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IntroductionBankshavetoupgradethemselves,orriskbeingburnttothegroundTABLE
OFCONTENTSInterviewwithbanking...
INTRODUCTIONBaijuNT,Editor,BigDataMadeSimpleReadinterviewsbyfive
thoughtleadersinbankingandtheirviewson...

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ChapterOneBANKSHAVETOUPGRADETHEMSELVES,ORRISKBEING
BURNTTOTHEGROUNDInterviewedbyManuJeevanPrakashSubedi...
Fordecades,bankshaveonlycompetedwithoneanother,onthesameterms.Asan
industrynotveryusedtochange,theban...
oftenthatisundertheheadingofinnovation,butitmayalsobeaproductmanagerora
businesslineexecutivethatjust...
WithwhatmotivesandvisiondidyoustarttheBankInnovatorsCouncil?TheBank
InnovatorsCouncilisapublicmembership...
aninfrastructuremanagerbeingcustomerintimateaproductinnovatorIbelievethat
veryfewbankswillbeproduct...
Thefirst,isthatforthousandsofyears,bankshaveonlycompetedwithoneanother.
Theydidnthavetoprovidemeaningf...
Thatssimple.Theyneedtoanalysecustomerdata.Datafromsocialmedia,merchants,
andtransactionsisreadilyavailabl...
Evenmoreimportantthantechnologyisaverystrongfocusoncustomerintimacy.There
areanumberofbanksthatareusin...
Thesecond,isthatwewillhavefewerbanks.Banksthatwerebuiltintheeraofbrick
andmortareitherhavetoupgrade...
ChapterTwoOnthepast,present,andfutureofbankingInterviewedbySrikantSastri
Cofounder,CrayonDataVikAtalFor...
Forbanks,usingdataanalyticsforbettercustomersatisfactionanddeeperengagementis
likedevelopingamusclethats...
Duringthefinancialcrisis,IwasaskedtomanagehighriskglobalaccountsforCiti
Bank.Atthetime,theapproachwea...
Tobehonest,myroleatCrayonevolvedquitedramatically!Iwashavingacasualcupof
coffeewithSrikant,discussingt...
Banksareonlynowstartingtolaythefoundationforacompletelynewbusinessmodel.
Theyareshiftingtheirfocustoco...
Allowmetoexplain.Forabank,itsnotenoughtohaveanAppleiOSorMac
application.SinceallbanksareontheApple...
43percentofU.S.customersbelievetheirprimarybankdoesnotunderstandtheirneeds
31percentfeeltheirbankisnot...
HighlightsIfyoucomparebankstocompanieslikeGoogle,itsevidentthatbanksare
stillatthenascentstageofthe...

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ChapterThreeThechallengeforbanksisn'tbecomingdigitalbutproviding
personalizationInterviewedbyBhaskarVCrayo...
Withtheshifttowardsdigital,consumersarebombardedwithcompetingmessages.
Bankshavetotrulyunderstandtheircust...
MasterCardAdvisorsoffersunparalleledinsightintotheretailspendingtrends,drawing
from43billionanonymizedandag...
aretheexpectationsofMasterCardscustomerschanging,andhowisMasterCard
planningtomeettheseexpectations?Aswe...
institutions,retailers,paymentnetworks,governmentsaswellasgreatervigilanceamong
consumersthemselves,isrequire...
aboutwhatthattrulymeans.Beitpayments,fundstransferorevencreditscoring,
bankingisbeingunbundledbyFinTech...
Giventhedigitalwave,howisthemerchantnetworkevolving?Whatrole,ifany,doyou
seethemerchantnetworksplaying,...
Morethanjustminingmoredata,businessesneedtheright,smartdatathatanswerstheir
questionsandprovidesactionabl...
Thatsjustonesteponourjourneytoourstatedgoalofmakingfinancialservices
availableto500millionmorepeopleb...
ChapterFourBoththephysicalanddigitalworldspresentnewchallengesforbanksRon
ShevlinDirectorofResearch,Corne...
Toomuchofthebigdatahypefocusesonpredictingwhatasingleconsumerwillbuy.
Butabetteruseofbigdataisto...
Bankssitontrovesofdata.Distinguishingbigdatafromotherkindsofdatasome
peoplenowliketosaythatbanksne...
IrecentlyhadaconversationwithVikramAtal,ExecutiveVicepresidentofCITIbank.
Hesaidthatbankshavecomplexbus...
NodoubtthattheyrecoolButtheyrejustabankstoolYousaidthatFintechwont
rulethefinancialindustry.Can...
FranciscoGonzales,chairmanofBBVA,saidthatBBVAwillbeasoftwarecompanyin
thefuture.Whatisyourviewonhis...
Thereareanumberofbanksthatareusingcuttingedgeinnovativetechnology.Canyou
giveussomeexamplesofbanksthat...
HighlightsSimplyprovidingmobileaccesstobankaccountstocheckbalancesor
transferfundsisntenoughtodriveadd...

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ChapterFiveWerewitnessingthecreativedestructionoffinancialservicesArvind
SankaranGlobalBusinessLeader,Retai...
Werewitnessingthecreativedestructionoffinancialservices,rearrangingitselfaround
theconsumer.ellusalittlea...
Bigdataandanalyticshavebeenintensivelyusedinwealthmanagementspaceonlyin
thelastfiveyearsorso.BothatCi...
domainthatIwasapartof!YourroleatCrayonisthatofaStrategicAdvisor.Canyou
tellusmoreaboutyourroleasa...
Comingtoyourquestionabouthowthissectorischangingwiththeadventofbigdata.
Untilrecentyears,financialservi...
Werewitnessingthecreativedestructionoffinancialservices,rearrangingitselfaround
theconsumer.Whoeverdoesthis...
incubatororacceleratorprogrammesthathelpplugintostartupstoworkonideas.Who
areabletoprovidewidgetsandAP...
Ifanybankwantstoengagewithmillennials,itneedstoputadigitalbankoutthere.
servingconsumerwhowantshighhu...
Ifyoulookatthetraditionalconsumerwalletofpaymentproducts,creditcardshave
generallybeenpreferredoverdebit....
buildupofthestrongtalentpool,theyareinaverygoodpositiontowinthemarket
goingforward.Thesecondthemeis...
HighlightsWerewitnessingthecreativedestructionoffinancialservices,rearranging
itselfaroundtheconsumer.Whoe...
BigDataMadeSimple(BDMS)isoneofthefastestgrowingbigdatacontentwebsites
today.ItispoweredbySingaporebase...
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Bigdatamadesimplepppfiveexpertstalk
1.1.InterviewswithFIVEBIGDATAEXPERTSINBANKINGPoweredby
2.2.IntroductionBankshavetoupgradethemselves,orriskbeingburnttotheground
TABLEOFCONTENTSInterviewwithbankingexpertJPNicols12345Onthe
past,present,andfutureofbankingInterviewwithbankingexpertVikAtalThe
challengeforbanksisn'tbecomingdigitalbutprovidingpersonalizationInterview
withMasterCardsEricSchneiderBoththephysicalanddigitalworldspresentnew
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challengesforbanksInterviewwithRonShevlinWerewitnessingthecreative
destructionoffinancialservicesInterviewwithbankingexpertArvindSankaran
3.3.INTRODUCTIONBaijuNT,Editor,BigDataMadeSimpleReadinterviewsby
fivethoughtleadersinbankingandtheirviewsonBigDataforbanking.igital
personalization.FinTechs.Businessmodelsofbanks.Innovationinthebanking
industry.BigdataAnalytics.Inordertocompetetoday,everybankmustembrace
theseandothertechniquesthatwereirrelevantagenerationago.Thesetopics
continuetoevolve,andnewtheoriesandpracticesarecreatedanddiscarded
constantly.Thatmeansthatthetypicalsearchengineapproachcanyieldconflicting
oroutofdateinformation.Really,theonlywaytogetaccurateandcomplete
informationistoaskpeoplewithhandsonexperienceintheindustry.Sothatswhat
wedid.Overthepastfewmonthswehavebeenluckytoconductindepth
interviewswithfiveexpertsinthebankingindustryforbigdatamadesimple.com.
Thefiveintervieweeshavevariedrolesandfocusareas:fromstrategicadvisorsto
consultants,tothoseworkingatestablishedcompanies.Theraisond'etreofthisPDF
version:wewantedtomaketheinterviewseasilyaccessibletothecommunity.You
canreadthisebookinanyorder.Eachinterviewisstandalone,sofeelfreetoskip
aroundtothetopicsthatinterestyou.ThisissecondebookintheMastersofBig
Dataseries.Wehopeyouenjoythereadandthanksagaintoallourexpert
interviewees!D
4.4.ChapterOneBANKSHAVETOUPGRADETHEMSELVES,ORRISKBEING
BURNTTOTHEGROUNDInterviewedbyManuJeevanPrakashSubeditor,Big
DataMadeSimpleJPNICOLSCofounder,BankInnovatorsCouncil
5.5.Fordecades,bankshaveonlycompetedwithoneanother,onthesameterms.As
anindustrynotveryusedtochange,thebankingsectoriscurrentlyundergoinga
radicaltransformation.ordecades,bankshaveonlycompetedwithoneanother,on
thesameterms.FAsanindustrynotveryusedtochange,thebankingsectoris
currentlyundergoingaradicaltransformation.JPNicols,aveteranfromthebanking
sector,hasspenttwentyyearsinthespace.Forthepasteightyears,hisworkhas
beenattheintersectionofbankingandfintech.Inthisinterview,Nicolsshareshis
perspectivesonthetransformationofthebankingsector.YouaretheCOOof
Innosect.com.WhatexactlydoesInnosectdoandwhatisyourroleasaCOOat
Innosect?AtInnosect,webelieveinnovationistheintersectionofhumancapacity
andideas.Ideasaloneareadimeadozen.Whatmattersishowyouorganizepeople
aroundthoseideastobringthemtolife.Ioftentellbankingaudiencesaboutwhat
happenedtoKodak.ItisnotthatKodakwasunawareofdigitalphotography,infact
theywereactuallypioneersofthetechnology.However,theyfailedtogetthe
companyfocusedonhowdigitalinnovationsintheindustrywerechangingcustomer
behaviors.Allbusinesseswanttomoveforward.Todoso,theynotonlyhaveto
createideasbutimplementthemandturnthemintorevenue.ThatswhereInnosect
comesin.Wemobilizecompaniestoturnideasintoaction,5
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6.6.oftenthatisundertheheadingofinnovation,butitmayalsobeaproductmanager
orabusinesslineexecutivethatjustwantshelpgeneratingnewsourcesofrevenue
ornewcostsavings.WhatkindofanalyticstechniquesdoyouuseatInnosect.com?
FounderandchairmanofInnosect,JayVanZyl,hasbeenapioneerinsocial
innovation.Socialinnovationistheconceptofgettingpeopleinvolvedthroughout
theorganization,intheprocessofinnovation.HehelpedFNB(numberonebankin
SouthAfrica)tobenamedthemostinnovativebankintheworldin2012,hedidthat
usingthesocialinnovationapproach.Hegotpeopleacrossthewholeorganization
involvedinideas.Now,wedoitwithbigdataanalyticsatmachinescale.Weare
takingsocialcomputingandmultidimensionaldatasetsandactuallyapplying
networktheoryandsocialcomputation,onhowpeopleandideascometogether.
Whatif,outofyourhundredideas,wecouldtellyouwhichtwoyoushouldtryfirst
basedonmarketplacepositioning,yourcustomersandyourprobabilityfor
success.Thesearethealgorithmswearebuildingandtesting.Ouralgorithmsare
similartothenetworkanalysistechniquesusedtotrackterrorists.Agovernment
securityagencyoncewantedourhelptrackingdownsomesuspectedhackers.We
wereactuallyabletopredicttheirlocationbasedonanalyzingsocialandmulti
dimensionaldata.ButthatsthemostIcantellyou!ItisnotthatKodakwasunaware
ofdigitalphotography,infact,theywerepioneers.Buttheyfailedtonoticehow
digitalinnovationswerechangingcustomerbehaviors.
7.7.WithwhatmotivesandvisiondidyoustarttheBankInnovatorsCouncil?The
BankInnovatorsCouncilisapublicmembershiporganizationthatisdesignedto
supportandpromoteinnovationbanking.Ourmotivewassimple.Threeyearsago,I
wasapartofabankthatwantedtoinnovate.Ialsoknewthatsuchpeoplewereoften
lonely,becausetheyweresurroundedbywhatwecalledtheBusinessPrevention
Department.Fintechcompaniesactuallyhavealotofsupport,intheformof
incubators,acceleratorsandventurecapitalists,butbankswereontheirown.We
wantedtoreachouttobankerswhoweretryingtoinnovateandcreateachange,and
givethemaplacetoconnect,supportoneanother,anddiscovernewideas.Two
yearsago,welaunchedtheBankInnovatorsCouncilinNewYorkduringFinovate
Fall.Today,wehavemembersin65countries.InyourinterviewwithMoney
Summitcompaniesyousaid:ThatifConsumersengagedirectlywithFintech
companiesinsteadofbanks,thenbanksbecomeacommoditybehindthescenes.To
illustrateyourpoint,youtalkedaboutcompanieslikeKabbageorMovenorProsper
thatteamupwithabankingentity.Whydidyoumakethisstatement?Canyou
pleaseelaborate?HarvardprofessorsJohnHaggleandMarcSingerformulated
aconceptcalledunbundlingthecorporation.Therewasasimilarconceptbrought
outbyMichaelTreacyandFredWiersemintheirbookcalled,Thedisciplineof
marketleaders.Eachofthosetwogroupscameupwithsimilarpositions,even
thoughtheyuseslightlydifferentterminology.Letmeexplain.Therearethreemain
domains,whichyoucanmasterinanybusiness:Ifconsumersengagedirectlywith
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fintechcompaniesinsteadofbanks,thenbanksbecomeacommoditybehindthe
scenes.7
8.8.aninfrastructuremanagerbeingcustomerintimateaproductinnovatorI
believethatveryfewbankswillbeproductinnovators,maybeahandfulacrossthe
globe.Whenasked,mostbanksthinkthattheyarecustomerintimate.Justlastweek,
Iwasakeynotespeakeratanevent.Iaskedtheaudiencewhatsinglewordthey
thinkdifferentiatesthemfromeverybodyelse.Mostpeoplesimultaneouslysaidthe
samethingservice.Hence,eventhoughbanksthinktheyarecustomerintimate,
theyarenottheyarealltryingtocompeteonthesamedimension.Realistically,
mostofthemfocusoninfrastructure.Bankspayattentiontoeconomiesofscale,
standardizationandcostreductionallthreefarfromcustomerintimacy.Soifbanks
cannottrulybecustomerintimate,theyaredoomedtobejustdumbcommodities,
actingbehindthescenes,likeutilities.Theproblemariseswhenwethinkabouthow
manyofthesebankswereallyneed.IntheUS,thereareover6,000banks,andwe
certainlydontneed6,000utilities.Whatweneedisabankthatisintimatewitha
groupofcustomersthattrulythinksabouttheirneeds,ambitionsandproblems.43
percentofU.S.customersbelievetheirprimarybankdoesnotunderstandtheir
needs.Howcanyouexplainthis?Ithinktherearetwoprimarycausesforthis:Even
thoughbanksthinktheyarecustomerintimate,theyarenottheyarealltryingto
competeonthesamedimension.8
9.9.Thefirst,isthatforthousandsofyears,bankshaveonlycompetedwithone
another.Theydidnthavetoprovidemeaningfulbenefitstotheircustomers.They
justneededtobebetterthantheworstbank.Technologyhascompletelychanged
this.Thesecond,isthatthecurrenteraisonethatisinthecontextoftheaftermathof
aglobalfinancialcrisis.Thefocusformanysincethecrisishasbeenon
standardizingandimprovinginternalprocessesandquantifyingandreducingrisks,
andnotenoughbankshavebeentrulyfocusedontakingcareofthecustomer.This
focushasbeendrivenbyregulatorsconcernsaboutbanksstabilityandcompliance,
andwitheliminatingunfairanddeceptivepractices.Banksdonthaveachoicetobe
compliant,buttheregulatorsaretypicallyfocusedonwhatnegativebehaviorsto
avoid,notwhatpositive,customercentricbehaviorstoembrace.Allofthistendsto
reinforcethenecessityoffocusingoninfrastructure.Theproblemwithlosing
customersis,itdoesnthurtovernight.Ifyouquietlyleakafewcustomersevery
year,itseasytomisdiagnosewhatwentwrong,andyoukeepmakingsmall
adjustmentstoimprovecustomerexperience.Meanwhile,thegapbetweenthe
experienceyouareprovidingandwhatyourcustomerneedskeepswidening.A
customerwhospendshisdaysusingcustomerfriendlyappslikeUber,Netflix,even
Starbucks,feelsahugedisconnectwhenhewalksintoabankbranch.Bankersdont
evenrecognizethisdisconnect.Howdoyouthinkbankscanunderstandtheir
customersbetter,andbecomeapartoftheircustomerslives?Ifbankscannottruly
becustomerintimate,theyaredoomedtobejustdumbcommodities,actingbehind
thescenes,likeutilities.
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10.10.Thatssimple.Theyneedtoanalysecustomerdata.Datafromsocialmedia,
merchants,andtransactionsisreadilyavailabletobanks.Theycancreatebuyer
personasaroundtheircustomers.Bankscanbuyaggregateddatafromcompanies
likeYodlee,Xignite,andothers.MerchantslikeNordstorm,WalmartandTarget
havealotofcustomerdata,andtheyareverygoodatanalyzingit.Mostmerchants
areprettyproprietaryaboutthatdata,butastrongpartnershipthatcombines
merchantpurchasedatawithbanksincomeandotherdatawouldcreateevendeeper
insightstoprovideamoreintimatecustomerexperience.Majorbankssitontroves
ofdata.However,lessthan10%ofthisdataisreadilyaccessible,andlessthan1%is
actuallyusedforanyanalytics.So,howcanbanksbetterexploitthepowerofdata?
Thegoodnewsisthateventheworstbankshavethousands,ifnotmillions,of
customers,andalotofdataonthosecustomers.Theyknowwhattheircustomers
ownandwhattheyowe,whatcomesinandwhatgoesout,whenitgoesandwhereit
goes.Youareabsolutelyrightthattheyhavedoneverylittlewithitsofar.However,
theyareinvestinginbigdataanalytics,inbetterwaystoharnessthedata.Thereare
manyevenlookingforpartnershipswithbigdatafirmsandcustomerfacing
technologyfirms.Inmyopinion,thewinnersofthefuturewillbetheoneswho
successfullyadoptbigdatatechnologies.Asforthosewhodont,Ithinktheywill
justquietlymergewithsomebodywhounderstandshowtomonetizetheircustomer
data.Lackofinnovationisneverputonabankstombstonewhenitdies.BBVA,
CapitalOne,WellsFargo,arejustsomeofthebanksstartingtoexperimentwithbig
data.ToquoteFranciscoGonzales,chairmanofBBVA,BBVAwillbeasoftware
companyinthefuture.Whatweneedisabankthatisintimatewithagroupof
customersthattrulythinksabouttheirneeds,ambitionsandproblems.10
11.11.Evenmoreimportantthantechnologyisaverystrongfocusoncustomer
intimacy.Thereareanumberofbanksthatareusingcuttingedgeinnovativetech.
Canyougiveussomeexamplesofbanksthataredoingwellindigital
personalizationandthebigdataspace?CapitalOneisacreditcardcompanyturned
bankthatistryinghardtopersonalizeoffersfortheircustomers.UmquaBankin
Portland,Oregontakesabitofauniqueapproach.Theyarentreallyhightech,and
theirpersonalizationmostlycomesfrombuildingengagingbranchenvironments.In
thelongrun,wewillneedfewerbranchesoverallinbanking,butbankslikeUmqua
willdowellwithbranches.Barclaysisexperimentingwithtechstartupsthattackle
differentfacetsofconsumerissues.Ithinkthisworksforbiggerbankswhocan
affordtoinvestinthiskindofapproach.Itsgettingharderandharderforsmall
banksononehand,butontheother,technologyhasneverbeenmoreeasily
accessible.SmallbankslikeLiveOakBankandCBWareexamplesofsuchbanks,
thathaveembracedtechnologydespitetheirsize.Evenmoreimportantthantheiruse
oftechnologythough,isaverystrongfocusoncustomerintimacy.Theyarevery
clearaboutwhotheircustomersare,andwhotheyarent.Mostbankscannotbeall
thingstoallpeople,andtheyshouldnttry.Whatisthefutureofbanking?Asfaras
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Imconcerned,therearetwotrends.Thefirst,iswhatFranciscoGonzalezsaid,
Successfulbanksaregoingtobemoreliketechnologycompanies.11
12.12.Thesecond,isthatwewillhavefewerbanks.Banksthatwerebuiltintheeraof
brickandmortareitherhavetoupgradethemselves,orriskbeingburnttothe
ground.Ithinkthesetwotrendswillcombineinprettypowerfulways,andthemost
successfulbankswillbetheonesthataredigital.HighlightsIfconsumersengage
directlywithFinTechcompaniesinsteadofbanks,thenbanksbecomeacommodity
behindthescenes.Eventhoughbanksthinktheyarecustomerintimate,theyare
nottheyarealltryingtocompeteonthesamedimension.Thefocusformany
bankshasbeenonstandardizingandimprovinginternalprocessesandquantifying
andreducingrisks,andnotenoughbankshavebeentrulyfocusedontakingcareof
thecustomer.Wewillhavefewerbanks.Banksthatwerebuiltintheeraofbrick
andmortareitherhavetoupgradethemselves,orriskbeingburnttotheground.Go
backtotheTableofContent
13.13.ChapterTwoOnthepast,present,andfutureofbankingInterviewedbySrikant
SastriCofounder,CrayonDataVikAtalFormerExecutiveVicePresident,Citigroup
14.14.Forbanks,usingdataanalyticsforbettercustomersatisfactionanddeeper
engagementislikedevelopingamusclethatsneverbeencompletelyused.ellusa
littleaboutyourself,outsideoftheinformationthatispubliclyavailableonline.Ah,
thatsatrickyone.Well,itmaybeinterestingtonotethatbeforeIstartedmycareer
infinance,IhadexploredtheoptionofdoinganadvanceddegreeatISI(Kolkatta).
Eventually,Ioptedtopursuefinanceinstead,butwithmyrecentshiftinfocusto
information,analyticsandinsights,IfeellikeIvecomebackfullcircle!Inthe
initialstagesofmycareer,Ifocusedontraditionalfinance.However,forthepast15
years,Ihaveworkedonawiderangeofconsumerorientedrolesinbusiness
management.Interestingly,bothhavestraddledthebankingandretailsectors.To
workinthesesectorshasbeenanincrediblelearningexperienceforme.Ithasgiven
metheopportunitytogainremarkableinsightsintothemindofboth,customersand
retailerswhileremainingfocusedonthebusinessandprofitdynamicsofbanking.
Mostrecently,Ivebeenexploringhowtoleverageinformationandanalyticsto
drivebusinessperformance.Thiscuriositywasheightenedduetomylearningsfrom
theglobalfinancialcrisis.Ithinkthechaositleftinitswakecouldprobablyhave
beenreduced,tosomeextent,withpredictiveanalytics.AstheExecutiveVice
PresidentofCitiBank,oneofthelargestbanksintheworld,youwatchedtheworld
endureandrecoverfromtheworstfinancialcrisissincethe1930s.Whatwereyour
keylearnings?T14
15.15.Duringthefinancialcrisis,Iwasaskedtomanagehighriskglobalaccountsfor
CitiBank.Atthetime,theapproachweadoptedwaslargelyfocusedoncollections
andrepayments.However,bythetimeacustomershowedevidenceofrisk,itwas
oftentoolatetotakeaction.Hence,thequestionbecamehowcouldwechangeour
approachtoidentifyandmanagehighriskaccountsbetter?Wedidtrytouse
predictiveanalyticstodetermine,whichcustomersdemandedimmediateactionand,
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whichonescouldbetendedtolater.Butwesoonrealizedthatbusinessprocesses
andmodelswerejustnotcalibratedeffectivelyenoughatthetimeforpredictive
analytics.Postthefinancialcrisis,theefficacyoffinancialmodelswasthoroughly
scrutinizedforwhattechniquesandinformationsetsmightbeapplicable.
Unanimously,theconclusionarrivedatsuggestedthattherewasenormous
opportunityforbankstoleveragedataandimprovetheirperformancesubstantially.
IfyoucomparebankstocompanieslikeGoogle,itsevidentthatbanksarestillatthe
nascentstageofthedigitalanddatarevolution.Bankshaveverycomplexembedded
businessprocessesandbusinessmodels.Itis,therefore,asignificantchallengefor
bankstomigratetoanewstate.Iviewthischallengeasasignificantopportunity
sinceithasprovidedaclearrationaleforbringingsolutionstothefinancialservices
industryacrosstheirneedsbuildingscalable(andlowcost)customeracquistions,
movingtowardsrealtimeprocesses,layingoutaframeworkforbecoming
informationcentricandsimilaractivities.CanyoutellusaboutyourroleatCrayon
Data?WhatexcitesyoumostaboutyourworkatCrayonData?Ifyoucompare
bankstocompanieslikeGoogle,itsevidentthatbanksarestillatthenascentstage
ofthedigitalanddatarevolution.
16.16.Tobehonest,myroleatCrayonevolvedquitedramatically!Iwashavinga
casualcupofcoffeewithSrikant,discussingtheworkCrayonhadbeendoingin
Asia.SrikantwantedtoexploretheopportunitiesintheU.SmarketforCrayon.The
U.SmarketisuniqueinthatcompaniesintheU.Sgaincredibilityonlybyactually
workingintheU.S.AndbeforeIknewit,wewereenthusiasticallychalkingouta
planforCrayontopenetrateoneofthemostcompetitivemarketsintheworld.Ive
satthroughanumberofCrayonsbusinessmeetingsandpresentationstoclients.In
allofthem,Ivenoticedthattherehasnotbeenasingleclientinteractionattheend
ofwhichtheclientdidnotconcurwithCrayonsvision,approach,andhighly
practicalrecommendations.WhatexcitesmemostaboutCrayonisthatImproudto
saythatIhavepartneredwithacredibleorganizationwhoseproductclearlymeets
theneedsofthemodernconsumer.Whatisyourviewonhowthefinancialservices
sector&insurancespaceintheUSischangingwiththeadventofbigdataanalytics?
Rightnow,banksarebeingconfrontedwiththerealizationthattheboundariesof
whatispossibleand,intandem,customerexpectationsareshiftingdramatically.
Theirbusinessmodelsarenolongerassuccessfulastheywereinthepast.Banks
haveverycomplexembeddedbusinessprocessesandbusinessmodels.Itis,
therefore,asignificantchallengeforbankstomigratetoanewstate.16
17.17.Banksareonlynowstartingtolaythefoundationforacompletelynewbusiness
model.Theyareshiftingtheirfocustoconsumers,tryingtofigureouthowtoget
newcustomers,deepenrelationshipsandmeetdemandingcustomerexpectations.
Theyaremakingeffortstogodigitalandevenemploybigdataanalytics,butthe
practicalstateofthismigration,onascaleof1to100,isstillintheteens.Accenture
estimatesthatcompetitionfromnonbankscoulderodeonethirdoftraditionalbank
revenuesby2020.CompanieslikePaypal,ApplePay,andGoogleWallet.Howcan
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banksrespondtothesethreats?Yes,thesecompaniesarestealingawayadecent
chunkofrevenuefrombanks.Butletsnotforget,therearemultipledriversof
bankingrevenuelending,transactions,andsavings.AndneitherApplenorGoogle
orPaypalareinterestedinlendingorsavingsbecauseitisheavilyregulatedand
extremelycomplex.Banksneedtofocusmoreonhowtodrivemarketsharein
traditionalassetsidelendingandthinklessaboutexternalcompetitorslikeGoogle,
becausethecorelendingbusinessisntgoinganywhereintheforeseeablefuture.
WithspecificregardtoGoogle,Apple,andPaypal,theyhavecausedtwoproblems
forbanks:Banksloseaportionofarevenuestreamrevenuetheyreceivefrom
transactionsdonebytheircustomersthatishighvolumeandverylowriskBanks
nowhaveonemoreplatformonwhichtheyneedtocompeteforshelfspaceand
allocatescarcemarketingresources.Banksbusinessmodelsarenolongeras
successfulastheywereinthepast.17
18.18.Allowmetoexplain.Forabank,itsnotenoughtohaveanAppleiOSorMac
application.SinceallbanksareontheAppleecosystem,eachbankhastofigureout
howtomaketheirproductstandoutforacustomerto,say,usetheircreditcard.
AccordingtoaTransunionstudy,8millioncreditcardusersareinactive.Howcan
banksgettheircustomerstousecreditcards?Firstly,itsmorethan8million.Its
probably,multiplesofthat.Customersthatusetheircreditcardactivelyforsales
transactions.CustomersthattakeacreditcardbecauseoflowinterestLetssaya
customergets0%interestratefor18months.Therearemanycustomerswhowill
justusethecreditcardforthose18monthsandthenbecomeinactive.Thissetof
customersisextremelyunprofitableforbanksbecausetheyspendlotsofmoneyto
acquirecustomers,whoeventuallybecomeinactive.Customerswhotakecredit
cardsbutneverusethem.Thesecustomersarecompletelyinactive.Customersneed
tobeapproacheddifferently,dependinguponwhichoftheabovebucketsthey
belongto.Alongstandingcustomerwhogottiredofaproduct,forinstance,canbe
enticedtomigratebacktothebankwithanewproduct.Hence,whenwetalkabout
inactivecustomers,identificationofthesourceofthatinactivityisanextremely
importantmetrictocreateanapproachforthatcustomer.Banksneedtofocusmore
onhowtodrivemarketshareintraditionalassetsidelendingandthinklessabout
externalcompetitorslikeGoogle,Paypal,andAmazon.
19.19.43percentofU.S.customersbelievetheirprimarybankdoesnotunderstand
theirneeds31percentfeeltheirbankisnothelpingthemreachtheirprimary
financialgoals.Whyarentbanksabletounderstandtheircustomers?Because
understandingeveryindividualcustomerhasneverbeenapartofabanksbusiness
model.Thetopfivetosixcreditcardplayersholdaninetypercentshareofthecredit
cardindustryintheU.S.Theseplayersoperateonaverylargescale.CitiandJP
Morganeachhaveactivecreditcustomers(customerswhogetastatementevery
month)atwelloversixtymillion.Shiftingfromanactuarialsegmentation
structure.toaonetoonerelationshipisanextremelycomplexendeavor.Thisisa
problemforallthemainbanks.Bankssitontrovesofbigdataand,accordingto
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Tresata,only1%ofthisdataisusedforanalytics.Howcanbanksmakebetteruse
ofdata,tounderstandtheircustomersbetter?Peoplesaybanksdontusetransaction
dataefficiently.Thisisnotonlytruebutisapartofthebiggerproblem!Forthem,
usingdataanalyticsforbettercustomersatisfactionanddeeperengagementislike
developingamusclethatsneverbeencompletelyused.Itrequiresintensefocus,
discipline,andpersistence.Further,transactiondataprovidesonlylimitedinsight
intothemindofacustomer.Itwouldbeanenormousmistakeforbankstoleverage
onlytheirinternaldata.Theynowhavetorethinknotonlytheirapproachtowards
theirowndata,butalsoaccountfortheexistenceofmassiveandgrowingpoolsof
externaldata.Whenwetalkaboutinactivecustomers,identificationofthesourceof
thatinactivityisanextremelyimportantmetrictocreateanapproachforthat
customer.19
20.20.HighlightsIfyoucomparebankstocompanieslikeGoogle,itsevidentthat
banksarestillatthenascentstageofthedigitalanddatarevolution.Banksare
makingeffortstogodigitalandevenemploybigdataanalytics,butthepractical
stateofthismigration,onascaleof1to100,isstillintheteens.Companieslike
Paypal,GoogleandApplepayarestealingawayadecentchunkofrevenuefrom
banks.Understandingeveryindividualcustomerhasneverbeenapartofabanks
businessmodel.Transactiondataprovidesonlylimitedinsightintothemindofa
customer.Itwouldbeanenormousmistakeforbankstoleverageonlytheirinternal
data.GobacktotheTableofContent
21.21.ChapterThreeThechallengeforbanksisn'tbecomingdigitalbutproviding
personalizationInterviewedbyBhaskarVCrayonDataEricSchneiderAsiaPacific
Head,MasterCardAdvisors
22.22.Withtheshifttowardsdigital,consumersarebombardedwithcompeting
messages.Bankshavetotrulyunderstandtheircustomerstopinpointhowtocut
throughtheclutterandconvertcustomers.ellusalittleaboutyourselfIvebeenwith
MasterCardsince2001,andIamcurrentlyheadingMasterCardAdvisors,the
professionalservicesarmofthecompany,intheAsiaPacificregion.Themost
excitingaspectofmyjobistowitnessandbeapartofthegrowthofourdataand
analyticsbusiness.Wevebeendoingandmoreimportantly,applyingBigData
longbeforeanyonecalleditthatway.Wediscoveredearlyonthatspendingdata
evenwhencompletelystrippedofallpersonalinformation,which,bydesign,
MasterCarddoesnotcollect,needorwantcanbeinvaluableforamultitudeof
reasons.Ithelpsusbetterunderstandconsumerbehaviour,targetmarketing
programs,designbetterfittingproducts,makesmarterriskdecisionsandmuch
more.Youdonthavetobeatechieordatajocktolovedata.Youhaveextensive
experienceincustomeracquisition.Canyoutellusthemostimportantingredientof
asuccessfulcustomeracquisitionstrategy?Withtheshifttowardsdigital,consumers
arebombardedwithcompetingmessages.Businesseshavetotrulyunderstandtheir
customerstopinpointhowtocutthroughtheclutterandconvertcustomers.More
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thanjustminingmoredata,businessesneedtheright,smartdatathatanswerstheir
questionsandprovidesactionableinsights.T22
23.23.MasterCardAdvisorsoffersunparalleledinsightintotheretailspendingtrends,
drawingfrom43billionanonymizedandaggregatedtransactionsprocessedeach
year.Wepairthiswithrigorousdatascience,reinforcedbystrictdataprivacyand
confidentialitypolicies,toturnbigdataintosmartdataforourcustomers.Many
businesseshaveasolidunderstandingoftheircustomersspendhabits,butthey
donthavethelineofsightintobroadermarketplacetrends.Forexamplewhoare
theirmostvaluablecustomers?Whatexperiencesaretheyseeking?Whatdotheydo
beforeandaftertheyshop?Whatisourshareofwallet?Wehavethatknowledge,
andweputthattoworkforcompaniesofallsizestohelpthemattractandretain
customers,anddeliverbettermarketingcampaignstoreachtherightcustomersat
therighttimewiththerightcontent.Howdoyouthinkfinancialinstitutionscan
understandtheircustomersbetter,andbecomeapartoftheircustomerslives?With
manycustomersforginglifelongrelationshipsthatcaninvolvecards,mortgages,
checkingandotheraccounts,financialinstitutionsareinauniquepositiontotruly
gettoknowtheircustomersneeds,wantsanddesires.Therearesomanyincredible
opportunitiesacrossacustomerslifecycletocreateenhancedexperiencesthat
deliverrealvaluetodeepentherelationship.Additionally,financialinstitutionscan
benefitgreatlyfromunderstandinghowtheircustomersegmentsengageacrossthe
marketplace.Bybuildingrobustcustomersegmentations,wehelpourclients
understandtheircustomersbetter,sotheycandevisestrategiesthatwilldrivetheir
businesses.Today,weseeanincreasingdemandformobileanddigitalcapabilities.
HowFinancialinstitutionscanbenefitgreatlyfromunderstandinghowtheir
customersegmentsengageacrossthemarketplace.
24.24.aretheexpectationsofMasterCardscustomerschanging,andhowis
MasterCardplanningtomeettheseexpectations?Aswetransitionintoan
increasinglydigitallyconnectedlifestyle,thepaymentsindustrywillseeevengreater
demandforsimple,convenientandsecuresolutions.TheteamatMasterCardare
continuouslyworkingwithourpartnersinthepaymentsecosystemtomeetthese
growingdemandsformobileanddigitalcapabilities,andTodeliverinnovative,
scalablesolutionstoourcustomers.AgoodexampleisMasterPass,whichwas
launchedinearly2013.Sincethen,ithasbeenrolledoutto27marketsaroundthe
world.Itisourdigitalpaymentsplatformthatenablesconsumerstostorealltheir
card,shippingandbillinginformationinoneplaceforasimpler,saferandmore
convenientcheckoutexperiencewhenshoppingonlineorontheirmobiledevice.
MasterPassisnowavailabletoover40millionconsumersintheAsiaPacificalone,
andthisgrowthisexpectedtocontinue.Lookingforward,theunprecedented
convergenceofthephysicalandthedigitalworldpresentsnewchallenges.Justas
consumershaveembracedmoresecureandconvenientwaystomakepayments
criminalsarealsoadapting,usingincreasinglyadvancedtechnologytocommit
cybercrimeandfraud.Thereisnoonesolutiontodealwithcybercrime,anditneeds
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amultifacetedapproachtocombatitasbestaswecan.Inourview,collaborationis
thekeyauniversalcommitmentbetweenfinancialTheteamatMasterCardis
continuouslyworkingwithourpartnersinthepaymentsecosystemtomeetthese
growingdemandsformobileanddigitalcapabilities,andtodeliverinnovative,
scalablesolutionstoourcustomers.24
25.25.institutions,retailers,paymentnetworks,governmentsaswellasgreater
vigilanceamongconsumersthemselves,isrequired.CollaborationisMasterCards
motivationbehindourannualGlobalRiskLeadershipConference,whichwas
recentlyhostedinSingapore,wherewebringtogethercustomers,merchants,issuers,
banks,andlegislatorstosharebestpractice,ideas,andhaverobustdiscussionson
howtocontinueourfightinthebattleagainstfraudandcybercrime.Inwhatwaysdo
youseebigdata(potentially)makinganimpactontraditionalpayments&card
companies?MasterCardiscommittedtoexpandingourservicesportfolio,delivering
deeperinsightsandbroadercapabilitiestohelpourclientsgrowtheirbusinesses.
Havingtherightdataisacriticalpartofhowweevolveourbusiness.Beingina
positiontohelpclientsmakesmart,sounddecisionsbasedonMasterCardAdvisors
insightsisincredible.Andyetitsastoundingtoseehowmanypeoplestillflyblind
whenitcomestomakingdecisionsthatshouldbebasedonsoliddata.Itwasa
challengetomakepeopleseethevaluewhentheconceptofBigDataemerged.That
hassincecometopass.Whatmattersnowismakingitcleartocustomersthatnotall
BigDatadeliversvalue.Alldataisnotcreatedequal.Youcanhavethebestdatain
theworldbutwithoutsmartpeopleandprecise,provenanalytics,whatyouendup
decidingtodowiththatdatamayfallflat.Andviceversa.Youneedboth,andweas
anindustryneedtodoabetterjobofeducatingpeopleYoucanhavethebestdatain
theworldbutwithoutsmartpeopleandprecise,provenanalytics,whatyouendup
decidingtodowiththatdatamayfallflat.25
26.26.aboutwhatthattrulymeans.Beitpayments,fundstransferorevencredit
scoring,bankingisbeingunbundledbyFinTechplayers.Howdoyouthinkbanking
canrespond?Mostconsumersarelookingforconvenience,securityandvalue.
WhilesomeFinTechplayershaveidentifiedanddeliveredinnovativesolutionsthat
consumersusetoday,banksstillplayauniqueandintegralroleinmoney
management.Theyultimatelyowncustomerdepositandlendingrelationships,and
consumersurveyshaveshowntimeandagainthatpeopletrusttheirbanksmorethan
anyonewiththeirmoney.Also,consumersareincreasinglygoingmobile,especially
inAsiawithIndiajoiningChinaastheonlytwocountriesintheworldtohaveover
1billionsmartphoneusers.However,atthesametime,banksalsohaveareputation
forbeingslowertoadaptwhenitcomestoinnovation,andalsoboggeddownin
regulationthatisoftentheretokeepourmoneysafeinthefirstplace.Sothebanks
needtogetpasttheirhistoricalpenchantforbuildingeverythingthemselvesand
insteadembracetheexplosionofexperimentationandinnovationthattheFinTech
playersbreedincludingpayments,microlending,riskmanagementandmarketing.
Theseprovideopportunitiesforpartnershipsandacquisitionsthatcanhelpthebanks
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innovatefasterandstaycompetitive.Byworkingwithmoreplayersanddeveloping
inhousetechnologies,bankscancombinethenewerservicesthatconsumershave
foundcompellingwiththeirexistingofferingstodevelopanevenmorerobust
offeringinthefuture.WhilesomeFinTechplayershaveidentifiedanddelivered
innovativesolutionsthatconsumersusetoday,butbanksstillplayauniqueand
integralroleinmoneymanagement.
27.27.Giventhedigitalwave,howisthemerchantnetworkevolving?Whatrole,ifany,
doyouseethemerchantnetworksplaying,tostrengthenabanksproposition?Ifwe
gobacktothebeginningofcardpayments,MasterCardhasconnectedmillionsof
consumersandtheirbankswithmillionsofmerchantsandtheirbankswithoutany
ofthemnecessarilyhavinganydirectrelationshipwithoneanother.Themerchant
doesnthavetovetthecustomerscreditworthinessnoristhemerchantssale
dependentonhowmuchcashthecustomerhasinherwallet.Wearetheretomake
thepaymentsimple,convenientandsafeforbothparties.Youdonthearalotof
peopleormerchantscomplainabouthowcomplicated,orinconvenientcard
paymentsare.Thedaysoflongcheckoutprocessesarefarbehindus,andweare
nowseeingpeoplepaywiththeircardsoftentappingratherthanswipingor
dippingandspeedingthroughthecheckoutprocess.Digitalischangingtheform
factor,butthegoalremainsthesame:asingularfocusonmakingitevensaferand
simpler.Whatwasaplasticcardrepresentingabankaccountwillincreasinglybea
mobilewalletoravirtualcardnumberwithinanapp,suchthatpaymentisatap
awayonourmobiledevices.Withourstateofthearttokenizationtechnology,
MasterCardisatthecuttingedgeofallofthis,encryptingcardholdersactualcard
numberbehindthescenesforeverysingledigitaltransactionintoaonetimeuse
number,calledatoken.Evenintheunlikelysituationofamerchantdatabreach,
thistokenwouldberendereduselessasitisinsufficienttocompletethetransaction.
Andifthatdoesntalreadyprovideconsumerswithenoughcauseforpeaceofmind,
ifcardholdersnoticetheunauthorizeduseoftheirMasterCardcard,theyareDigital
ischangingtheformfactor,butthegoalremainsthesame:asingularfocuson
makingitevensaferandsimpler.27
28.28.Morethanjustminingmoredata,businessesneedtheright,smartdatathat
answerstheirquestionsandprovidesactionableinsights.protectedfromthecostof
theunauthorizedtransactionaslongastheyhavetakenreasonablestepstoprotect
themselvesfromfraud.Whatisthebiggestchangewearegoingtoseeinthe
financialservicesindustryinthenext5years?Throughouthistory,themiddleand
affluentclasseshaveenjoyedeasyaccesstofinancialservices.However,ontheother
endofthespectrum,themajorityoflessaffluentpopulationshavekepttheirlife
savingsunderamattressorwornontheirbodies.Justastheypayapremiumfor
buyingbasicstaplesinsmallquantities,theypayapremiumforlackofaccessto
conventionalfinancialservices.Thisleavesthemsusceptibletotheft,punitivelyhigh
fees,andextortion.OnarecenttriptoMyanmar,Ilistenedtovillagerssharingabout
havingmoneytransmittedtothemfromrelativesworkinginYangonorabroad
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throughmultiplemiddlemenalltakingbigcuts.Buttwobigtrendsarechangingthat.
Oneisthesimplefactthatthebankedmiddleclassisgrowingveryquickly
especiallyinAsiaandAfrica.Atthesametime,technologyismakingfinancial
servicesincreasinglyaccessibletothepoor.Mobilephones,ecommerce,and
electronicpaymentsplayabigpartofthat,andMasterCardsrightinthecenterofit.
Forexample,wehavepartneredwiththeUniqueIdentificationAuthorityofIndia
(UIDAI)todevelopbiometricauthenticationservicesfortheAadhaarprogram,the
largestbiometricidentityprogramintheworldandthecornerstoneforachieving
financialinclusioninIndia.Sinceitslaunchsevenyearsago,Aadhaarhasenrolled
over900millionIndians.28
29.29.Thatsjustonesteponourjourneytoourstatedgoalofmakingfinancialservices
availableto500millionmorepeopleby2020.Doingwellanddoinggoodneednot
bemutuallyexclusive,andifwecreatetherightmodelforthenewequation,wecan
bringthoseleftbehindintotheformaleconomy.HighlightsTherearesomany
incredibleopportunitiesacrossacustomerslifecycletocreateenhancedexperiences
thatdeliverrealvaluetodeepentherelationship.Aswetransitionintoan
increasinglydigitallyconnectedlifestyle,thepaymentsindustrywillseeevengreater
demandforsimple,convenientandsecuresolutions.Youcanhavethebestdatain
theworldbutwithoutsmartpeopleandprecise,provenanalytics,whatyouendup
decidingtodowiththatdatamayfallflat.Banksneedtogetpasttheirhistorical
penchantforbuildingeverythingthemselvesandinsteadembracetheexplosionof
experimentationandinnovationthattheFinTechplayersbreed.GobacktotheTable
ofContent
30.30.ChapterFourBoththephysicalanddigitalworldspresentnewchallengesfor
banksRonShevlinDirectorofResearch,CornerstoneAdvisorsInterviewedby
ManuJeevanPrakashSubeditor,BigDataMadeSimple
31.31.Toomuchofthebigdatahypefocusesonpredictingwhatasingleconsumerwill
buy.Butabetteruseofbigdataistounderstandconsumerspurchasejourneyor
decisionmakingprocess.ellusalittlebitaboutyourself?(somethingthatwecant
findonline)Its2016.TheageofBigData,Google,andtheNSA.Everythingyou
couldpossiblywanttoknowaboutmecouldbefoundonline.Sadly,thingsyou
wouldntwanttoknowaboutmecanprobablybefoundonline.Bankssitontroves
ofbigdata.HowcanbanksrealizegreatervaluefromtheirData?Bystartingwitha
moregranulardefinitionofwhatproblemstheyretryingtoaddress,orbusiness
questionstheyretryingtoanswer.Thatsprobablyobvioustoprofessionalswith
strongquantitativemarketingskills,butthepressandpundits(andunfortunately,
manyconsultants)havelednonquantitativelyorientedbankingexecstothinkthat
BigDatainandofitselfwillpredictwhatconsumerswillbuy,andbecomesome
kindofmagicalcompetitiveadvantage.ToomuchoftheBigDatahypefocuseson
predictingwhatasingleconsumerwillbuy.Butabetteruseofbigdataandby
thatImeannewtypesofdatanottypicallyorhistoricallyusedbybanks,for
example,mobilelocationorotherdigitalchannelactivityisunderstandingthe
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macro(vs.micro)environment,toidentifytrendsinthemarketregardingwhat
consumersingeneralarebuying,andunderstandingtheirpurchasejourneyor
decisionmakingprocess.Iwould,however,challengeyourstatementthatbankssit
ontrovesofbigdata.T31
32.32.Bankssitontrovesofdata.Distinguishingbigdatafromotherkindsofdata
somepeoplenowliketosaythatbanksneedtodoabetterjobofusingtheirlittle
dataisnonsense.Dataisdata.Howcanbanksbecomeapartofeverydaylifeofa
customerandprovidedailyvaluebasedonaconsumerspersonalneeds,habits,and
preferences?Thekeytothisliesinthedevelopmentanddeploymentofmobileapps
thatserveveryfocusedpurposes,forexample,trackingexpensesagainstabudget,
monitoringthemarkettocheckpricesforanintendedpurchase,guidingthewedding
planningprocess,orassistingwithahomeorautopurchase.Mobileappsarekey
becauseoftherolemobiledevicesplayinourlives.Fewpeoplewanttocomehome
fromwork,eatdinner,watchTV,thensitdownandlogontotheirbankaccountto
analyzetheirfinanciallivesordoresearchaboutinvestmentsorpurchases.Mobile
appsenablepeopletodothesethingsastheyreengagedintherelevantprocesses
duringtheday.Theotheraspectthatscriticalhereistheprovisionofadvice,
guidance,andhelpinthedecisionmakingprocess.Evenenablingamore
convenientprocessbytrackingactivitiesandexpensescouldbehelpful.Butoverall,
simplyprovidingmobileaccesstobankaccountstocheckbalancesortransferfunds
isntenoughtodriveadditionalcustomerengagement.Thechallengeforbanksisnt
becomingdigitalitsprovidingvaluethatisperceivedtobeinlinewiththecost
orbetteryet,providingvaluethatconsumersarecomfortablepayingfor.
33.33.IrecentlyhadaconversationwithVikramAtal,ExecutiveVicepresidentofCITI
bank.Hesaidthatbankshavecomplexbusinessmodelsbecauseofwhichtheyare
stillinthenascentstageofthedigitalanddatarevolution.Canyoutelluswhatis
wrongwithbanksbusinessmodel?Bankshadcomplexbusinessmodelslongbefore
thedigitalanddatarevolution.IntheUnitedStatesatleast,bankshavehadcomplex
businessmodelsbecauseofregulatoryrequirements,theconglomerationofvarious
linesofbusinessprovidingverydifferentproductsandservicestoawidevarietyof
customers,andtherapidconsolidationoftheindustry.Attheretaillevel,the
businessmodelisflawedprimarilybecauseofthemisalignmentofvalueandcost.
Withtheadventoffreechecking,whatconsumersendeduppayingforwasoverdraft
fees,andthenATMfees,andextraordinarilyhighfeesforserviceslikestop
paymentsorexpeditedbillpayments.Theproblemisthatconsumersdontperceive
thevaluetheygetfromtheseservicestobeinlinewiththevalueprovided.The
challengeforbanksisntbecomingdigitalitsprovidingvaluethatisperceived
tobeinlinewiththecostorbetteryet,providingvaluethatconsumersare
comfortablepayingfor.IreadthefollowingquotemadebyyouintheNextBank
USAsummitWhowillrulebankinginthefutureBanksorFintechs?Dontbea
foolFintechwontruleBankshadcomplexbusinessmodelslongbeforethe
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digitalanddatarevolution.IntheUnitedStatesatleast,bankshavehadcomplex
businessmodelsbecauseofregulatoryrequirements.33
34.34.NodoubtthattheyrecoolButtheyrejustabankstoolYousaidthatFintech
wontrulethefinancialindustry.CanyoutelluswhyFintechsarejustbankstool?
AsMr.Atalcanattestto,banksarecomplexorganizationswithmultiplelinesof
businessservingamultitudeofcustomersegments(whetheritsretail,commercial,
orinstitutionalinvesting).Theoverwhelmingmajorityoffintechstartupsare
focusingonnichesinthemarketwhetheritsbyanarrowcustomersegmentorby
anarrowsetofproductsorservices.Someofthesestartupswillcertainlysurvive,
butscalingbeyondanarrownicheisnteasyanditisntcheap.Establishedfirms
whetheritsexistingbanksorothertypesofcompaniesarebetterpositionedto
helpstartupsgrow.Intheend,thepathtocashingoutformanyfintechstartupswill
besellingofftoexistingbanks.Hence,bankswin.Notthatfintechstartupslose.The
premiseofthedebatewasprettystupidsinceitsnotaneither/orwin/losesituation.
Howcanbankshelptheircustomersunderstandhowtomaximizeopportunitiesand
buildwealth?Thisistoodifficultaquestiontoanswer.Consumersattitudes,
approaches,andbehaviorsregardingfinancialmanagementvarysowidelythatits
impossibletoboilitdowntoasingleeasyanswer.Bankshaveto:1)segment
consumersbytheirneeds,and2)figureoutwhichsegmentsthey(thebanks)arebest
abletoserve.Consumersattitudes,approaches,andbehaviorsregardingfinancial
managementvarysowidelythatitsimpossibletoboilitdowntoasingleeasy
answer.34
35.35.FranciscoGonzales,chairmanofBBVA,saidthatBBVAwillbeasoftware
companyinthefuture.Whatisyourviewonhisstatement?Youreallyliketopit
meagainstotherpeopleintheindustry,dontyou?Withnointendeddisrespectto
Mr.Gonzales,thestatementmakeslittlesense,andifhereallybelieveswhathesaid,
thatcouldbereallybadnewsforhisbank.Iwouldassertthatfewsoftware
companiesareknownfortheirsuperiorcustomerservice,letaloneprovidegood
customerservice.Issuperiorsoftwaregoingtobethekeytocompetitiveadvantage
inbankingintheyearsahead?Orwillitbesuperiorserviceandasuperiorcustomer
experience?Now,onecouldarguethatsincethatcustomerexperienceislikelytobe
evenmoredigitalintheyearsahead,thatsoftwareisthekey.Butthekeytoa
superiorcustomerexperienceisntsuperiorsoftwaredevelopmentitssuperior
understandingofcustomerneeds,designandawholehostofothercapabilities.
Softwaredevelopmentcanbeandisoutsourced.Thetitleofyourbookis
SmarterBank.Whoisthetargetaudienceforyourbookandhowwillyourbook
benefitthem?Targetaudienceisbank/creditunionexecutives,fintechexecutives,
andconsultantsservingthefinancialservicesindustry.Thebookwillprimarilydo
twothingsforthem:1)Helpthemunderstandhowtechnology,consumers,and
businessmodeltrendswillimpactbanks,andwhattheyshoulddoaboutit,and2)
Makethemlaugh.Mostbusinessbooksareboringsnoozefests.NotSmarterBank!
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Thekeytoasuperiorcustomerexperienceisntsuperiorsoftwaredevelopmentits
superiorunderstandingofcustomerneeds.
36.36.Thereareanumberofbanksthatareusingcuttingedgeinnovativetechnology.
Canyougiveussomeexamplesofbanksthataredoingwellindigital
personalizationandthebigdataspace?Interestingwaytowordthequestion.There
arecertainlyexamplesandgoodonesatthatofbankingusingcuttingedge
innovativetechnology.Butdoingwellindigitalpersonalization?Mytakeisthat
thewholepersonalizationthingisoverblown.Thebestexamplesofusesof
technologyInbankingareforprovidingrealtimeadvice/guidance,added
convenience,improvedprocessexecution,andenhancedcustomerexperience.With
apologiestoeveryoneoutsideoftheU.S.,myfavoriteexamplescomefromtheU.S.
becausethatsthemarketIfocuson.Imsurethereareplentyofgoodexamples
fromoutsidetheU.S.,butheretwogreatexamplesofcompaniesmakinggreatuseof
cuttingedgeinnovativetechnologyare:1)USAA.USAAsuseofmobile
technologiesforhomeandautobuyingnotjustthelendingpartoftheprocess
isredefininghowtheirmembersbuyhomesandcars.2)Moven.Movencontinuesto
leadtheindustryinpersonalfinancialmanagementfeaturestohelpitscustomers
bettermanagetheirfinanciallives.Thebestexamplesofusesoftechnologyin
bankingareforprovidingrealtimeadvice/guidance,addedconvenience,improved
processexecution,andenhancedcustomerexperience.36
37.37.HighlightsSimplyprovidingmobileaccesstobankaccountstocheckbalances
ortransferfundsisntenoughtodriveadditionalcustomerengagement.The
challengeforbanksisntbecomingdigitalitsprovidingvaluethatisperceived
tobeinlinewiththecostorbetteryet,providingvaluethatconsumersare
comfortablepayingfor.Bankshaveto:1)segmentconsumersbytheirneeds,and
2)figureoutwhichsegmentsthey(thebanks)arebestabletoserve.Thekeytoa
superiorcustomerexperienceisntsuperiorsoftwaredevelopmentitssuperior
understandingofcustomerneeds.GobacktotheTableofContent
38.38.ChapterFiveWerewitnessingthecreativedestructionoffinancialservices
ArvindSankaranGlobalBusinessLeader,Retail,Banking&WealthManagement
InterviewedbyManuJeevanPrakashSubeditor,BigDataMadeSimple
39.39.Werewitnessingthecreativedestructionoffinancialservices,rearrangingitself
aroundtheconsumer.ellusalittleaboutyourselfIamachemicalengineerby
trainingfromBitsPilani.Aftergraduation,Ispentaveryinterestingyearasatrainee
greasemonkeyattheITCfactoryinBangalore!ThenIwentontodoanMBAin
financeatIIMCalcutta.NotmanyfolkswouldknowthatIthenspentayearatNew
YorkUniversitypursuingaPh.D.whichIthendroppedoutof!Asabanker,Iwas
fortunatetohaveopportunitiesovertwodecadestobuildandrunbusinessesin
branchbanking,creditcards,lendingandwealthmanagement.StintsatCitibank,
BarclaysandHSBCtookmetofivecountriesinAsiaandEMEAwhichwere
fantasticprofessionalandculturalexperiencesformyfamilyandme.Arvind,I
understandoneofyourareasofexpertiseisinwealthmanagementyouarea
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strategicadvisorforbanksinbigdataspace.Howdidyougetintobigdata?I
actuallyspenttimeinitiallyonthelendingsideofbankingthenImovedtowealth
managementinthelast1215years.VeryearlyonatCitibank,Iwasimmersedinthe
useofAnalytics.Intheearlytolate90s,therewasnobigdata,andprimarilythe
riskcommunityusedanalyticstocreatelendingscorecardsandstrategiesIwas
veryinvolvedinthat.Beinganengineerbytraining,Iwasfascinatedbyanalytics,
statistics,andmodels.Intheearlyyearsofthenewmillennium,whenImovedto
wealthmanagement,Ifoundthatanalyticsinthisareawasataveryrudimentary
leveltomodelthebehaviouroftheinvestororthemarkets.Thetoolsthatwerebeing
usedwerestaticmodelbasedandwithlowefficacy.T39
40.40.Bigdataandanalyticshavebeenintensivelyusedinwealthmanagementspace
onlyinthelastfiveyearsorso.BothatCitibankandHSBC,whereweuseddata
drivenanalytics,themodellingworkdonewaslargelydrivenoffinternaltransaction
data.Butsincethen,thebigdataspacehasgainedrapidsophisticationwithplayers
likeCrayon.TheworkCrayonDatadoestobringexternaldatasetstoworkforthe
enterprisesisamazingintermsofwhatitcandofortheBankingindustry.Canyou
tellusmoreaboutyourroleatCrayonData?Whatexcitesyoumostaboutyourwork
atCrayon?Lastyear,SureshandIgottalkingabouttheexcitinglandscapefor
consumerbrandsinAsia,andinparticularfinancialserviceswhicharebeingdriven
bygrowingaffluenceofthemiddleclass,expandinglifestylechoices,and
discretionaryspend.BeforeIknewit,IwascompletelytakeninbytheCrayonstory.
Mayasproductcapability(productofCrayon)issomethingIhadbeensearching
highandlowforyearsasaretailbankmarketingandsalesleader.AndsohereIam
nowasastrategic.advisortoCrayon.WhatitmeansisthatImveryinterestedin
makingCrayonevenmoresuccessfulthanitistoday.Whatexcitesmeverymuch?
Firstly,Crayonisoperatingatthecuttingedgeandischangingthewaythe
marketplaceandbrandsengagewithconsumers.IreallylikethevisionthatCrayon
hassetforitselftosolvetheworldsproblemofchoice.ThatisBIGandBOLD!
Secondly,workingwiththeyoung,smart,nextgenerationofengineersanddata
scientistsbrightsparkswhoareattheforefrontofcreatinganddeliveringCrayons
vision.Thirdly,andIgetapersonalkickoutofthis!NowIamadvisingaventure
thatisdisruptingandrevolutionizingthewayfinancialservicesaremarketed,the
veryBigdataandanalyticshavebeenintensivelyusedinwealthmanagementspace
onlyinthelastfiveyear.
41.41.domainthatIwasapartof!YourroleatCrayonisthatofaStrategicAdvisor.
Canyoutellusmoreaboutyourroleasastrategicadvisor,canyoubemorespecific
aboutyourrole?Asastrategicadvisor,thereareafewthingsIbringtothetable:
Thefirstis,ofcourse,subjectmatterexpertise.ForCrayon,winninginthebanking
verticaliscriticalthisiswhereIbringmyimmediatevalueadd.Iworkwithproduct
andclientdeliveryteamssothattheirproductdevelopmentworkislaserfocusedon
clientneeds.ThesecondvalueIaddishelpingCrayonwithitsclientfacing
activitiesandinitsefforttobuildarobustbusinesspipeline.Intheimmediateterm,
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thatmeansfocusingonasmanywinsforMayaLifestyle(productofCrayon)with
paymentproductbusinesses.IhelpopendoorsandputCrayoninfrontofkey
industrydecisionmakers.Mostofmybankingcareerwasinclientfacingroles,soI
loveattendingasmanyCrayonpitchesasIcan!ThirdistohelpCrayonwithits
fundraisingactivities.Asyouknow,CrayonsuccessfullyclosedCN2andithasbeen
asuccessfulfundinground.Throughmyyearsandnetworkintheindustry,Ihelp
bringstrategicinvestorstoparticipateinthefuturesuccessofCrayonData.Now,
letstalkaboutchangesintheindustry.Howhasthefinancialservicesandinsurance
sectorsintheAPACchanged,withtheadventofbigdataanalytics?Firstly,Idlike
toclarifythatinsuranceplayersareverymuchapartofthefinancialservices
industry.Theretailfinancialservicesindustryiscomprisedofbanking,asset
management,insuranceandbrokeragewithlargelocalandglobalplayerscompeting
intheAsianmarketplace.Banksarelookingforefficientwaystodeliverservicesto
clientsandindoingso,thetraditionalphysicalbranchchannelsarebeginningtobe
supplantedbyadigitalstrategy.41
42.42.Comingtoyourquestionabouthowthissectorischangingwiththeadventofbig
data.Untilrecentyears,financialservicesfirmshadverylimitedunderstandingof
theirclients.Bigdatawasinitiallydrivenbyinternaldatawarehouseteams,who
collectedtransactionaldatawithintheenterprise,andthemodelsthatwereusedwere
largelylimited.Astechnologyhasadvanced,memorybecamecheaper,thesizeof
thedatarepositoryincreased,andcomputingpowerquadrupled,financialservices
companieswereabletodeploymodelsandanalyticalcapabilitiesthatweremassive.
Withthat,newinsightswerediscoveredthatprovidedgranularunderstandingof
prospects,theirchoices,thewaytheyconsumedthefinancialproducts.Andthathas
changedthewayfinancialservicescompaniescreatetheirmarketentrystrategies,
thewaytheybuildconsumerproductsandlargemarketingcampaigns.Thishasbeen
simplytransformational.Yet,weareonlyscratchingthesurface,becausewherewe
aregoingwiththis,itisgoingtocompletelychangethewayfinancialbrandsengage
withconsumers.Fromalastcenturyapproachofbluntsegmentation,mass
customisationofoffersandcommunicationchannelsoutofsyncwithcustomertime
andcontext,thefutureisallaboutultrapersonalisationofproductoffers,drivenby
sophisticatedinsights,throughmultipleproprietaryalgorithmsandmodelsthatwork
offmassiveinternalandexternaldatasets,deliveredthroughadeviceofchoicein
completesyncwithcustomertimeandcontext.Everybanknowhasorisinvolved
withafintechbootcamp,incubatororacceleratorprogrammesthathelppluginto
startupstoworkonideas.42
43.43.Werewitnessingthecreativedestructionoffinancialservices,rearrangingitself
aroundtheconsumer.Whoeverdoesthisinthemostrelevant,excitingwayusing
dataanddigital,wins!Next,letstalkFintech.YouknowhowFintechstartupsare
innovatingmoreeasilyandrapidlycomparedwithbigbanks.Howcanbankskeep
pace?Yes,theirbusinessmodelsarecomplex,andtheyhaveverycomplicated
systemsisitevenpossibleforbankstoreplicatetheagileinnovationmindsetof
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theFintechstartup?Thisquestioniswhatiskeepingmanybankingleadersawakeat
night!Inrecenttimes,theeconomicsoffinancialservicesindustryhaschanged
dramatically.Operationalmarginsaredown,thecostofacquiringandretainingstaff
isup,thecostofcomplianceisup,andtechnologyisobsoleteasaresult,
profitabilityhassignificantlydeclined.Banksarelookingforefficientwaysto
deliverservicestoclientsandindoingso,thetraditionalphysicalbranchchannels
arebeginningtobesupplantedbyadigitalstrategy.Butthisnewagendaismoving
slowlybecauseofrigidstructuresandprocessesthatdontallowbankstoactwith
agility.Sowhatbanksaredoingistofosterinnovationwithintobreakdowninternal
barriersanddrivethischange.Internalinnovationishoweveralwaysahardthingto
doforalargeenterprise.Theotheroptionistolookatexternalinnovation,
partneringwithfintechstartups,whoaresmallandagile.Everybanknowhasoris
involvedwithafintechbootcamp,Withbigdataanalytics,newinsightswere
discoveredthatprovidedgranularunderstandingofprospects,theirchoices,theway
theyconsumedthefinancialproducts.
44.44.incubatororacceleratorprogrammesthathelpplugintostartupstoworkon
ideas.WhoareabletoprovidewidgetsandAPIsdeliveringvaluetothebank,which
isrelativelylowriskandofhighimpactinashorttime.Asthesestartupsmobile
payments,roboadvisors,authentication,sociallendingetc..begintobuildthings
thatarevaluable,thebanksarelikelytotakeastake,acquirethemorgetintolong
termstrategicalliances.Ithinkthisisthewaythemarketisgoingtoprogress.Next,
therewasaninterestingstudyconductedbyMillenialDeceptionIndex.Accordingto
that,53%ofmillennialsdontthinktheirbankisanydifferentfromotherbanks.So,
whatdoyouthinkthebankscandotobemoreappealingtothenextgeneration
millennials,intermsoffinancialservices,tobemoreattractive?Thisissomething
thatisobviouslygoingtobeamakeorbreakforbanks.Ifyoulookattheskewof
globaldemographics,youhavemanywesternsocietiesageingrapidlyandtheprofile
ofthecustomerbasethereislargelythemiddletoolderageset.Theyhaveaspecific
setoffinancialneedsandtheyareprobablynotdigitalnatives.Ontheotherhand,
youhavetheemergingmarketswherethedemographicsisskewedtowardsthe
young.Forexample,ifyoutaketheIndianmarket,twothirdsofthepopulationare
undertheageof35andthatsthesamecasewhenyoulookatanyotheremerging
marketlikeIndonesia.Youllfindthatthemillennialsareahugepartofthe
demographic.Anyfinancialservicesplayerthatwantstowininthismarketplacehas
togodigital.Ifanybankwantstoengagewiththisset,itneedstoputadigitalbank
outthere.Therefore,youseealotoftraditionalbankswhoarebuildingabank
withinabank.Youhavethelargerbank,whichisthetraditionalbrickandmortar
bank,Anyfinancialservicesplayerthatwantstoattractthemillennialshastogo
digital.44
45.45.Ifanybankwantstoengagewithmillennials,itneedstoputadigitalbankout
there.servingconsumerwhowantshighhumaninteraction,physicaltouch,the
familiarenvironmentofabankbranch.Thesamebankisbuildingadigibankwithin
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itself,servingthemillennials.Astheybuildthisdigibank,bankswillhavetowork
withpartnersandproductproviderswhocandovetailintodigibankplatform.Thats
wherefintechpartnerswillcomeintoplay.Definitely.ThekindofpersonalisationI
getfromanapplikePaytm,forexample,isnotsomethingIgetfrommybank.Apps
likeOxygenWalletmakeitsoeasyformetoshoponlineandaremoreappealing
thanbanks.Absolutely.Somefinancialplayerslikeinsurancecompanieshavea
biggerrisk.Insurancecompanieshavetraditionallybeendisintermediated.Their
productshavealwaysbeendeliveredbyaninsuranceagentorabanksales
representative.Asaresult,theydonotpossessadeeplevelofunderstandingoftheir
policyholders.Tocompoundthesituation,insuranceisnotahighcontactproducta
typicalclientmeetstheinsuranceagentorsalesrepresentativemaybeonceayearto
talkaboutinsuranceandrenewalofthepolicy.So,theresalsotheriskofsparsedata
thatisatthedisposaloftheinsurancefirm.Theyneedtogodigitalveryquicklyto
acquiredatadriveninsightsandbuildthatconversationdirectlywiththeirend
consumer.Otherwise,theyaregoingtofindthemselvesevenmoreremovedfromthe
marketplace.In2014,therewereapproximately40billiondebitcardtransactionsat
anaverageswipefeeof31centseach,equaling$12.4billionintotal.Howcan
financialinstitutionsgrowtheirshareofthispiebywinningmoreaccountholders
throughadvocacy,theystandtoreaptremendousprofits?45
46.46.Ifyoulookatthetraditionalconsumerwalletofpaymentproducts,creditcards
havegenerallybeenpreferredoverdebit.Creditcardcompaniesoffermoreattractive
productspropositionsaswellaspromotions,onthebackofrelativelyhigherprofit
marginsavailabletodeployintocampaignsandbenefits.Creditcardtransactionsare
alsogenerallyofahigheraverageticketsize,largervolumeascomparedtodebit
cardbilltransactions.Atthesametime,debitcardtransactionsoriginatefromthe
savingsorcheckingaccountofthebankingcustomer.Thatpoolofsavingsand
checkingbalancesissignificantlylargerthancreditcardlimitsandspendglobally.
Asmoreyoungadultsjointheworkforce,earnsalariesandspenddisposableincome
ondiscretionarylifestyledrivenitems,expenses,debitcardsareverywell
positionedtobeapaymentproductofchoice.Buttheplayerthatisgoingtocapture
asizableshareofthisparticularpoolwillneedtointensivelyharnessdatadriven
insightstobeabletooffertheirdebitcardholdersultrapersonalisedchoicesthatare
timeandcontextrelevant.Finally,towrapthingsup,wheredoyouseebankingin
thenext5years?Andinthenext20?Therearemanythemesthatarecoming
through.Oneislocalvs.global.Inthepreviousera,theglobalbanksruledinthe
newera,itislikelytobethelocalbanksthataregoingtorule.Forexample,inAsia
fromthe90stillthefirsthalfofthenewmillennium,foreignbankslikeCitibank,
StanC,HSBC,etc.prettymuchownedthespaceofconsumerbankinginnovation
andserviceexcellence.Whereas,ifyouseeinthelast57years,localbankslike
DBSandOCBCinSingapore,BCAinIndonesia,CIMBinMalaysia,HDFCand
YesBankinIndia,theyhaveallrapidlygainedgroundandarenowrelativelyinvery
goodposition.Withrelativelyrobustbalancesheetsthatwerelessaffectedbythe
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GFC,globalstandardinfrastructure,andgovernanceandBanksneedtogodigital
veryquicklytoacquiredatadriveninsightsandbuildthatconversationdirectlywith
theirendconsumer.
47.47.buildupofthestrongtalentpool,theyareinaverygoodpositiontowinthe
marketgoingforward.Thesecondthemeisthat,physicalvs.digital.Previously,we
hadthetraditionalbrick&mortar,highhumantouchcentricdeliverymodel.Weare
enteringadigitalomnichannelparadigmnow.Thirdisinnovationpreviously,
innovationwasincremental,largelyprocesscentredwhereas,goingforward,itis
goingtoberapidinnovation,whichisgoingtobepartnerdriven,whereyouhave
Fintechplayerscocreatenewideas.Alltheseareinthenext5years.Inthecoming
20years,itishardtocrystalgaze.Itappearsthatpoliticianswanttogobackto
wherebankingwasattheturnofthecentury!Servingasocietalobjective,serving
theneedsoftheeverydayconsumer,safeguardingsmallsavings.Wemightseethe
industrymorphintotwoecosystems.One,whichisalargeutilityorientedindustry
servingthesmallsaver,highlyregulatedandanotheranicheindustrynotfundedby
thetaxpayer,cateringtothemoresophisticatedconsumer.Ithinkthattherewill,
however,beafewseculardrivers:digital,omnichannel,global,andbigdatadriven
businessactions.Ifyoulookatthetraditionalconsumerwalletofpaymentproducts,
creditcardshavegenerallybeenpreferredoverdebit.47
48.48.HighlightsWerewitnessingthecreativedestructionoffinancialservices,
rearrangingitselfaroundtheconsumer.Whoeverdoesthisinthemostrelevant,
excitingwayusingdataanddigital,wins!Everybanknowhasorisinvolvedwitha
fintechbootcamp,incubatororacceleratorprogrammesthathelpplugintostartups
toworkonideas.Ifanybankwantstoengagewithmillennials,itneedstoputa
digitalbankoutthere.Banksneedtogodigitalveryquicklytoacquiredatadriven
insightsandbuildthatconversationdirectlywiththeirendconsumer.Gobacktothe
TableofContent
49.49.BigDataMadeSimple(BDMS)isoneofthefastestgrowingbigdatacontent
websitestoday.ItispoweredbySingaporebasedBigDatastartupCrayonData.
BDMSwaslaunchedin2014withavisiontobuildaglobalbigdatacommunity,and
tocreateaonestopcomprehensiveinformationresourceoneverythingBigData.
BDMScuratesandgeneratescontentforalmost25verticals.Theportalisbuilton
twopillarsdiscoverandexchange.Itgivesanopportunitytowriters,thought
leaders,journalists,businessentitiestocometogetherunderoneroof.SUBSCRIBE
TOOURNEWSLETTERABOUTBIGDATAMADESIMPLEFollowus

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