Smarter Banking after the “reset”
Transcript of Smarter Banking after the “reset”
Presented by
Presented to
BRANCHING AND DELIVERY AFTER THE “RESET”December 2, 2020
Steve WilliamsPresident and Partner
© 2020 Cornerstone Advisors Inc 2
BEFORE WE BEGIN…LET’S CONNECT!
1. Grab your cell phone2. Open your camera app3. Point the camera at the QR code – no need to take a picture4. A LinkedIn QR Code message box appears5. Tap the box6. Connect with me on LinkedIn!7. I will make sure to get you important Cornerstone research!
THERE HAS NEVER BEENA MORE IMPORTANT TIME…
FOR BANK EXECUTIVESTO THINK STRATEGICALLY
© 2020 Cornerstone Advisors Inc 4
THE GREAT DIGITAL ACCELERATION
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THE NEXT DECADE OF BANKINGDisruptions in other industries like travel (Expedia) and retail (Amazon) have trained consumers to expect faster, side by side comparisons, to help them save money.
This creates a huge opportunity for tech companies to reimagine financial services by leveraging data and lower-cost digital solutions to offer more personalization.
Jonathan Metrick, Chief Growth Officer for Portage VenturesForbes 9/20
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BANK STOCKS HAVE BEEN HARD HIT
S&P 500KBW Regional Bank Index
THE DIGITAL SHIFT IS BECOMING A SHAREHOLDER VALUE PRIORITY IN BANKING
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80%
70%
60%
50%
40%
30%
20%
10%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
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2020
2021
2010 – 2020 WAS THE MOBILE FIRST DECADENow digital will begin to significantly disrupt shareholder value creation
Note: Online banking refers to access traditionally by a website on a computer while mobile banking is via an application on a phone or tablet.Source: Cornerstone Advisors, Javelin Strategy & Research
Online banking
ATMMobile bankingBranch
IVR
Perc
enta
ge o
f US
Bank
ed A
dults
Forecast
Channel Adoption at Primary FI • Financial institutions need to shift focus from basic adoption to deeper engagement.
• Success will be measured by an institution’s ability to offer the right experiences and feature set to build relationships and trust.
© 2020 Cornerstone Advisors Inc 9
MOBILE IS DRIVING SATISFACTIONRedefining “Service”
Source: Cornerstone Advisors, ACSI
75
80
85
90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bank and Credit Unions12-Year ACSI Trends
Banks Credit Unions
1.30%
-1.30% -1.20%
-2.50%
National Banks Super Regional Banks Regional and CommunityBanks
Credit Unions
YoY Satisfaction Trends
For the first time in the history of ACSI measurement, banks overall show a higher level of customer satisfaction than credit unions.
For many consumers, everyday banking has gone mobile, and big banks have the resources to keep their digital platforms and apps up to date. And as technology improves, so too does customer satisfaction.
© 2020 Cornerstone Advisors Inc 10
WHAT ARE WE SEEING? • Americans prefer using mobile apps
for managing their bank accounts
• More than half of Gen Z and millennials use mobile apps most often
• Consumer preference for mobile validates the importance of developing and implementing a robust digital banking strategy
• Commercial businesses are ready for a more robust digital experience and the next generation of leadership is demanding it.
Source: Morning Consult Survey: Bank Customers Use Mobile Most to Manage Accounts; ABA; November 12, 2020
36%
29%
17%
8%5%
2%
39%
32%
10%7% 6%
3%
Mobile App Online Bank Branches ATM Telephone Mail
How Americans Bank: Before and During Covid-19
Before Pandemic Since Pandemic
© 2020 Cornerstone Advisors Inc 11
BRANCH CLOSINGS WILL ACCELERATE POST-COVID
96,237
81,613
70000
75000
80000
85000
90000
95000
100000
Total Branches
Total Branches In U.S.
2010 2020$96.40
$190.10
0
50
100
150
200
Total Branches
Deposits Per Branch ($Millions)
2010 2020
POLLING QUESTION
How many branches in 2030?
80,000 #
FINTECH IS CAPITAL-RICH AND CHANGING CUSTOMER EXPECTATIONS
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FINTECH HAS HEIGHTED CONSUMER EXPECTATIONS
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IT’S NOT JUST TECH - FINTECH'S ARE BRANDING BETTER
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DIGITAL BANKS
Now a top 10 bank?
And doesn’t include…
Source: Cornerstone Advisors
Success of Easy Account Opening
$14.5 billion recent valuation of Chime
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IMPACTS OF COVID-19
Source: Cornerstone Advisors
(as of July ‘20)
“While the digital banks made huge gains in primary bank status during the first half of 2020, they’ve done so predominantly at the expense of community banks and credit unions.”
Ron Shevlin, Director of ResearchCornerstone Advisors
2020 Survey of US ConsumersNumber of adults who consider a digital bank to be their primary bank
Jan 2020 July 2020
14.2 million
8.5 million
An Accelerated Trend
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Student Loan Financing
Checking / Savings Trust Accounts Credit Cards Student
Lending
Mortgage Lending
Small Business Lending
Commercial Deposits and
Lending
Cash Management
Credit Card Debit CardConsumer
Line of Credit
Prepaid Cards
P2P Payments
Business Payments
Business Lending
Merchant Financing
Personal Lending
Mortgage Lending Home Equity Investment
Accounts
Retirement Accounts
Personal Cash Management Debit Card Insurance
Accounts
FINTECHScaling By Entering New Verticals
Online Payments Peer-to-Peer Lending
Initial Focus Initial Focus Initial Focus
Founded: 2011Revenue: $550 million
Founded: 2002Revenue: $17.8 billion
Founded: 2006Revenue: $550 million
Current Offering Current Offering Current Offering
STOP THINKING ABOUT TRANSACTIONS…WE HAVE ENTERED A NEW ERA IN SELLING
AND ENGAGING CUSTOMERS
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BIG BANKSOwn Retail Banking
Note: ‘Big Banks’ include Chase, Bank of America, Wells Fargo and Citibank
• Targeting large, fast-growing expansion markets
• Chase has reported that 2/3 of the accounts in the new markets have been through digital channels
• Ability to invest across all business lines
• Invest in new tech and existing tech
• 100 million estimated active mobile banking users
• Bank of America reports roughly 30% of total sales are through digital channels
• Hold over 40% of all deposits• Preferred institutions by 44% of
Millennials
Billion Dollar Tech Budgets
Shifting Customers To Digital
Targeted Expansion While Reducing Existing Network
Growing Deposits at a Faster Rate
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S e r v i c i n gF i n a n c i a l
M a n a g e m e n tM a r k e t i n g
O r i g i n a t i o nA n c i l l a r i e sM o n e y
M o v e m e n t
DIGITAL & PAYMENT TRANSFORMATIONWhat your customer expects to find in their digital & payment offering
© 2020 Cornerstone Advisors Inc 22
PERSONALIZATIONA Differentiator For Financial Institutions
Source: Cornerstone Advisors, Total Expert, Digital Banking Report
Of those that do use some level of personalization in marketing campaigns, the highest number indicated that first-name personalization was as far as they go.
65% 27% 19%of institutions say they do not use data as often as
they should to educate and cross-sell customers.
say they do minimal or no personalization in their
marketing.
say they don’t use data-driven insights at all.
• Consumers are beginning to expect that their financial institution to understand their needs and deliver personalized solutions.
• Financial institutions can take what they already “know” indirectly about an individual (from transaction data and other sources) and transform this data into insights that are predictive, personally relevant and useful.
IT’S TIME FOR TRADITIONAL BANKS TO TRANSFORM INTO SMARTER BANKS
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STRATEGYDATA
TALENT
VENDORS
TECHNOLOGY
EXPERIENCE
BUILDING THE SMARTER BANK
Focus Your STRATEGY on Crucial Bets
Actively Manage a Vendor and Partner Ecosystem
Make TECH a Top-Down Discipline
Engineer EXPERIENCE to Drive Revenue
Leverage DATA for Breakthrough Performance
Create a Network of Connected TALENT
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The Smarter Bank Will Transform Its Financial Model
• Smarter Bank Executives will free up 50 – 75 bp from their current legacy expenses and reallocate to technology, digital, data, marketing and talent development over the next decade.
• A Smarter Bank will be stronger growth, lower-margin, higher efficiency with intelligently managed risk.
• Smarter Banks are likely trade at a 50% plus multiple premium to legacy banks.
THE NEXT GEN BANKING ECONOMIC MODEL
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NEW ANALYTICS ARE NEEDED TO DRIVE “RETURN ON CHANNEL”
Revenue ValueCurrent year revenue from channel
volumes (Consumer Loans, New Deposit Accounts, etc.)
Direct ExpensesAnnual direct channel expenses
(Facilities, Technology, Staff)
How much revenue are we generating in channels from annual production?
How much are we spending on channels to generate new volumes and retain?
Servicing Value Income from existing deposits
Total ROCReturn on Channel
How much income are we generating in each channel? Are we getting positive returns on the $ we are spending?
How much value do we allocate based on usage?
© 2020 Cornerstone Advisors Inc 27
ARE YOU DELIVERING THE BRANCH OF THE FUTURE?
Visibility in market is a critical strategic role
Facility and staffing costs greatly reduced with “universal” skills
Paperless and digital enabled
“Anywhere Bankers” digitally and socially active drive sales
Enterprise lead and service event pipeline drives the organization.
Picture courtesy of Bank of Australia
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BUILDING A METRIC-BASED DISCIPLINE AROUND DIGITAL
POLLING QUESTIONA. Reacting and ScurryingB. Finishing First StageC. Maturing in Later StagesD. Arrived and Innovating
A. B. C. D.
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DISCIPLINE IS HARD WHEN DISRUPTION AND TECH IS EXCITING
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YOUR JOURNEY TO SMARTER BANKING Acquire transformational talent and move faster on digital, marketing, analytics and
customer experience. Link the details of execution road maps with the strategy – “god is in the details” Quantify the costs and risks of the digital shift across the entire delivery system –
this is a shareholder value issue!Modernize commercial banking at the same pace as retail banking – this can’t wait! Build enterprise dashboards and benchmarks to provide visibility and accountability
for the next wave of efficiency Drive impact with vendors and partners – this takes 200% more time and requires
expertise
© 2020 Cornerstone Advisors Inc 32
IN CASE YOU MISSED THE OPPORTUNITY TO CONNECT…
1. Grab your cell phone2. Open your camera app3. Point the camera at the QR code – no need to take a picture4. A LinkedIn QR Code message box appears5. Tap the box6. Connect with me on LinkedIn!
THANK YOUSteve WilliamsPresident and Partner Cornerstone [email protected]
Check out our blog:gonzobanker.com