in and offerscustomers the convenience of banking through facebook. Tablet-specific Apps should be made.

ING Vysya Bank services 2 million customers on a PAN India basis (Source : ING Investor Presentation)Out of these 7% are already using net banking. (Study by McKinsey & Company, http://www.business-standard.com/article/finance/7-account-holders-in-india-use-net-banking-study-111072000193_1.html)

As a reference point we begin with 140,000 customers already using digital banking at ING Vysya Bank

Adoption rate = Assuming 10% of the non-online customers become online customers every year we get

In India, Cost of servicing at the branch = Re. 1Cost of servicing through internet = 10pCost of servicing through phone = 35 pCost of servicing through debit cards = 20 p (Also, assuming all the channels are simultaneously used toservice the customers)*Cost Savings will be Rs. 11,84,541 in the next three years.

2015 2016 2017

186000 167400 150660

ITEM Web Phone Debit Cards

2015 167400 120900 148800

2016 150660 108810 133920

2017 135594 97929 120528

*Source : http://www.icmrindia.org/free%20resources/casestudies/banking3.htm

The bottom line: Based on these assumptions, a 10% increase in online banking adoption could reduce support costs by about Rs 1.1 million.

Digital Banking is to grow at an exponential rate till 2050

Adoption rate is low which is reflected in the survey undertaken also. Hence disinclined conservatives should be targeted by educating them about digital banking experience to increase the adoption rate as well as retain them. Key is to market ING’s image as “Safest Bank” to work with.

Currently, internet is the most commonly used channel for digital banking followed by mobile. But it is seen that customers are very inclined to use tablets for net banking. Hence tab-specific banking applications should be made.

An emerging trend of using social media (like Facebook) to use carry out banking transaction is noticed.

ING’s roadmap to go digital should provide a seamless experience that lets customers decide how and when they interact with the bank. 360-degree channel strategy should be adopted.

• Key attributes to be considered are partner relationship, integrating customer data, creating value proposition and targeting customers based on that proposition

References :

• http://wearesocial.net/tag/india/• http://ingvysyabank.com/IngBlog/Media/PDF/Investor-Presentation_Q1-FY15.pdf• http://www.ingvysyabank.com/personal-banking/products/home.aspx• http://www.bain.com/publications/articles/digital-challenge-to-retail-banks.aspx• Growth and Development of Retail Banking in India: Drivers of Retail banking, Dr. Samiksha Ojha and Vibhu Bhandari• Internet Users in India Crosses 200 Million Mark , Internet and Mobile Association of India Report, 2013• http://www.fmsi.com/-what-will-your-branch-transaction-volume-be-in-2025.xhtml

PRIMARY SOURCES :

• Consumer Survey (Structured Information)• Conversation with the respondents (Unstructured Information)