Ian Goodliffe, Partner, CACI
Retail Banking Innovation Conference
February 2016
FinTech: THE CONSUMER PERSPECTIVE AND HOW IT WILL AFFECT PHYSICAL DISTRIBUTION
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This has implications for investment across the 4 Ps:
INTRODUCTION
Digital transformation is happening in our daily lives…
…banking is no different
PEOPLE PLACES PRODUCTS PLATFORMS
BUT – things are not equal to all People and this means the other Ps need to be structured accordingly
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THE WAY WE BANK IS CHANGING
TOTAL CURRENT ACCOUNT INTERACTIONS:
Source: CACI Channel Impact. An Interaction = one branch visit; one answered call; one login
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TOTAL CUSTOMER INTERACTIONS
Source: CACI Channel Impact. An Interaction = one branch visit; one answered call; one login
TOTAL CURRENT ACCOUNT INTERACTIONS:
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MORE WAYS TO BANK THAN EVER BEFORE
Digital banking is becoming
increasingly popular, both on
mobiles, tablets and desktop
computers.
Access is driven by both by
internet availability and willingness
to adopt new technology
Communicating with your bank,
now often 24/7, is easier than ever
before – including through
telephone banking, SMS, email,
online chats, and using social
media such as Facebook or
TECHNOLOGY/BEHAVIOUR COMMUNICATIONPHYSICAL ACCESS
Bank branches are still pivotal for
customers but there are a number
of other ways to bank now –
including through the Post Office,
ATMs, mobile bank branches, and
cash back facilities
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RETAIL BANKING IS FUNDAMENTALLY CHANGING
ONE SIZE DOES NOT FIT ALL…
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THE EARLY ADOPTERS
The first early adopters of “digital” banking were classified into one of three groups:
Source: CACI Ocean; research using real bank customers from our clients (c25 million individuals)
Student-dominated “free thinking” towns
Canterbury; Durham; Lancaster;
St Andrews
Remote communities, using “Mail Order” since the 1970s
Cornwall; Highlands & Islands of Scotland;
North Yorkshire
Cash Rich, Time Poor
Up to 50 miles from London along main motorways: M1;
M3; M4; M11
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A MORE SOPHISTICATED VIEW IS REQUIRED
We also compared to published sources on more general digital trends
Teamed up with the well-respected Research organisation GFK to pool data on the emerging banking behaviour in the digital world
CACI Econometrists and Statisticians ran forecasts for future banking behaviour for all channels – based on this data
Finally we reviewed the output with our banking clients and got their feedback
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IT’S DIFFERENT BETWEEN SALES AND SERVICE…
Transactions first…
Convenience Cost
New Accounts catching up…
But not all products are the same
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IT’S DIFFERENT BETWEEN PRODUCTS…
CURRENT ACCOUNTS:
of all transactions will be digital by 2020
SAVINGS ACCOUNTS:
90% 45% 85% 71%
of new accounts will be digital by 2020
of all transactions will be digital by 2020
of new accounts will be digital by 2020
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FORECAST: CURRENT ACCOUNT MANAGEMENT
Still At Home
Starting Out
Rising Metropolitans
Poorer Parents
Working Singles & Couples
Home-Owning Families
High Income Professionals
Older Working Families
Mid-Life Social Renters
Asset Rich Greys
Road To Retirement
Low Income Elderly
Mobile Log-ons per Individual, by Fresco Segment, 2015 & 2020
OVERALL GROWTH:
150%
INCREASE: +1.5 BILLION
LOG-ONS
Mobile logons per individual by Fresco Segment – 2015 & 2020
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High Income Professionals: TRANSACTIONAL BEHAVIOUR% of individuals using each channel to manage their current accounts
59% 70%39% 31%
20
15
branch visits a year
5 will open a new current account
this year
8%
20
20
branch visits a
year2
56% 36%80% 25%
branch visits a year
2
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Road to Retirement: TRANSACTIONAL BEHAVIOUR% of individuals using each channel to manage their current accounts
69% 46%10% 20%
20
15
branch visits a year
12 will open a new current account
this year
2%
20
20
branch visits a
year2
61% 46%53% 17%
branch visits a year
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High Income Professionals: BUYING BEHAVIOUR
Annual new savings deposits
are typically worth
£16K
Assumes an annual growth rate for this segment of 2.0% (source: CACI Channel Impact)
% of new savings accounts coming via each channel
2015 202038%
53%
9%5%
18%
77%
£4.1bn
£2.9bn
£0.7bn £0.4bn
£1.6bn
£6.8bn
Phone
Digital
Branch
Branch
Digital
Phone
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Road to Retirement: BUYING BEHAVIOUR% of new savings accounts coming via each channel
Annual new savings deposits
are typically worth
£6K
2015 202059%
31%
10%6%
36%
58%£2.8bn
£5.4bn
£0.9bn £0.6bn
£5.9bn
Phone
Digital Branch
Digital
Phone
£3.6bnBranch
Assumes an annual growth rate for this segment of 1.5% (source: CACI Channel Impact)
KEY TOWNS FOR EACH SEGMENT – VERY DIFFERENT PLACES
ExamplesGuildfordHarrogate
KingstonSolihull
Winchester
ExamplesBlackpool
EastbourneGreat Yarmouth
ScarboroughTorquay
Source: CACI Locality Market Geography
HIGH INCOME PROFESSIONALS ROAD TO RETIREMENT
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A “DIGITAL” LIFE vs. FS VALUE: TARGETING THE RIGHT PEOPLE WILL BE ESSENTIAL
VA
LUE
PER
CU
STO
MER
high
low
DIGITALISATION OF THEIR LIFElow high
DIGITALISATION: driven by a range of factors: smartphone/tablet ownership; app usage; online shopping behaviour; social media engagement etc.VALUE: driven by products & balances, cost not included
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SO WHAT?
Technology might make geography less relevant, but it doesn’t make demographics or socio-economic factorsany less important
There is only ONE Customer andDemand is FINITE
An optimal distribution strategy has to be a balanced distribution strategy - balanced across Channel; from a Sales, Service and Communication perspective
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IN CONCLUSION
Banking is changing as a result of technology and consumer requirement
Pace of change isn't equal across the country, as the biggest driver of consumer behaviour is demographic
Branches will still be important as "brand anchors“ and will need to change their format, purpose and location to stay relevant
Banks should optimise their future distribution effort based on a bottom-up appraisal of the local needs from physical and digital assets
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