Mega Trends in Retail Banking

Mega trends in Retail Banking

3. International RISE Workshop (Jun 15, 2012)

Frank Schwab

http://www.rise-research.org/?p=438 http://www.FrankSchwab.de

Source: Berlin Institute for Population and Development

Development of Age Structure in Germany

Development of Age Structure in United States

Source: US Bureau of Census

1940 2000 2040

Development of Age Structure in China

Source: US Census Bureau, International Data Base (2007)

Reverse mortgage

Reverse mortgage

Borrower older than 62 years

Borrower must occupy the property as their principal residence

No minimum income or credit requirements

No payments are required on the mortgage

Not subject to income tax payment

Maximum lending limit of $625,000.00

Payment is taken as line of credit, lump sum, or monthly payments

R E V E R S E L O A N

Trend = General tendency or direction

How to know?

"There is no reason

anyone would want

a computer

in their home.“

Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

"Stocks have reached what looks like a permanently

high plateau.“

Irving Fisher, Professor of Economics, Yale University, 1929

Dow Jones Industrial Average (1900 to Present)

Source: StockCharts.com

It is difficult to make predictions,

especially about the future

Sir Winston Leonard Spencer-Churchill

Knowledge Society The Rise of BRIC

Female Shift Change of Demographics

Globalisation

Information Technology

Climate change

Mobility

Environmental Awareness

Urbanisation

Internet

Individualisation

Characteristics of Mega Trends

Long term – impact > 5 to 10 years, sometimes decades

Influences our view of the world

Influences our values

Influences our thinking

Changes demand for products and services

How to identify?

11 Mindsets to identify trends

The Future is embedded in the presence

Resistance to change falls if benefits are real

11 Mindsets to identify Mega Trends

1.  While many things change, most things remain the same

2.  The future is embedded in the present

3.  Focus on the score of the game

4.  Understand how powerful it is not to be right

5.  See the future as a picture puzzle – your idea guided by a few fixed stars combined into a single vision

6.  Don’t get so far ahead people don’t know you’re leading

7.  Resistance to change falls if benefits are real

8.  Things we expect to happen always happen more slowly

9.  You don’t get results by solving problems, but by exploiting opportunities

10.  Don’t add unless you subtract

11.  Don’t forget the ecology of technology – ask what’s enhanced, diminished, or replaced

Mega trends in Banking

Increase of regulatory requirements

Regulation

SolvV

SOX AML

Basel II

Basel III

Basel I

MiFID II

WpHG BörsG

MiFID I

Basel III – Additional Core Tier 1 Capital Requirements

European Banks In Billion $

2.330

2010E

2.990

2015F

660

Source: McKinsey

Basel III – Additional Core Tier 1 Capital Requirements

US Banks In Billion $

1.790

2010E

2.610

2015F

820

Source: McKinsey

By Juni 2012 European Banks need additional 106 Billion Euro Tier 1 Core Capital

30

5.1

1.3

4.1

2.9

14.7

8.8

Source: European Banking Authority EBA, October 2011

in Billion Euro

26.1 7.8

1.4

3.6

Return on Equity (ROE)

2007 2010

Europe

16,7%

7.9-9.2%

2015E

7.4-8.6%

Source: McKinsey

Increase of Cost Pressure

European Banks cut jobs

-500

-700

-900 -2,750 -2,350

-3,500 -3,500

-30,000

-15,000

-2,000 -2,000

-3,000

November 2011

Mega trends in Banking

Increase of regulatory requirements

Consolidation

Number of US Banks (1990 to 2011)

Source: FDIC

6.000

7.000

8.000

9.000

10.000

11.000

12.000

13.000

14.000

15.000

16.000

1990 2011 2000

Number of German Banks (1990 - 2011)

Source: Deutsche Bundesbank

1990 2011 2000

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

For Banks?

Need to be M&A ready to survive

COMMERZBANK Integration of Dresdner Bank becomes more expensive ... ... IT drives total integration costs from 2.0 to 2.5 Billion Euro ...

Source: manager magazin online, November, 25th 2009

For IT Provider?

Less potential

customers

Mega trends in Banking

Increase of regulatory requirements

Legacy technology Consolidation

Withholding tax Several 100.000 bank customers need to wait a couple of month to finalize their tax statements. The reason: Some banks failed to change their IT systems.

Source: May 2010, Financial Times Deutschland

000100 IDENTIFICATION DIVISION. 000200 PROGRAM-ID. HELLOWORLD. 000300 000400* 000500 ENVIRONMENT DIVISION. 000600 CONFIGURATION SECTION. 000700 SOURCE-COMPUTER. RM-COBOL. 000800 OBJECT-COMPUTER. RM-COBOL. 000900 001000 DATA DIVISION. 001100 FILE SECTION. 001200 100000 PROCEDURE DIVISION. 100100 100200 MAIN-LOGIC SECTION. 100300 BEGIN. 100400 DISPLAY " " LINE 1 POSITION 1 ERASE EOS. 100500 DISPLAY "Hello world!" LINE 15 POSITION 10. 100600 STOP RUN. 100700 MAIN-LOGIC-EXIT. 100800 EXIT.

"Hello world!"

// C++ Hello World #include <iostream> int main() {

std::cout << "Hello, world!\n"; }

// WebService Hello World http://localhost/helloworld

Project, Application and Organisation Silos

IBM Mainframe

Sun Server

Intel blade

Tandem

Thin clients

Fat clients

AIX Server Server Farm

Example Workflow

NOS öffnen ► Kunde suchen

NOS-Übersicht ► Partner / Adressen ► Anzeigen / Ändern ► Bestätigung ► Änderung der Telefonnummer? ► bestätigen / Ändern ► Ausdruck bestätigen ►zurück zur Übersicht NOS-Übersicht ► Produkt / Ändern ► Einlagen / Termingeldprolongation ► Daten ändern ► bestätigen ► zurück zur Übersicht Einmeldung in KIM ► Starten von KIM ► Anmeldung ► Kunden suchen ► neuen Eintrag wählen ► Daten einpflegen ► Abschluss anlegen ► Daten eingeben ► bestätigen ► zurück zur Übersicht

¨  Customer approaches service desk ¨  Customer informs the bank about address change ¨  Advisor notifies a due “time deposit” in the customer’s portfolio

37 Clicks

Complex

Complicated

Unproductive

Inflexible

Cost inefficient

Need to transform

Mega trends in Banking

Increase of regulatory requirements

Legacy technology

Changing customer behaviour

Consolidation

2011 2016 2012 2013 2014 2015

662 M

4.03 B

Source: Cisco, 2012

Number of internet capable mobile devices

72% Watching TV

Playing Video Games

Listen to music

Reading newspapers

Reading books

Internet

Smartphones are used always and everywhere

Sources:TheMobileMovementStudy,Google/IpsosOTXMediaCT,Apr2011Base:SmartphoneUsers(5013)Q.Ingeneral,whichofthefollowingmedia-relatedacOviOesdoyoudowhilealsousingtheInternetonyoursmartphone?

0 new friends in 5 days

86 new friends in 5 days

8 new friends in 1 minute

Wants to co-create products

Expects better user experience

Inform themselves

online

Trusts in advice of peers in

online forums

Uses social media to

communicate

Buys online

The New

Customer

For Banks?

Increased competition from new entrants

For IT Provider?

Opportunity to offer new technologies

Mega trends in Banking

Increase of regulatory requirements

Legacy technology

Changing customer behaviour

Consolidation

What to do now?

How to do it?

To do all the time the same thing and to expect

different results is stupid

.

If you want something you never had, you need to do something you never did.

Change

New approaches

Text based

Static

Lack of visual experience

Can it be done differently?

Highly visual

Bold photos

Dynamic content

Modern design

Human

Technology

Business

Design Thinking

Experience

New Paradigms

User interface Functional Productivity oriented

More and more banks follow new paradigms towards IT

Distribu)on MiddleOffice BackOffice

Paper reduced by 90 %

Process costs reduced by 50 %

Dynamic work distribution

Implementation time reduced by 50%

Process costs reduced by 80%

User interface Functional Productivity oriented

Processes Fix coded Flexible

Services Application centric

Service- oriented

& packaged

More and more banks follow new paradigms towards IT

Reduce data centre costs by 50%

Infrastructure

Services

Processes

User interface Functional Productivity oriented

Fix coded Flexible

Application centric

Service- oriented

& packaged

High variety

Industrialised & low cost

More and more banks follow new paradigms towards IT

Requirements

Design

Traditional Waterfall Model

Implementation

Test

Maintenance

Service Creation

observe analyze prototype ideate market

Surface Banking

Natural Banking

Success = 1% Inspiration + 99% Perspiration

Do you want to learn more?

Frank@FrankSchwab.de

http://www.FrankSchwab.de