Client loyalty in the cyberfinance-world Forum Banca & seguros Lisbon, December 3 2002...

Client loyalty in the Client loyalty in the cyberfinance-worldcyberfinance-world

Forum Banca & seguros

Lisbon, December 3 2002

CharlesCharlesGoldfingerGoldfinger

www.gefma.comwww.gefma.com

© Charles Goldfinger 2

GEF GEF

Presentation planPresentation plan

Digital tornado and financial hurricane Cyberfinance: lessons of experience

No disintermediation Triumph of click and mortar

Cyberfinance challenges From multi-channel to cross-channel Smart customer Capturing value


GEF GEF

Digital tornadoDigital tornado There is no Internet hype !

“ We tend to overestimate the speed of change in the short term and underestimate in the longer run”

- Unprecedented rate of growth Years to reach 50 MM users

Radio - 38 years TV - 15 years Internet - 5 years

Unprecedented scope of change Telecommunications realm Information Technology Realm Business realm


GEF GEF

Digital tornadoDigital tornado

Three dimensions of Internet revolution Telecommunication protocol

Infinite connectivity

Information architecture Network – computer convergence

Business model Abundance management


GEF GEF

Digital tornadoDigital tornado Information architecture

From centralised Master - slave

...to distributed Client - server

..to ubiquitous Peer - to- peer

Network is the computer

Computer is a network

and


GEF GEF

Digital tornadoDigital tornado Infrastructure - network dissociation

From physical to virtual From dedicated to shared

Before

Network Infrastructure

Now

Network

Network

Network

Network

Infrastructure

Infrastructure

Infrastructure


GEF GEF Digital tornadoDigital tornado Business Model impact

No disintermediation Growing demand for intermediation

Markets Systems

• Middleware Upheaval

…but no disruption

Unlimited connectivity

Relations proliferation

Functional confusion

Infoglut Complexity Transaction costs fall

Transactions volume explosion

Markets proliferation

Fragmen-tation

Integra-tion


GEF GEF

Financial hurricaneFinancial hurricane From geofinance

…to eurofinance

…and cyberfinance


GEF GEF

Financial hurricaneFinancial hurricane Cyberfinance

Financial services is the domain where Internet impact has been the strongest

0,0%

5,0%

10,0%

15,0%

20,0%

% of penetration

Internet securities trading

Internet banking

Internet book selling

B2C e-commerce

E-commerce market share(in % of total turnover)


GEF GEF

CyberfinanceCyberfinance Ubiqutuous reach

RetailBanking

Financial markets

Insurance

Fundmanagement

Financial Data

Wholesale banking


GEF GEF

CyberfinanceCyberfinance New configuration

E-Banking

E-markets B2B banking

Financial Portals

Asset management

Riskmanagement


GEF GEF

CyberfinanceCyberfinance Preliminary lessons of experience

E-finance is only beginning Blurring boundaries

Finance Technology Information Transaction Financial institutions Technology providers

Key role of incumbents « Click and mortar » model dominant

All finance is becoming cyberfinanceAll finance is becoming cyberfinance


GEF GEF

CyberfinanceCyberfinance Lessons of experience: Internet banking

Iceberg costs Implementation complexity Client acquisition

Difficult entryObstacle course

Not a Killer application !Not a Killer application !Not a Killer application !Not a Killer application !

No revolutionary impact


GEF GEF

CyberfinanceCyberfinance

Lessons of experience: Internet banking No salvation outside “click and mortar”

Success stories Nordea Wells Fargo Bradesco

Critical success factors Integration

• Technology• Marketing

Business models


GEF GEF

Cyberfinance Cyberfinance

Key challenges Technology

Not just another channel

Customers End of asymmetry Smart customer

Business model Capturing value


GEF GEF

CyberfinanceCyberfinance Technology challenge

From multi-channel architecture….

Branch

ATM

POSBank

Telephone banking

On-line banking


GEF GEF

CyberfinanceCyberfinance Technology challenge

…to cross-channel architecture

Branch

ATM

POS

Smart Card TV

Infoappliances

MobilesExtranets

TCP/IP


GEF GEF


Technology challenges Integration imperative From e-finance to m-finance

MobilePC client

Martini banking

• Anytime• Anywhere• Anyway

• Anytime• Anywhere• Anyway


GEF GEF


End of information and knowledge asymmetry

Goldfinger’s law

Customer is always smart

DistributorDistributorProducer Producer ConsumerConsumer

Customer challenge Three structural trends

Lower transactions costs Market power shift


GEF GEF


Customer challenge

Willingness to search Quality imperative Willingness to shop

Willingness to pay Failure tolerance Loyalty


GEF GEF

CyberfinanceCyberfinance Customer challenge

Conflicting trends

Time pressures Convenience

“One-stop shop”

Low search costs Better information

“Best of breed”

Financial supermarketsFinancial supermarkets Specialised providersSpecialised providers


GEF GEF


Customer challenge Mixed experience

Financial supermarkets What synergies for customers ? Internal turf wars and co-ordination costs

• Cross-selling challenge

Specialised providers Preserving talent Maintaining competitive advantage Avoiding mid-size trap

• Too small or too big


GEF GEF CyberfinanceCyberfinance Customer challenge

Third way: AggregationAggregation“Best of both approaches”

Advantages Convenience Broad choice Capitalising on common standards

Hurdles Permanent tension between aggregators and service providers

• Brand primacy• Revenue sharing

Privacy protection Customer trust


GEF GEF


Customer challenge Aggregation experience to date

More developed in US than in Europe Tradition of vertical integration in Europe Challenge of cross-border integration

Focus on Information consolidation Technology convergence

• Not so common standards

No customer rush Yoodlee

• Less than 1 million clients


GEF GEF

CybefinanceCybefinance Business model challenge

Great difficulty of catching value Willingness to pay

Growing importance of indirect revenues Manchester United model

• 80 000 paying ticketholders• 50 000 000 non-paying fans

Retail banking model• Float vs. service services

=Purchase Consumption

Consumption Purchase


GEF GEF

CyberfinanceCyberfinance Business model challenge

Proliferation of pricing systems and mechanisms Direct payments Third party payments

Advertising Supplier rebates Services commissions Spread capture

Catch value when and where you can


GEF GEF

CyberfinanceCyberfinance Business model challenge

From CRM to DTM

DDynamic TTransaction MManagement

Control Multiple Revenue Streams

Simulate & analyze dynamic pricing

System Performance, Scalability

and Real Time

Capture, Benchmark and Share Transaction Value

Client loyalty in the cyberfinance-world Forum Banca & seguros Lisbon, December 3 2002...

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