Lecture Materials

RETAIL BANKING

Virginia Heyburn Vice President, Strategic Pursuits

Fiserv virginia.heyburn@fiserv.com

Miami Beach, Florida 786-239-4898

August 8, 2017

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Vision 2020: Growing the Banking Franchise in a Digital World

Virginia HeyburnVP Strategy

© 2017 Fiserv, Inc. or its affiliates.   |CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies®

2014 | 2015 | 2016 | 2017

2011

2016

Technology is Driving Industry Transformation

Source: Visual Capitalist, “The Largest Companies By Market Cap Over 15 Years,” August 2016*Top 5 By Market Cap

2001

2006

Tech Other

#1 #2 #3 #4 #5

$406B $272B $261B $260B

$446B

$406B

$383B $327B $273B

$277B $237B $228B

$365B

$293B

$376B

$582B $556B $452B $364B $359B

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Disruptors are Changing the Banking Landscape

Source: Instantly Brand Monitor in Cooperation with Statista, “Americans Trust Tech Firms More Than Banks for Finance,” June 2015*Original Question: “Please state for each firm you know whether your overall opinion of the provider of financial products is positive, neutral, negative.”

44%

37%

40%

36%

73% 71%

64% 57%

Banks Tech Firms

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Banks Have an Innovation Gap to Bridge

30%20% 19%

37%

22% 27%

44%31% 34%

106%

133%

118%

2011 2013 20140%

20%

40%

60%

80%

100%

120%

140%

Top 5 Banks Top 3 Carriers* Top 4 Payment Networks* Gang of 5

Consumer Perception of Innovation Brands of Innovators vs. Banks and Payment Networks

Source: Javelin Strategy & Research “2015: Gang of Five: Apple Pay vs. Android Pay vs. Samsung Pay vs. PayPal “Pay”?,” March 2015 n=5,878, 6,651, 3,200

Note: Networks are carriers are normalized for 5 firms for comparison

Innovation Gap

Note: Gang of Five consists of Apple, PayPal, Samsung, Google, and Amazon

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1. Technology Innovation is transforming all industries,

including banking

2. Digital transformation is opening doors to new

competitors with a clear vision of ‘fast and simple”

3. Millennials are voicing new preferences and service

expectations shaped outside financial services

Key Takeaways

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2014 | 2015 | 2016 | 2017

The Digital Triad

ONE Experience

Move Money

Mobile Now

Bank of Things

Five Game Changers in Banking

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Game Changer #1: The Digital Triad

We spent a lot of years training banking customers on our terminology:

“DDA, ACH, Routing number, PIN, Wire, Bill Pay”

This new generation of customers doesn’t care.

LoansDeposits Payments

Digital Strategy for an Always-On World

Money Service

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Consumers Value the Merits of Non-Banks

Sources: Accenture, Capgemini, Salesforce.com

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Unbanked by Choice is a New Phenomenon

1%

1%

2%

2%

6%

7%

8%

10%

15%

24%

25%

0% 20%

Banks Do Not Have Convenient Hours or Locations

Banks Don't Offer the Products or Services I Need

I Cannot Manage/Balance an Account

The Fees are Too High or Unpredictable

I Don't Like Dealing with Banks

Other

I Wouldn't Use an Account Enough

Banking History, Credit or ID Problems

Refused to Answer

Don't Need or Want an Account

Don't Have Enough Money

Most Important Reason for Not Having a Checking, Savings or Money Market Account

Source: The Federal Reserve System, “Consumers and Mobile Financial Services 2014,” March 2014

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Why Should New Entrants Matter to Banks?

Source: Accenture “2016 North America Consumer Digital Banking Survey - Banking Shaped By The Customer,” June 2016n=>4,000

87%of consumers will use their branches in the future – and want human interaction when they go there

46%of consumers are willing to bank using robo-advice in the future

45%of consumers say the top reason they would stay loyal is if their bank offers discounts on purchases of interest

11%of consumers left their bank in the past year – and consumer switching to virtual banks is at double-digit levels

The Branch is Alive and Well Value is Important

Robo-Advice is Welcomed Switching FIs is Not an Obstacle

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Seamless movement across touchpoints

One experience, multiple engagements

Game Changer #2: ONE Experience

Initiate

Continue

Finish

New: Chat/App/Voice/Augmented/Virtual Reality

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Transformed Branch

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Banks Must Innovate or Lose Profitable Accounts

595 611 634 624 613 579 581

171 173 178 183 189 196 200

0

100

200

300

400

500

600

700

800

900

2010 2011 2012 2013 2014 2015 2Q16

Num

ber

of A

ccou

nts

FDIC-Insured Credit Unions

Total U.S. Deposit Accounts (in Millions), 2010-2Q16

Source: FDIC: FFIEC Call Report 2Q16 and NCUA Call Report 2Q16

*May exclude Savings Institutions Prior to 2012

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Millennials to Inherit $59 Trillion in Personal Wealth

Source: Visual Capitalist, “How Affluent Millennials are Changing the Finance Industry,” December 2015

2030

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1. Banks must focus on deposits, payments and loans as part

of a digital triad strategy or risk market share erosion

2. Millennials are ten times more likely to switch their financial

institution than older generations

3. Consumers are demanding a consistently “fast and simple”

experience across multiple touchpoints/channels.

Key Takeaways

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Game Changer #3: Move Money

whohow

much when

Sender’s Bank Receiver’s Bank

Sender Receiver

Payment Network

Invisible paymentsPayments appsInteroperable networks

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Today’s Payment Reality is Fragmented

People have numerouspayment relationships, but they manage them separately..

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Speed is the New Black

Relative size of words reflects the frequency with which the future of electronic billing and payment was described in one word by industry analysts from Aite Group, Celent, Forrester, IDC Financial Insights, Javelin Strategy & Research and Mercator Advisory Group.

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New Players Proliferate

Consumers have increasing choices for all financial services.

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Large Tech Companies a Clear Threat in Money Movement

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2014 | 2015 | 2016 | 2017

Primary Bank No Longer the Top Preferred Mobile Wallet Provider

16%

13%

16%

19%

24%

20%

20%

25%

43%

22%

34%

16%

14%

17%

21%

31%

28%

25%

28%

45%

27%

42%

22%

25%

27%

29%

34%

34%

37%

48%

51%

56%

63%

MCX CurrentC

Facebook

Starbucks

Microsoft

Android Pay

Apple Pay

American Express

MasterCard

Your Primary Bank

Visa

PayPal

0% 10% 20% 30% 40% 50% 60% 70%

2015

2014

2013

Likelihood of Choosing Company as a Mobile Wallet Provider

Source: JAVELIN, “What’s In Your Mobile Wallet?,” March 2016

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2014 | 2015 | 2016 | 2017

Game Changer #4: Mobile Now

“What do you want to do?”

becomes

“What can we do for you?”

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2014 | 2015 | 2016 | 2017

Who Will Own Financial Conversations?

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2014 | 2015 | 2016 | 2017

Game Changer #5: Bank of Things

Auto purchase

College choice

Car insurance

Home purchase

 Hyper-competitive, hyper-connected

 Network interoperability

 Artificial Intelligence for personalized service

 Bank creates customer routine

• Partner and collaborate

• Aggregate data with all partners

• Build interconnected network beyond traditional “bank-owned” channels innovation

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“The Internet of Things (IoT) describes the phenomenon

of everyday devices connecting to the Internet through

tiny embedded sensors and computing power.”

Accenture

The Internet of Things

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Ways to Defend and Succeed Against Non-FI Threats

Invest in Sustainable Innovation

Digital First

All Form Factors

Digital Sales

Consumers trust FIs more than non-FIs

Advantage FIs: established relationships with regulators

Lead in Customer Experience

Focus on Digital

Simple and convenient

Easy and always on

Zero tolerance for defects

Leverage Established Position of Trust

Build, Buy, Partner, Fund?

Build innovation teams

Choose WHERE to innovate

Innovate Faster

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© 2017 Fiserv, Inc. or its affiliates.   |CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies®

2014 | 2015 | 2016 | 2017

1. The payments landscape is transforming with new

technology capabilities

2. The biggest trend in payments is that payments are

becoming ‘invisible’.

3. Mobile is the most important customer touchpoint for

both transactions and sales

Key Takeaways

© 2017 Fiserv, Inc. or its affiliates.   |CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies®

2014 | 2015 | 2016 | 2017

The Digital Triad

ONE Experience

Move Money

Mobile Now

Bank of Things

Five Game Changers in Banking

15

© 2017 Fiserv, Inc. or its affiliates.   |CONFIDENTIAL – LIMITEDFORTUNE Magazine World's Most Admired Companies®

2014 | 2015 | 2016 | 2017

Thought for the Day:

The only thing changing faster than technology is consumer

expectations

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Thank You!

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Vision 2020: Growing the Banking Franchise in a Digital World

Virginia HeyburnVP Strategy