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NEXT GENERATION SME BANKING The future of the SME revenue growth
opportunity in the digitalization era
Apri l 2015
Report Preview
Luis Fernández de Nograro Head of Banking Practice in Spain [email protected] @LuisFdezNograro
“Banks should be afraid, very afraid” - Antony Jenkins, Barclays CEO
New players will change the Banking industry
“There are hundreds of new companies, start-ups and developers, with lots of brains and money that are already working on alternatives to traditional banking”. - Jamie Dimon, JP Morgan CEO
Silicon Valley’s companies have lots of brains and money working on alternatives to Traditional Banking
Banks as a key SME business partner SME will require more than money. They demand more complex financial products for helping them grow.
SME SEGMENT
CONTRIBUTION
TO EU GBP
OF EU COMPANIES
ARE SME 99%
60% SME ARE
INTERNACIONALIZED 27% Source: EU Commission - European SME 2014
EU COUNTRIES SME GROWTH TREND IN 2014
SMEs are a growth opportunity for European Banking. Knowing the digital SME banking customer is one of the great challenges to grow in this segment.
Source: AXIS CORPORATE SME Survey - April 2015 / EU Commission - European SME 2014
80% OF SURVEY RESPONDENTS CONSIDER THAT
TO GROW IN THE SME SEGMENT IS A
PRIORITY
AVG. OF TOTAL CLIENTS
OF THE BANKS ARE SME
CLIENTS
10% AVG. OF TOTAL
CONTRIBUTION COMES
FROM SME SEGMENT
12%
Banks have to work on how to meet digital SME expectations. Others can do it faster before and better than us.
What does the digital native expect from his Bank?
Bank in the digital customer ecosystem First banks able to be accepted as a part of clients' digital ecosystem, will have a competitive advantage.
The SME segment will be digitized within the next 5 years. First banks to be digitized will capture the early adopters having a competitive advantage of 5% increase in Market Share(1).
Source: AXIS CORPORATE SME Survey - April 2015 / (1) McKinsey Survey 2014
75% OF SURVEY RESPONDENTS
CONSIDER THAT IN THE NEXT 3
TO 5 YEARS THE SME SEGMENT
CLIENT WILL BE DIGITIZED
Digital Adoption Level Growth in SME Banking Segment
LEVEL 1. Simple & Safety
Online Banking
LEVEL 2. Advanced Online
& Mobile Banking
LEVEL 3. Omnichannel
Integration & Social Banking
Applying for a working capital loan
Recommending my bank to a friend Interested on a
Exchange Risk Cover
Banks need to answer to the real financial needs of SME client. Banking needs to shift from an Operational Customer Segmentation to a Unique and Cross-Segmentation
OF BANKS STARTS USING
BASIC BEHAVIORAL DATA
FOR SEGMENTATION
OF BANKS USE
DEMOGRAPHIC DATA
FOR SEGMENTATION
90% 55% Source: EFMA Survey - June 2014 / AXIS CORPORATE SME Survey - April 2015
OF BANKS ARE PLANNING T0
USE CUSTOMER LIFETIME
VALUE FOR SEGMENTATION
40%
Source: AXIS CORPORATE Survey - April 2015
The new digital native demands Real-time Ommichannel Experience. 75% of SME clients interactions with Banks will be digital in 2020.
SME CLIENT CHANNELS TREND
50% OF SURVEY RESPONDENTS SAY
DIGITAL CHANNELS WILL
INCREASE SOCIAL ENGAGEMENT
Digitalization of channels has direct effect on SME
segment profit.
Effective Omni-Channel Integration
LIKEHOOD TO
CROSS SELL 1.8x
AVERAGE ANNUAL
CUSTOMER
PROFITABILITY 1.5x
Source: AXIS CORPORATE Survey - April 2015 / PWC Survey 2015
Self-Remote Channels will be the main channel for
SME Clients in 2020.
Effective Omni-Channel Integration
Source: AXIS CORPORATE Survey - April 2015
2015 Main Channel 2020 Main Channel
OF SURVEY RESPONDENTS SAY
BRANCHS WILL FOCUS ON
HIGH-VALUE ADVISORY SERVICES
From branch to full-service hub Business Center
92%
The branch will still play an important role in
the relationship with SME client.
My Financial
Advisor
My Trade Service
Specialist
Source: AXIS CORPORATE Survey - April 2015
“The biggest challenge in the traditional branch is to
change people’s orientation: shift from a service vocation
to a selling vocation".
- Caixabank
Banks invest on new Financial Advisor profiles Financial Advisor is considered as a key figure for the growth and engagement of the SME client
Source: AXIS CORPORATE Survey - April 2015
“We have doubled the number of SME
financial advisors supported by sales
teams and specialists, with an advanced
customer segmentation base focus”.
- Santander
“We seek to improve the sales SME model
with higher-profile advisors oriented to
sales results and sales performance
improvement“.
- Deutsche Bank
Banks should move from transactions to Client Engagement Transparency and two-way interaction through social media will facilitate Banks to become Social.
98% OF BANKS ARE
IN FACEBOOK BUT ONLY FEW
HAVE TRANSACTIONAL APPS
50% OF RESPONDENTS SAY THAT
DIGITALIZATION WILL INCREASE
CLIENT ENGAGEMENT
30% OF BANKS DON’T PLAN
TO BE ON LINKEDIN
Source: AXIS CORPORATE Survey - April 2015 / Financial Brand Report 2014
Smart Omni-Channel
Bank
• Basic Multichannel integration
• Basic presence in Social Media
• Demographic-Based
Segmentation
• Low Cross-Selling
• Partial Digital Value Chain
Coverage
• Virtual Branches for simple
products
Today
Social Enganging
Bank
My Business Advisor
Bank
• Social media listinening and
monitoring
• Enhanced Customer Experiences
• Influencers
• Co-Creation
• Transparency
• Sharing Knowlege Communities
Next Generation SME Banking
• Banks as a trust business advisor
• Building Relationships
• Subject matter experts availables
online and offline
• Deep Client Understanding
• Real Time Analytics-Based
Segmentation
• Tailor-Made products
• Smart Interaction with clients
• Mobility
• Cross Channel Excellence
• Streamlined Customer Processes
• Self-Service
Digital Transformation Challenges for SME Segment Banking
Traditional Bank
Tangible Results
Transformation Leaders
New Digital Business Model
Our Approach to Accelerate Digital Transformation
Shared Vision Target Operating
Model
Continuous Improvement
Transformation Execution
Business Sponsors Existing Business Model Current IT Systems
Omnichannel
Integration
New
Digital Products
New
Digital Process
Branch Network
Optimisation
New Technology
Platform
CIO CMO COO CxO CEO &
Board Members
Branches &
Standard Products
ERPs &
Transactional Systems