NEXT GENERATION SME BANKING

NEXT GENERATION SME BANKING The future of the SME revenue growth

opportunity in the digitalization era

Apri l 2015

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Luis Fernández de Nograro Head of Banking Practice in Spain [email protected] @LuisFdezNograro

“Banks should be afraid, very afraid” - Antony Jenkins, Barclays CEO

New players will change the Banking industry

“There are hundreds of new companies, start-ups and developers, with lots of brains and money that are already working on alternatives to traditional banking”. - Jamie Dimon, JP Morgan CEO

Silicon Valley’s companies have lots of brains and money working on alternatives to Traditional Banking

Banks as a key SME business partner SME will require more than money. They demand more complex financial products for helping them grow.

SME SEGMENT

CONTRIBUTION

TO EU GBP

OF EU COMPANIES

ARE SME 99%

60% SME ARE

INTERNACIONALIZED 27% Source: EU Commission - European SME 2014

EU COUNTRIES SME GROWTH TREND IN 2014

SMEs are a growth opportunity for European Banking. Knowing the digital SME banking customer is one of the great challenges to grow in this segment.

Source: AXIS CORPORATE SME Survey - April 2015 / EU Commission - European SME 2014

80% OF SURVEY RESPONDENTS CONSIDER THAT

TO GROW IN THE SME SEGMENT IS A

PRIORITY

AVG. OF TOTAL CLIENTS

OF THE BANKS ARE SME

CLIENTS

10% AVG. OF TOTAL

CONTRIBUTION COMES

FROM SME SEGMENT

12%

Banks have to work on how to meet digital SME expectations. Others can do it faster before and better than us.

What does the digital native expect from his Bank?

Bank in the digital customer ecosystem First banks able to be accepted as a part of clients' digital ecosystem, will have a competitive advantage.

The SME segment will be digitized within the next 5 years. First banks to be digitized will capture the early adopters having a competitive advantage of 5% increase in Market Share(1).

Source: AXIS CORPORATE SME Survey - April 2015 / (1) McKinsey Survey 2014

75% OF SURVEY RESPONDENTS

CONSIDER THAT IN THE NEXT 3

TO 5 YEARS THE SME SEGMENT

CLIENT WILL BE DIGITIZED

Digital Adoption Level Growth in SME Banking Segment

LEVEL 1. Simple & Safety

Online Banking

LEVEL 2. Advanced Online

& Mobile Banking

LEVEL 3. Omnichannel

Integration & Social Banking

Applying for a working capital loan

Recommending my bank to a friend Interested on a

Exchange Risk Cover

Banks need to answer to the real financial needs of SME client. Banking needs to shift from an Operational Customer Segmentation to a Unique and Cross-Segmentation

OF BANKS STARTS USING

BASIC BEHAVIORAL DATA

FOR SEGMENTATION

OF BANKS USE

DEMOGRAPHIC DATA

FOR SEGMENTATION

90% 55% Source: EFMA Survey - June 2014 / AXIS CORPORATE SME Survey - April 2015

OF BANKS ARE PLANNING T0

USE CUSTOMER LIFETIME

VALUE FOR SEGMENTATION

40%

Source: AXIS CORPORATE Survey - April 2015

The new digital native demands Real-time Ommichannel Experience. 75% of SME clients interactions with Banks will be digital in 2020.

SME CLIENT CHANNELS TREND

50% OF SURVEY RESPONDENTS SAY

DIGITAL CHANNELS WILL

INCREASE SOCIAL ENGAGEMENT

Digitalization of channels has direct effect on SME

segment profit.

Effective Omni-Channel Integration

LIKEHOOD TO

CROSS SELL 1.8x

AVERAGE ANNUAL

CUSTOMER

PROFITABILITY 1.5x

Source: AXIS CORPORATE Survey - April 2015 / PWC Survey 2015

Self-Remote Channels will be the main channel for

SME Clients in 2020.

Effective Omni-Channel Integration


2015 Main Channel 2020 Main Channel

OF SURVEY RESPONDENTS SAY

BRANCHS WILL FOCUS ON

HIGH-VALUE ADVISORY SERVICES

From branch to full-service hub Business Center

92%

The branch will still play an important role in

the relationship with SME client.

My Financial

Advisor

My Trade Service

Specialist


“The biggest challenge in the traditional branch is to

change people’s orientation: shift from a service vocation

to a selling vocation".

- Caixabank

Banks invest on new Financial Advisor profiles Financial Advisor is considered as a key figure for the growth and engagement of the SME client


“We have doubled the number of SME

financial advisors supported by sales

teams and specialists, with an advanced

customer segmentation base focus”.

- Santander

“We seek to improve the sales SME model

with higher-profile advisors oriented to

sales results and sales performance

improvement“.

- Deutsche Bank

Banks should move from transactions to Client Engagement Transparency and two-way interaction through social media will facilitate Banks to become Social.

98% OF BANKS ARE

IN FACEBOOK BUT ONLY FEW

HAVE TRANSACTIONAL APPS

50% OF RESPONDENTS SAY THAT

DIGITALIZATION WILL INCREASE

CLIENT ENGAGEMENT

30% OF BANKS DON’T PLAN

TO BE ON LINKEDIN

Source: AXIS CORPORATE Survey - April 2015 / Financial Brand Report 2014

Smart Omni-Channel

Bank

• Basic Multichannel integration

• Basic presence in Social Media

• Demographic-Based

Segmentation

• Low Cross-Selling

• Partial Digital Value Chain

Coverage

• Virtual Branches for simple

products

Today

Social Enganging

Bank

My Business Advisor

Bank

• Social media listinening and

monitoring

• Enhanced Customer Experiences

• Influencers

• Co-Creation

• Transparency

• Sharing Knowlege Communities

Next Generation SME Banking

• Banks as a trust business advisor

• Building Relationships

• Subject matter experts availables

online and offline

• Deep Client Understanding

• Real Time Analytics-Based

Segmentation

• Tailor-Made products

• Smart Interaction with clients

• Mobility

• Cross Channel Excellence

• Streamlined Customer Processes

• Self-Service

Digital Transformation Challenges for SME Segment Banking

Traditional Bank

Tangible Results

Transformation Leaders

New Digital Business Model

Our Approach to Accelerate Digital Transformation

Shared Vision Target Operating

Model

Continuous Improvement

Transformation Execution

Business Sponsors Existing Business Model Current IT Systems

Omnichannel

Integration

New

Digital Products

New

Digital Process

Branch Network

Optimisation

New Technology

Platform

CIO CMO COO CxO CEO &

Board Members

Branches &

Standard Products

ERPs &

Transactional Systems

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NEXT GENERATION SME BANKING

Business

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