BBDO KNOWS Banking Industry Challenges Part One

8/22/2019 BBDO KNOWS Banking Industry Challenges Part One

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KNOWSBDOBANKING INDUSTRY

CHALLENGES PART ONE

2013


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FINANCE CATEGORYBUSINESS CHALLENGES

BBDOKNOWS


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SLOW MOTION RECOVERY


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HOW WOULD YOU DESCRIBE THECURRENT BANKING

ENVIRONMENT?

BBDOEXPERT VIEW:

LEILA GHORASHI, Senior Director,Corporate Executive Board Financial

Services

ZERO GROWTH


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The economy remains fragile across many markets, there are of coursepromising signs in developing markets but the developed world is stilldesperately seeking growth (Deloitte)

The economy and the slow motion recovery continues to hinderbanking growth

Weak credit demand from consumers and shrinking interest incomeare both impacting banking growth. The credit market remains

especially sluggish in the Euro zone and well below its pre-crisis peak(CEB)

SLOW MOTION RECOVERY

Sources: Deloitte 2012, The Economist Euro Crisis Blog 2012, Corporate Executive Board 2012

LOW

GROWTH

IMPLICATIONS FOR THE BANKING INDUSTRY

Bank profits at a global level remained negative for

a fourth consecutive year in 2011 despite positive

numbers in Asia (awaiting 2012 numbers)


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WHAT WILL BE THE MAIN SOURCES OFREVENUE GROWTH IN 2013?

BBDOEXPERT VIEW:

ANNABEL GORRINGE, Head of Content forBanking, Datamonitor

Opportunities are limited. Were going to seeanother 12 months of cost administration andlimiting the damage of past challenges rather

than seeing major revenue growth.


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WHAT ARE YOUR MAIN CHALLENGES IN 2013?

BBDOCLIENT VIEW:

While we are recovering well from the financialcrisis of '09, individuals and families are still notwhere they were. We are continuallysurrounded by world news that reminds us mostof the world is still deep in crisis - this weighsheavily on underlying confidence in their future,confidence to make decisions and take action,willingness to try new solutions, and trust in afinancial institution.

VP Marketing, Royal Bank of Canada


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BBDOCLIENT VIEW:

Global Head of Marketing Communication, BESPLEASE PLAY BES BANKING CONTEXT FILM


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The external context continues to limit growth and

profitability for the banking industry and impacts the waybanks do business as they operate in a context of extremeefficiency with too many uncertainties BES

CHALLENGE:

Banks need to address their own business andbusiness models in order to limit the impact of theexternal context and to increase their own profitabilityand thus aid the recovery of the industry

IMPLICATIONS FOR BANKS

IMPACTING

PROFITS

SLOW

MOTION

RECOVERY

LIMIT THE

IMPACT


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KNOWSBBDOSUPERVISION


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WHAT ARE THE MAIN CHALLENGESFOR BANKS IN 2013?

BBDOEXPERT VIEW:

ANNABEL GORRINGE, Head of Content forBanking, Datamonitor

Regulation which is having a huge externalimpact. We already know of many big regulationsimpacting the market- these we know about.

What really interests us is what comes next.


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WHAT HAVE BEEN THE MAIN CHALLENGES IN THE

PAST 20 YEARS?

BBDOCLIENT VIEW:

The financial crisis of 2008, the impact on

the marketplace and the creation ofexcessive regulatory processes andhurdles.

VP Marketing, Royal Bank of Canada


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2013 looks to be the year of supervision, or as Ernst & Young deems itintrusive supervision, if 2012 was the year of regulation, this is the year ofimplementation and a new era of regulation

Analsyts agree the regulators are re-writing the rules (Financial Times),Governments and central banks across the world continue to takeunprecedented measures to stimulate growth (Boston Consulting Group)

For bigger bank networks the challenge is that they are global, but regulationis national and varies according to market

The resulting context for banks is ongoing uncertainty and the threat ofcontinued imposed regulation and the resulting consequences, the CEBsuggest this makes it very difficult for banks to commit boldly to newproducts and services

SUPERVISION

IMPACTING

REVENUES


Rules and regulations are said to have reduced US bankrevenues by $75BN since 2007

Source: Ernst & Young, Boston Consulting Group, Kantar Media, The Financial Times, Corporate Executive Board


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As a consequence of the crisis the banking industry issubject to continued regulation. Banks, globally, have tooperate in a context of yet more uncertainty as rules andregulations continue to change and impact their models &finances

CHALLENGE:

Again, banks need to address their own businessmodels in order to limit the impact of regulation. Inthe long term the desire is for greater independence

and relaxed restriction, this relies on the industryregaining confidence


IMPACTING

REVENUES

INCREASED &

CONTINUED

REGULATION

LIMIT THE

IMPACT


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KNOWSBBDOCOMPETITION


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THE BANKING SECTORWILL BE HYPERCOMPETITIVE

FOR THE NEXT 3-4 YEARS.Booz & Company


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WHAT DO YOU EXPECT THE FUTURE BANKING

LANDSCAPE TO LOOK LIKE?

BBDOCLIENT VIEW:

Marketing Director, National Bank of Greece

It is almost certain that there will be furtherconsolidation down the road When theprocess is completed, it is estimated that three

well-capitalised large banks will remainalongside a few smaller ones Banks ingeneral will be in a position to benefit from theeconomies of scale and synergies resulting

from the process of consolidation. Theemerging new banking landscape will thus bequite different.


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HYPERCOMPETITIVE = CLOSURES & CONSOLIDATION

Analysts agree the context for banks is about to get even

busier, the expectation is that the fittest will survive andthat the global banking landscape will be redefined, withfewer remaining banks that are less complex (Ernst & Young)

There will also likely be a widening gap between the

leaders and their followers

HYPERCOMPETITIVE

CLOSURES


Jones La Salle predict that as many as 50% ofbranch networks may be declared obsolete in thedeveloped world by the decades end

Source: Ernst & Young, Jones La Salle


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Jones La Salle

SOME OF THE BIGGEST

COMPETITORS TO BANKS

OVER THE NEXT 10 YEARS

WILL BE THE TELECOMS

COMPANIES... COULDSTARBUCKS MOVE INTO

BANKING?


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Global Head of Marketing Communication, BES

BBDOCLIENT VIEW:

PLEASE PLAY BES COMPETITION FILM


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WHAT ARE THE KEY CHALLENGES IN 2013?

BBDOEXPERT VIEW:

ANNABEL GORRINGE, Head of Content for Banking,

DatamonitorPLEASE PLAY DM COMPETITION FILM


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NON TRADITIONALS

The shape of the competition will also change with Deloitteremarking traditional banks need to be aware of the disruptors.One of the biggest challenges will be defending the paymentsbusiness which until now banks have owned

Whilst Datamonitor dont expect the non traditionals to makehuge inroads, they do expect them to alter the structure of themarket and change customer expectations with implications for

the entire banking industry

CHANGING SHAPE OF COMPETITION

DIMINISH

REVENUES


PayPal is already half the size of CitiGroups globaltransaction services business

Source: Deloitte,Datamonitor


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The growth of so called

payday lenders has been

significant. They position

themselves as fast,friendly and accessible.

Their websites are simple,

clear and easy to use, the

application process is fast

and the decision even

faster.

Their communication is

high profile, in the UK,

Wonga sponsors popular

entertainment shows and

employs characters to

bring a likeability and

personality to the brand

http://www.barclays.co.uk/PersonalBanking/P1242603570446?WT.mc_id=301RDpingit

EXAMPLE: COMPETITION PAYDAY LOANSWONGA, UK COMPETITION


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Marks & Spencer is one

of the most well known

and loved department

store and grocerybrands in the UK, its

move into banking is

significant, we await to

see the uptake but we

expect it to be healthy

http://bank.marksandspencer.com/

EXAMPLE: COMPETITION -SUPERMARKETSMARKS & SPENCER, UK COMPETITION


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Money Saving Expert is

one of the most

popular finance

websites in the UK. It isfrequently cited as a go

to tool for advice and

more significantly a first

port of call for advice,

diluting the banks share

of the finance

conversation

http://www.moneysavingexpert.com/

EXAMPLE: COMPETITION OFFERING ADVICEMONEY SAVING EXPERT, UK COMPETITION


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The banking industry is becoming increasingly cluttered.Banks are threatened with closure or consolidation or facelosing business to non traditional entrants who are oftenmore endearing to the consumer.

CHALLENGE:

Banks need to continue to own the conversation.Banks also need to own innovation and not allow nontraditionals to woo the disillusioned customer


DIMISHING

REVENUES

INCREASINGLY

COMPETITIVE

LANDSCAPE

INNOVATE TO

DIFFERENTIATE

& REMAIN

RELEVANT


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EVEN MORE THAN BEFORE

TECHNOLOGY WILL EMERGEAS A KEY ENABLER AND

DIFFERENTIATOR, RATHERTHAN A COST TO MANAGE

DOWN.

Ernst & Young


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KNOWSBBDOKNOWSBBDOBBDOEXPERT VIEW:

M

ODEL/CHA

NNEL


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The challenge for many banks is to find efficiency in the branchmodel whilst being present and relevant to customers in the onlineworld

Analysts suggest technology has the potential to be a strong pointof difference. Around the globe we will see continuedexperimentation with formats and locations, Jones La Salle saygetting to the right mix of mobile, direct and locations basedchannels will be crucial.

In Asia and South America the question is what are banks going todo to make their branches more relevant and attractive toinvestors and landlords as the challenge is actually acquiringspace

THE MODEL

COST

INEFFICIENCY


The branch model is proving expensive to maintain, it isbelieved to cost $0.15 to open a bank account onlinecompared to $65 in branch according to Jones LaSalle. Atransaction that costs $4.25 in a bank, would cost $2.40 ina call center and 0.20 online (Bain) yet branch aidssatisfaction levels

Source: Jones LaSalle, Bain & Co


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Efficient, effective models are key to ensuring profitabilityand stability in the current context. The branch model is

costly but consumers still value the transaction andinteractions they make in person.

CHALLENGE:

Banks must uncover efficient models that continue toadequately service the customer across channels.Innovation in technology is one way to reclaim theterritory of facilitators/innovators


IMPACTSRETURN ON

INVESTMENT

COSTLY

OPERATIONS

BALANCE

EFFICIENCY

WITH

EFFECTIVENESS


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PLEASE NOW REFER TOCHALLENGES PART TWO

Documents

BBDO KNOWS Banking Industry Challenges Part One