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Transcript of Digital Banking
Digital BankingOpportunity for Extraordinary Gains in Reach, Service, and Productivity in the Next 5 Years
September 15, 2014September 15, 2014
Digital vs digitization-15sept14.pptx 1
Digital OpportunityDigital Opportunity
Engage customers on digital channels for higher engagement / sales• Not just lower cost
Digitize various processes to improve efficiency• Sales• Back office• Credit collections / monitoring• Administrative functions
Create propositions to attract the digitally savvy – fast growing segment
Work together to create systemic efficiency (eg. Eradicate cash)
Engage customers on digital channels for higher engagement / sales• Not just lower cost
Digitize various processes to improve efficiency• Sales• Back office• Credit collections / monitoring• Administrative functions
Create propositions to attract the digitally savvy – fast growing segment
Work together to create systemic efficiency (eg. Eradicate cash)
Digital vs digitization-15sept14.pptx 2
CASA growth = Transaction growthCASA growth = Transaction growth
0
20,000
40,000
60,000
80,000
100,000
0 10 20 30 40 50 60
Balance / active account
Total transactions / active account
Savings balance vs. transactions per account across banks (FY 14)Savings balance vs. transactions per account across banks (FY 14)
R2 = 92%
Digital vs digitization-15sept14.pptx 3
Digital transactions will dominate in 5 yearsDigital transactions will dominate in 5 years
Growth CAGR
40%
FY 14
Digital
Traditional
FY 20 (II)
53%
FY 20 (I)
18%
40-50 %
20-30%
3%
ATM/CDM
Transaction profile of Indian BanksTransaction profile of Indian Banks
Digital vs digitization-15sept14.pptx 4
Emerging paradigmsEmerging paradigms
Deposits business … offer payments for free
Payments service … deposit follows
Current Paradigm Current Paradigm Emerging ParadigmEmerging Paradigm
Source: BCG analysis.Source: BCG analysis.
Digital vs digitization-15sept14.pptx 5
Digital activation is very rewardingExample: Cross sell in Current Accounts CustomersDigital activation is very rewardingExample: Cross sell in Current Accounts Customers
0
2
4
6
8
4 5+
3210
Number of products from primary bank
ShopkeeperMSME
No. of channels used by customer
Digital vs digitization-15sept14.pptx 6
Customer activation is lowCustomer activation is low
POS 5.6% –
Accounts active onAccounts active on SASA CACA
Internet 3.0% 9.1%
Mobile 1.7% 1.6%
Digital vs digitization-15sept14.pptx 7
0
1
2
3
4
5
Many timesOnceNever / Don't remember
# of digital channels used
11 %
# of times digital channel was explained
Small business claim banks are disinterestedSmall business claim banks are disinterested
19 %
70 %
Digital vs digitization-15sept14.pptx 8
Why is digital adoption low?Why is digital adoption low?
Too busy opening accounts
Cumbersome on-boarding process
Organizational ownership of digital channels not prominent
Digital channel designed for transactions – not for engagement / sales
Disproportionate attention on retail (SB) at the cost of SME (CA)
Too busy opening accounts
Cumbersome on-boarding process
Organizational ownership of digital channels not prominent
Digital channel designed for transactions – not for engagement / sales
Disproportionate attention on retail (SB) at the cost of SME (CA)
Digital vs digitization-15sept14.pptx 9
Customer acquisition productivity is stagnantCustomer acquisition productivity is stagnant
1,594
796897933
FY 13-14FY 12-13
PSU(Medium)
Private (Old)PSU(Large)
Private(New)
1,052 860756 1,468
Number of savings bank accounts opened per metro and urban branch
Number of savings bank accounts opened per metro and urban branch
Digital vs digitization-15sept14.pptx 10
Digitization of sales is huge opportunityDigitization of sales is huge opportunity
x+35%
1.35x x
-50%
0.5x
x +33%
1.33x
0.5x
-55%
x
Productivity TAT First Time Right(FTR)
Traveltime
BCG Experience
ImpactImpact
Digital vs digitization-15sept14.pptx 11
Could public sector leap frog to a digital back end?Could public sector leap frog to a digital back end?Back office FTE as percentage of total FTE (FY 14)Back office FTE as percentage of total FTE (FY 14)
1.84.32.5 2.4 3.7
9.0
1.31.4
PSU(Medium)
3.9
Private (Old)
5.0
PSU(Large
)
4.2
10
13.3
Private (New)
Global benchmark
CreditOperational
Digital vs digitization-15sept14.pptx 12
10-20% over staffing in administrative functions 10-20% over staffing in administrative functions
Admin staff / Total bank FTE (FY 14)Admin staff / Total bank FTE (FY 14)Digital toolsfor efficiencyDigital toolsfor efficiency
11.513.1
14.7
11.210.3
PSU(Large
)
PSU(Medium)
IndustryPrivate(New)
Private(Old)
Ultra transparent performance management
Optimum resource allocation s
Re-engineer administrative /
functional processes
% of total bank FTE
Global median (10%)
Digital vs digitization-15sept14.pptx 13
Technology spend in IndiaTechnology spend in IndiaSpend on technology as % total revenue Spend on technology as % total revenue
Private (New)
4.6%
5.7%5.9%
PSU (Large
)
2.8%3.1% 3.3%
Average in FY 14Average in FY 13Average in FY 12
Digital vs digitization-15sept14.pptx 14
New approach to technologyNew approach to technology
Human Centered Design Human Centered Design Iterative, short sprintsIterative, short sprints
What is the real "need"?
What solutions are "feasible"?
Minimum "viable" option?
Digital vs digitization-15sept14.pptx 15
Seven hurdles in digitizationSeven hurdles in digitization
Non - Human Centric Design
Risk perception
IT Change capacity
Vendor Capabilities
Compete with BAU
Multi stake holder alignment
Value leakage between design and execution
Digital vs digitization-15sept14.pptx 16
"Bank in a Bank" for creative destruction"Bank in a Bank" for creative destructionIncumbent BankIncumbent Bank Digital Attacker BankDigital Attacker Bank
Typically universal
Digitise the legacy
Target The Digitally Savvy Customers
Processes designed from scratch
Branch at the core; digital channels are
alternate
Digital channels at the core
Digital vs digitization-15sept14.pptx 17
At first people refuse to believe that a strange new thing can be done,
...and then they hope it can be done,
...then they see it can be done,
...then it's done and all the world wonders why it was not done before.
– F H Burnett
At first people refuse to believe that a strange new thing can be done,
...and then they hope it can be done,
...then they see it can be done,
...then it's done and all the world wonders why it was not done before.
– F H Burnett