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RETAIL BANKING
Virginia Heyburn Vice President, Strategic Pursuits
Global Sales OrganizationFiserv
[email protected] Miami Beach, Florida
786-239-4898
August 3, 2016
Growing the Banking Franchise in a Digital World
Virginia HeyburnVice President, Fiserv
August 3rd, 2016
© 2015 Fiserv, Inc. or its affiliates.
Well informed
Highly connected
Tribal sharers and followers
Demand technology
© 2015 Fiserv, Inc. or its affiliates.
Consumers have increasing choices for all facets of financial services
3
© 2015 Fiserv, Inc. or its affiliates.
Disruptors are Changing the Banking Landscape
Source: Instantly Brand Monitor in Cooperation with Statista, “Americans Trust Tech Firms More Than Banks for Finance,” June 2015*Original Question: “Please state for each firm you know whether your overall opinion of the provider of financial products is positive, neutral, negative.”
44%
37%
40%
36%
73% 71%
64% 57%
Banks Tech Firms
© 2015 Fiserv, Inc. or its affiliates.
5 Key Disruptions in the Payments Space
Convergence occurring at digital speed
Merchant payments at epicenter of disruption
Digitization, analytics
critical to win
B2B and B2C payments
growing faster than C2C
Payment infrastructures
are rapidly being
enhanced
5
© 2015 Fiserv, Inc. or its affiliates.
For the First Time, Primary Bank No Longer the Top Preferred Mobile Wallet Provider
16%
13%
16%
19%
24%
20%
20%
25%
43%
22%
34%
16%
14%
17%
21%
31%
28%
25%
28%
45%
27%
42%
22%
25%
27%
29%
34%
34%
37%
48%
51%
56%
63%
MCX CurrentCFacebookStarbucksMicrosoft
Android PayApple Pay
American ExpressMasterCard
Your Primary BankVisa
PayPal
0% 10% 20% 30% 40% 50% 60% 70%
201520142013
Likelihood of Choosing Company as a Mobile Wallet Provider
Source: JAVELIN, “What’s In Your Mobile Wallet?,” March 2016
© 2015 Fiserv, Inc. or its affiliates.
Banks Have an Innovation Gap to Bridge
30%20% 19%
37%22% 27%
44%31% 34%
106%
133%118%
2011 2013 20140%
20%
40%
60%
80%
100%
120%
140%
Top 5 Banks Top 3 Carriers* Top 4 Payment Networks* Gang of 5
Consumer Perception of Innovation Brands of Innovators vs. Banks and Payment Networks
Source: Javelin Strategy & Research “2015: Gang of Five: Apple Pay vs. Android Pay vs. Samsung Pay vs. PayPal “Pay”?,” March 2015 n=5,878, 6,651, 3,200
Note: Networks are carriers are normalized for 5 firms for comparison
Innovation Gap
Note: Gang of Five consists of Apple, PayPal, Samsung, Google, and Amazon
© 2015 Fiserv, Inc. or its affiliates.
Retailers Are Making Inroads Into Banking
MobileTransactions Per Week
9M
MobileUsers16M
Percentage of U.S. Transactions Via Mobile
20%
RewardsMembers10M
Who am I?
8
© 2015 Fiserv, Inc. or its affiliates.
Why Should New Entrants Matter to Banks?
Source: Accenture “2015 North American Consumer Digital Banking Survey - Banking Shaped By The Customer,” April 2015n=>4,000
81%of consumers would not switch banks if their primary bank closed the local branch
79%of consumers consider their banking relationship to be transactional – up 8% since 2014
86%of consumers trust their bank over all institutions to securely manage their personal data
18%of Millennials switched their primary bank within the past 12 months
Reinventing the Branch Experience Making the Most of Customer Trust
Going Beyond Financial Transactions Winning Millennial Customers
© 2015 Fiserv, Inc. or its affiliates.
1. Change is coming to the banking industry on all fronts: economy, regulation, technology, and social
2. Digital transformation is game-changing for banks as strategy shifts from products to the experience
3. Generation Y is voicing new preferences and service expectations shaped outside financial services
10
Key Takeaways
© 2015 Fiserv, Inc. or its affiliates.
Few Major Banks are Becoming More Efficient
Improved Efficiency, 30%
Stayed Same or Became Less Efficient, 70%
Top 500 Global Banks Cost Efficiency, 2009-2012
Source: Foundation Capital, “A Trillion Dollar Market By the People, For the People,” May 2014
11
© 2015 Fiserv, Inc. or its affiliates.
Banks Must Innovate or Lose Profitable Accounts
595 611 634 624 613 579
171 173 178 183 189 196
0100200300400500600700800900
2010 2011 2012 2013 2014 2015
Num
ber o
f Acc
ount
s
FDIC-Insured Credit Unions
Total U.S. Deposit Accounts (in Millions), 2010-2015
Source: FDIC: FFIEC Call Report 4Q15 and NCUA Call Report 4Q15
*May exclude Savings Institutions Prior to 2012
© 2015 Fiserv, Inc. or its affiliates.
Sharing Economy Comes to Lending
Source: The Federal Reserve Bank of Cleveland, “Peer-to-Peer Lending Is Poised to Grow,” August 2014
Notes: Standard Consumer Finance Loans is the total amount of loans outstanding. Peer-to-peer Loans is the total amount of loans originated. Shaded bars indicate recessions.
© 2015 Fiserv, Inc. or its affiliates.
P2P Lenders Generate Cost Advantages Compared to Traditional FIs
270
135
29
28
20
19
39
0
0
0 100 200 300
Total Opex
Marketing
IT
Other
G&A
Origination
CS/CollectionBilling/Fraud
FDIC
Branch
Typical BankLending Club in 2015
695
100
35
30
30
100
170
10
220
0 500 1000
Total Opex
Marketing
IT
Other
G&A
Origination
CS/CollectionBilling/Fraud
FDIC
Branch
Source: Lending Club based on St. Louis Fed, Federal Reserve, Foundation Capital
14
© 2015 Fiserv, Inc. or its affiliates.
Millennials to Inherit $59 Trillion in Personal Wealth
Source: Visual Capitalist, “How Affluent Millennials are Changing the Finance Industry,” December 2015
2030
© 2015 Fiserv, Inc. or its affiliates.
Unbanked by Choice is a New Phenomenon
1%1%2%2%
6%7%8%
10%15%
24%25%
0% 20%
Banks Do Not Have Convenient Hours or LocationsBanks Don't Offer the Products or Services I Need
I Cannot Manage/Balance an AccountThe Fees are Too High or Unpredictable
I Don't Like Dealing with BanksOther
I Wouldn't Use an Account EnoughBanking History, Credit or ID Problems
Refused to AnswerDon't Need or Want an Account
Don't Have Enough Money
Most Important Reason for Not Having a Checking, Savings or Money Market Account
Source: The Federal Reserve System, “Consumers and Mobile Financial Services 2014,” March 2014
16
© 2015 Fiserv, Inc. or its affiliates.
Disruptive Innovation
© 2015 Fiserv, Inc. or its affiliates.
Brewing Threat to Traditional Financial Institutions
$2.5 BillionTPV
processed in 4Q15
P2P
90 PercentPercent of U.S. credit purchase
volume represented by registered FIs
MobilePayments
P2P Loans
$16.0 BillionLoans
processed since 2007
Digital Advisor
$3.9BAssets under management
International Remittance
Three-to-Six Seconds
The length of international
interbank transfer
Source: Apple Pay, Gobank, Lending Club 10-K 02/22/16, Ripple, and Venmo 4Q15
© 2015 Fiserv, Inc. or its affiliates.
Who Will Drive the Primary Banking Relationship?
19
© 2015 Fiserv, Inc. or its affiliates.
1. Mobile access means customers are engaging their banks more than ever
2. Technology is emerging as an important loyalty builder for banks seeking deeper customer relationships
3. Technology is leveling the playing field among large and small banks
4. Alternative lending is gaining favor with consumers
20
Key Takeaways
© 2015 Fiserv, Inc. or its affiliates.
Payments Have Not Kept Pace
• Days, not minutes
• Cut-off times
• Weekends and holidays
• Instant delivery options are very limited
$$
21
© 2015 Fiserv, Inc. or its affiliates.
A Quarter of Unbanked Consumers Say They Don’t Need or Want a Bank Account
1%1%2%2%
6%7%8%
10%15%
24%25%
0% 20%
Banks Do Not Have Convenient Hours or LocationsBanks Don't Offer the Products or Services I Need
I Cannot Manage/Balance an AccountThe Fees are Too High or Unpredictable
I Don't Like Dealing with BanksOther
I Wouldn't Use an Account EnoughBanking History, Credit or ID Problems
Refused to AnswerDon't Need or Want an Account
Don't Have Enough Money
Most Important Reason for Not Having a Checking, Savings or Money Market Account
Source: The Federal Reserve System, “Consumers and Mobile Financial Services 2014,” March 2014
22
© 2015 Fiserv, Inc. or its affiliates.
Financial Services Revenue at Risk of Disruption
26%
26%
26%
29%
29%
29%
31%
41%
50%
Sprint (U.S.)
AT&T Mobility (U.S.)
Amazon
Apple
Costco
T-Mobile (U.S.)
PayPal
Square
0% 10% 20% 30% 40% 50% 60%
If These Companies Offered Banking Services, How Likely Would You Be to Bank With Them?
Source: Accenture “2014 North American Consumer Digital Banking Survey – The Digital Disruption in Banking,” April 2014
Note: Percent of customers which would likely bank with each non-bank with which they do business.
23
© 2015 Fiserv, Inc. or its affiliates.
Banks Use Social Media to Engage Customers
0% 20% 40% 60% 80% 100%
Google Plus
Foursquare
YouTube
Blog
Engagement Acquisition Service Other
If Your FI Uses This Social Media Channel, What is the Primary Objective For Using It?
Source: Aite Group, “Bank and Credit Union Marketing Trends and Spends,” January 2015
24
© 2015 Fiserv, Inc. or its affiliates.
Technology Is an Important Loyalty Builder
80%
57%
18%14%
33% 36%
7% 10%
46%
0%10%20%30%40%50%60%70%80%90%
High OLB Satisfaction(9-10)
Medium OLBSatisfaction (6-8)
Low OLB Satisfaction(0-5)
Sat
isfa
ctio
n Le
vel
Unlikely to Switch FIs (0-4)Neutral (5-7)Likely to Switch FIs (8-10)
High Satisfaction With Online Banking Makes Consumers Less Likely to Change Their Primary Financial Institutions.
Source: Fiserv Proprietary Research, “2012 Fiserv Consumer Trends Survey,” 2012
25
© 2015 Fiserv, Inc. or its affiliates.
1. The payments landscape is transforming with new technology capabilities
2. Paper-based payments are in decline as cards-based payments are favored by consumers
3. Banks are competing with a host of new players
26
Key Takeaways
© 2015 Fiserv, Inc. or its affiliates.
It’s a Different World
© 2015 Fiserv, Inc. or its affiliates.
Invisible Payments
Instant Money Movement
Internet of Things
Data-Driven Relationships
Mobile Everywhere
© 2015 Fiserv, Inc. or its affiliates.
Looking to the Future
© 2015 Fiserv, Inc. or its affiliates.
“The Internet of Things (IoT) describes the phenomenon of everyday devices connecting to the Internet through tiny embedded sensors and computing power.”
Accenture
The Internet of Things
© 2015 Fiserv, Inc. or its affiliates.
By 2020, 20 Billion Devices Will Be Connected to the Internet
0%
10%
20%
30%
40%
50%
60%
70%
80%
SmartThermostat
ConnectedSecuritySystem
SmartRefrigerator
WearableFitnessDevice
SmartWatch
Self-DrivingVacuumCleaner
WearableHeads-Up
Display
SmartClothing
In the Next Year Five Years from Now More Than Five Years from Now Total Expected Adoption
Projected New Adoption of Connected Technology by Consumers
Source: Acquity Group, “The Internet of Things: The Future of Consumer Adoption,” 2014
Note: Percentage of Customers Expected to Purchase Device
31
© 2015 Fiserv, Inc. or its affiliates.
The Internet of Things Will Bring Radical Change to Banking
• Hyper-competitive, hyper-connected
• Network multiplier effect• FIs sit on the killer asset –
data!• FI will be ever-present part
of customers’ daily routines• Partner and collaborate• Aggregate data with all
partners• Build interconnected network
beyond traditional “bank-owned” channels innovation
Source: Accenture, “The Bank of Things,” 2014
Auto
Purchase
College
Choice
Car
Insurance
Home
Purchase
32
© 2015 Fiserv, Inc. or its affiliates.
Reverse Mentoring: Everyone is Connected
© 2015 Fiserv, Inc. or its affiliates.
1. Raise awareness about shifts in consumer preferences
2. Include young people and technology enthusiasts in strategic planning
3. Get ready to innovate faster than ever before and provide a world-class experience across channels
4. Elevate your digital strategy to the CEO and board level
34
Take Action
© 2015 Fiserv, Inc. or its affiliates.
Thought for the Day:
Expect “revolutionary change” in payments speed
in the next 3-5 years
35
Virginia [email protected]
Growing the Banking Franchise in a Digital World
Virginia HeyburnVice President, Fiserv
August 3rd, 2015
© 2015 Fiserv, Inc. or its affiliates.
What Does the Future of Payments do to Debit?
49%Debit
When Given a Choice, What Payment Form Do You Prefer?
2013 2014 2015
Source: PYMNTS.com, “Debit’s Loss is PayPal’s Gain,” January 2016
Debit49%
Debit43%
Debit41%
Credit35%
Credit35%
Credit34%
43%Debit
41%Debit
Other17%
Other22%
Other24%
