Digital disruption in banking – what has been done, and ......PayPass is accepted – using NFC enabled phones or a special NFC tag that integrates with the application. Key numbers:

Warsaw, March 2014

Deloitte is a global leader in professional servicesKennedy “Global Consulting Marketplace 2011- 2014”.

Digital disruption in banking – what has been done, and what’s coming

© 2014 Deloitte Polska 1

Content

1. Digital in Poland and overseas

2. Mobile payments market as a part of Digital

a) Global case studies of mobile payments solutions

b) Mobile payments solutions in Poland

3. Digital strategy framework

a) Global case studies of Digital solutions

b) Digital strategy in a banking industry

4. Summary


2012

Smartphones in Poland

2013

Mobile penetration in Poland is growing rapidly

Mobile

52%

50%

50%

40%

39%

38%

34%

30%

29%

UK

US

Russia

Poland

France

Italy

Germany

Japan

Greece

And Poland has one of the highest

social media usage rates in the

world1B1B

503M503M359M

FacebookYouTubeSina WeiboTwitterGoogle

4,8 billion mobile phones

in the world

4,2 billion toothbrushesIn the world

Customers are looking to engage

6M8M

of logins to the internet banking in Australia are

through the mobile channel

of logins to the internet banking in Australia are

through the mobile channel

77%

interact with brands in

social media

16-24 yo prefercustomer service

through social media

15% 50%

Social Media

>

Polish e-commerce market value is growing faster than anywhere in Europe

Customers have higher expectations for their digital interactionsCustomers have higher expectations for their digital interactions

44% of shoppers will tell friends about bad online experience

PLN 12B

2009

PLN 22B

2012

PLN 26B

20131

49% are less likely to visit problematic site again49% are less likely to visit problematic site again

Business is intensively using digital for sales, customer service, and to boost internal efficiency

89% will switch if service levels aren’t satisfactory

Source: Deloitte analysis, Mobile payments, Innovation Edge, November 2012; Trends and prospects of mobile payments industry in China 2012-2015, Deloitte, 2012; Press releases; ECB; PBI, E-commerce w Polsce. Rynek. Nabywcy. Trendy; SMG, Kelkoo, Forrester Research; 1 - estimation

Digital has already gained momentum – and is disrupt ing businesses and business models globallyA changing landscape The situation in Poland How does this impact business?


Market share of cash payments in PolandVisa 1) interchange fees

Germany 1,58%

Poland Mar 2014 1,25%

Slovenia 1,10%

Czech Republic 1,0%

Portugal 0,88%

EU 0,68%

Poland Jul 2014 0,50%

UK 0,38%

Latvia 0,14%

• The average value of a retail cash payments in Poland currently amounts to 28 PLN2) and is about to rise

• Transactions of no more than 20 PLN account for almost half of the number of cash payments

• The other half typically falls within the 20-200 PLN range and 2% of cash transactions exceed 200 PLN

2009

60,8%

2011 2013

66,2%72,8%

79,7%80,4%

2015 2017

Source: Deloitte analysis, VISA, Euromonitor International, Tomasz Koźliński „Zwyczaje płatnicze Polaków” Warsaw May 2013; 1) EMV Chip or General Electronic Authorized debit card; interchange fee rate calculated for payment EUR 25; 2) The exact value varies upon the source, e.g. the NBP reports 38 PLN

Digital transformation in banks has to be contextua lised. Currently, both interchange fees and cash payments are dropping


Source: Deloitte analysis, Mobile payments, Innovation Edge, November 2012, Deloitte, 2012; Polish banks, Ipsos Research; Euromonitor; Juniper Research; 1) Interpolation

Global mobile payment user base

Mobile payments are growing globally…

Value of m-Commerce in Poland – Ipsos

…as well as in Poland

Value of global mobile payments Value of m-Commerce in Poland – Euromonitor

2009

70M

2012

212M

2015

384M

2009

$26B

2012

$171B

2015

$472B

The mobile payments could reach about 4 per cent of all global retail transactions by 2017

Meanwhile, mobile payments are a rapidly growing ma rket

2013

PLN1,1B

2017

PLN5,0B

2015

PLN3,0B

2012

PLN2,1B

2011

PLN1,7B

2012

PLN0,7B

20151)

PLN3,5B

20131)

PLN2,5B


So first, let’s take a look at how some banks are r eacting in paymentsMap of case studies

Australia

Commonwealth Bank and Kaching

Bank builds its own leading mobile payments system, using NFC and partnering with cards

Canada

TD RESL

Mobile applications that allow the advisor and clients to have better conversations, leading to better deals

Australia

Bank in Australia with ANZ

Brings digital to physical spaces. Transforms how branches look and feel, and how customers can interact using digital

Source: Deloitte analysis

UK

VocaLink and Zapp

Mobile payments system being offered by the UK’s national payments processor


Vocalink’s processor

Vocalink is the national payments processor in the UK, and operates the national debit card network.The organisation is currently looking to launch Zapp, which will give consumers direct access to the money in their current bank accounts through their mobiles by linking it with their phone number and providing access to real-time payment service. Banks are partners.Zapp will allow multiple ways of making a payment – from code entry or QR scanning, to NFC.Vocalink• 65 000 ATMS throughout the UK

• 10 billion UK transactions with avalue of £4.9 trillion (network)

Zapp• £100m – cost to build solution

• 24/7, realtime payments to retailers

from customers• 2014 - launch date

Vocalink shows how a national payments processor (or a group of banks) can achieve outcomes – while Kaching shows how a bank can ‘go it alone’

Kaching payments

Kaching is Commonwealth’s mobile payment application, and allows customers to pay anyone by using their mobile number, email address or your Facebook friends list.

Kaching also lets you pay without cash or cards when you’re shopping – just tap your iPhone 4 or 4S anywhere MasterCard PayPass is accepted – using NFC enabled phones or a special NFC tag that integrates with the application.

Key numbers:

• 1.9 million active users• 56% of all of the Bank’s logins occur

through mobile channel

• >$1B transferred in first 11 months• $6.7 billion in next 18 months

• $8,375 per user during this time

After the success of Kaching, all of theApp’s features are being rolled intoCommonwealth’s mobile banking app, tocreate a ‘one stop shop’

Source: Deloitte analysis, Vocalink, Kaching


Kaching was so successful that all of its functional ity has now been merged into CBA’s standard mobile app to create a ‘one sto p shop’

• Between internal accounts

• Check account balance – without needing tolog in

$Send money using

a regular bank transfer or…

Facebook

E-mail

Phone #

Source: Deloitte analysis, Kaching

Kaching functionalities

• Using Australia’s ‘BPAY system:

• Code entry• QR code scanning

• Pay at any terminal with NFC

• An NFC sticker integrates with the app if you have an iPhone

• Manage Commonwealth credit cards that you associate with the device

Internal transfers Pay bills

$

Mobile payments

Account mgmt Credit cards


And it should be said – though the features are simi lar to what we have in Poland, we generally still have some way to go in t erms of user experienceNumber of taps/ swipes to perform actions (includin g login)

Source: Deloitte analysis, Kaching, ANZ, Polish banks


In Poland, there has been a significant reactions, which can be categorisedinto six key typesObservable mobile payments development


Contactless Card Payments

• Easy and fast payment with a card or sticker

Multiple payment standards –

lack of a unified system

Polski Standard Płatno ści

• Common settlement and authorization system for mobile payments

• Currently under development

Bank – Telecom Alliances

• Huge synergy• Customer acquisition• Big data benefits / targeted products

Digital Wallets

• Internet account allowing payments without directly providing personal data

Mobile Payments

• Wide range of solutions• The solutions involve various

value chain participants (banks, telecoms, card associations etc.)

Aggregators

• Internet payments• Multi-channel functionalities

But wait… digital is about more than just payments


Digital can be organised using digital pillars and f oundations – and there’s a lot more than just mobile payments

Enterprise strategy

Business unit goals

Traditional web

Social media

Mobile Multi channel

User Experience

Dig

ital p

illar

s

Digital channel

Technology

Process

Organization and governance

Stakeholder intelligence

Dig

ital f

ound

atio

ns

Information management & Security

Digital pillars – key in digitalDigital Strategy Framework

Traditional webUse of web content, language, design, and delivery of services through traditional web

Traditional webUse of web content, language, design, and delivery of services through traditional web

Social mediaUse of social media channels like Facebook, Twitter, or Pintrest, and leveraging customer connections

Social mediaUse of social media channels like Facebook, Twitter, or Pintrest, and leveraging customer connections

MobileUse of smartphones and tablet devices, both for customer applications and for internal operations

MobileUse of smartphones and tablet devices, both for customer applications and for internal operations

Multi-channelAllowing customers to seamlessly complete tasks while transitioning between channels

Multi-channelAllowing customers to seamlessly complete tasks while transitioning between channels

User experienceMaking user goals easy for customers to complete, and creating engaging experience

User experienceMaking user goals easy for customers to complete, and creating engaging experience



We need to look at mobility, physical spaces, and a whole lot of other transformations enabled by digitalMap of case studies


Australia

Commonwealth Bank and Kaching

Bank builds its own leading mobile payments system, using NFC and partnering with cards

Canada

TD RESL

Mobile applications that allow the advisor and clients to have better conversations, leading to better deals

Australia

Bank in Australia with ANZ

Brings digital to physical spaces. Transforms how branches look and feel, and how customers can interact using digital

UK

VocaLink and Zapp

Mobile payments system being offered by the UK’s national payments processor


In Canada, mobility is already being used to boost sales and improve the efficiency of sales staff

Source: Deloitte analysis, TD RESL, ANZ

TD RESL ‘Art of the Possible’

A self-service tablet tool for clients to expedite their mortgage application process with an advisor

• Used by the client (iPad or iPhone)

• VIP code emailed direct to client

• Client manages document upload

• Kofax image correction on device

• Document retention set by client

• Once logged in, operates without network connection

Agents can interactively walk clients. Through products andbenefits, at home or in the branch, and apply for Products on the spot

Branch Digital Media

Deloitte Digital worked closely with ANZ in creating a solution which met both business and marketing objectives and set a roadmap for how customers would interact with ANZ branches in the future. This entails changes to:

• Use of digital media to entertain, attract and educate customers

• Incorporation of new display technologies and "superwide" LED screens

• Interactive kiosks

• In-branch ipads

• Design of interaction and flow to wrap this into a cohesive digitalbranch experience


The ANZ brings the digital experience to the physic al spaces of the bank - it isn’t limited to visual effects – but extends throug h to customer interactionANZ concept branch of the future

• ’Older’ technologies –ATMs, paper forms still remain, so customers have a choice of how to interact

Familiarity

• Futuristic, but still familiar

• Digital ‘infotainment’ features strongly

New look space

• Staff are equipped with ipads showing ANZ’s native ipadapp, including an ANZ comparison tool, digital magazine, videos and feedback forms

Staff with ipads

• Displayed prominently throughout

• Includes action video portraits of in-branch staff to personalise the branch experience

Digital signage

Source: Deloitte analysis, ANZ


Let’s take a look at the future – here’s a sample of how banks could leverage digital for a client across the customer journey

Explore Purchase Manage EvolveChannelChannel

Customer

Lifecycle

Customer

Lifecycle

BranchBranch

Call CentreCall Centre

Traditional webTraditional web

MobileMobile

Explore products online

using bank website

Get more information from

sales staff at contact

center

Purchase the product, back

on a regular PC over the

internet.

Send login and product

information in a mobile

friendly format

But allow traditional web

to be used as well – to

explore the product…

…as well as facilitating

targeted discovery of new

products.



Five scenarios will emerge over the next five to 10 years with the evolution of digital banking

Source: Datamonitor

„We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the nex t ten. Don't let yourself be lulled into inaction” – Bill Gates

1234

5

“Banks will choose between a cost-efficient and a hi ghly usable mobile banking service”

“Biometrics will power banking security”

“Banks will differentiate themselves by identifying with specific customer segments”

“The breakdown of traditional lifestage models will r equire greater personalization”

“The next generation of banking customers will be wholly social and mobile ”


Summary

1

2

3

4

Significant changes are being brought about by Digi tal

There is a significant reaction in Poland within di gital payments

But there is more to digital for banking than just payments

Digital should be used to benefit clients throughout the customer lifecycle



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Documents

Digital disruption in banking – what has been done, and ......PayPass is accepted – using NFC enabled phones or a special NFC tag that integrates with the application. Key numbers: