Strategic Banking Insights

Digital Banking Strategy Roadmap

March 24, 2015

Our Digital World

In todays Digital World,
consumers expect to have
an interconnected
experience that allows
them to use any digital
means to seamlessly
communicate, transact
business, connect with
friends, order products and
services, refill prescriptions,
order pizza and track the
status of the delivery
online, make investment
decisions, track package
shipments, etc.
Digital Banking Strategy Roadmap

Our Digital World

Not to be left behind,
even Childrens Board
Games are shifting
their business
strategies to conform
to the reality of a
rapidly changing
Digital world.
As a matter of fact,
the average 2-4 year
old child can use a
computer tablet
before they can tie
their shoes.
Digital Banking Strategy Roadmap

Current State of Digital Banking

The Banking industry
has evolved to
incorporate Digital
technology into its
business products,
services, processes, and
operations.
A few, well-financed
major players, have led
the way with innovative
Digital banking options
for customers.
Digital Banking Strategy Roadmap

What are the Digital Banking Leaders Offering?

Bank of
Citiban
Wells Capital
Americ
k
Fargo
One
a

Mobile Banking Description of Services

Deposit checks from anywhere

View recent activity for your credit card accounts, including
pending transactions
Pay credit card bills and view payments
Schedule and cancel future credit card payments
View your available credit line
Find ATMs & branches nearby
Contact Customer Service 24/7
Check the balances in your linked accountschecking,
savings, credit card, home equity or personal lines and loans,
and mortgages
Pay virtually any person or business in the U.S and track
payments
See recent activity
Transfer money between accounts
Transfer money to friends with accounts at other banks
Learn the minimum credit card payment due (and due date)
Track rewards Points
Schedule
appointments
withRoadmap
banking specialists
Digital
Banking
Strategy

Chase

What are the Digital Banking Leaders Offering?

Bank
Citiban
of
Wells Capital
k
Americ Fargo
One
a

Mobile Text Banking Description of Services

Chase

View account balances

Credit card payment details

Recent transactions
Additional transactions (up to 15)

Nicknames for bank and credit card accounts

Supportonline or by phone

View Reward Balances

Find Branch and ATM Locations

View Rewards Balances

Overdraft Protection has been utilized

Account balance is below/above targeted amount

NSF fee has been charged to the account

A Direct
Deposit
has been
posted to the account
Digital
Banking
Strategy
Roadmap

What are the Digital Banking Leaders Offering?

Bank of
Citiban
Wells Capital
Americ
k
Fargo
One
a

Tablet Banking Description of Services

Manage your accounts in a whole new way that's

optimized for your iPad or Android tablet
Finances truly come to life with rich displays, charts, data
and more.
View account balances, check recent activity, make bill
payments, transfer funds or simply read up on personal
finance and money management.
Access to linked accounts and credit card accounts
check balances, view recent activity, pay bills and more
A streamlined flow to quickly set up payments and
transfers from checking/savings, including payments to
your credit card account
Interactive, graphic displays to help you visualize your
current spending and plan for your future
Easy tools and useful information to help you manage
your personal finances

Digital Banking Strategy Roadmap

Chase

What are the Digital Banking Leaders Offering?

Online Banking Description of Services

Live Online Chat Services

Bank of
Citiban
Wells Capital
Americ
k
Fargo
One
a

Online Customer Survey

Online Business Credit Card Application

Online Consumer Credit Card Application

Open checking and savings account online
Apply for Personal Line of Credit Online

Apply for Home Mortgage or HELOC online

Person-to-person ability to send and receive money to
individuals with accounts at other banks
Small Business ability to make payments to vendors,
employees, or anyone else, and also send invoices to
customers for payment
Transfer money between checking, savings, credit card, home
equity line of credit, installment loan, mortgage, or
investment accounts.
Transfer money to my accounts at other banks

From a single site, you can set up budgets, get organized for
tax season and track spending in all your accounts, even at
other financial institutions. Sign into your all accounts
dashboard for easy accounts access and comparison so you
Digital
Strategy
never Banking
have to hop
from siteRoadmap
to site again.
8

Chase

Traditional Banking Model for Delivery of Products,

Services, Marketing, Channels

Commercial /
Treasury
Management

Retail /
Small
Business

Trust / Wealth
Management

Mortgage

Underlying Digital Technology

Digital Banking Strategy Roadmap

Insurance

Convergence of Digital Products, Services,

Marketing, Channels, and Delivery
As Digital technology
continues to evolve, and as
increasing numbers of
consumers embrace the
digital delivery of products
and services as the norm, we
will continue to see the
convergence of the various
banking customer
touchpoints.

Biometri
cs
Mobile
Paymen
ts

As Banking
such, banks
need
Digital
Strategywill
Roadmap

to

Digital
Banking
Delivery

Interne
t

Customers expect a seamless

integration of the Digital
experience from initiation to
fulfillment.
10

Branch

Call
Cente
r
ATMs

Cards
Marketin
g

Digital Banking Model for Delivery of

Products, Services, Marketing, Channels

Underlying Digital Technology

Commercial /
Treasury
Management

Retail /
Small
Business

Digital Banking Strategy Roadmap

Trust / Wealth
Management

11

Mortgage

Insurance

Traditional Banking Model Versus Digital Banking

Model for Digital Delivery of Banking Services
Traditional Banking
Model

The Bank Branch is the center

of the banking experience
All interactions with customers
originate with a branch
experience
Customer definition is confined
to branch footprint
Digital delivery is layered on
top of branch system
Duplicative products and
services offered through
various channels
Inconsistent customer
experience across channels
Digital Banking Strategy Roadmap

Digital Banking Model

The Customer is the center of the
banking experience
Customers choose how they
interact with the bank. Some may
never enter a branch.
Customer definition is not
confined to branch footprint
Digital delivery is the centerpiece
of product & service offerings.
Product and Service offerings are
tailored to the customers
delivery preferences
Channels are non-existent, which
provides a consistent customer
12 experience

Implications for Traditional Banks

Most banks erroneously believe that implementing a Digital
strategy is simply continuing their traditional branch-based
banking strategy, but with a new focus on mobile enablement of
some banking functions.
However, it is important to point out that a mobile banking
strategy is simply a component of an Enterprise Digital
Banking Strategy.
This distinction is important, because banks that simply layer
mobile delivery on top of a traditional branch-focused delivery
strategy will not achieve the business results they expect.
Further, whatever limitations the bank has in its current
traditional delivery of banking services will be replicated in its
mobile banking experience, and will not be tolerated by
customers.
And since customers digital delivery expectations have been
shaped by their experiences with Amazon, iTunes, eBay, etc.,
banks that pursue such a mobile enablement approach will fail.

Digital Banking Strategy Roadmap

13

Implications for Traditional Banks

Traditional branch-based banks competitors are already
providing integrated Digital delivery of banking products and
services.
Banks that are just now focusing on enterprise digital banking
strategies are playing catch-up.
Therefore, in order to achieve maximum competitive
advantage, The Traditional Banks Digital Banking Strategy will
need to be a part of its overall Business Strategy.
This approach will require a complete re-thinking of the banks
business delivery model.
Banks must also realize that non-banks have entered the digital
banking arena and are offering financial services to customers
who previously depended on banks for these offerings (digital
payments, financial management software, credit cards, loans,
account aggregation, ability to view accounts online, P2P
payments, etc.).
Digital Banking Strategy Roadmap

14

Implications for Traditional Banks

In order to be successful, a banks Digital Banking
Strategy will need to be a direct outcome of the
organizations overall corporate strategy.
Corporate
Strategy

Busine
ss
Strate
gy

Enterpris
e Digital
Strategy

Digital
Delivery
of
Products
and
Services

There will also need to be a recognition that the

traditional branch-based banking delivery model
needs to be replaced by a digital banking delivery
model.
Digital Banking Strategy Roadmap

15

The Bank Business Strategy will Drive the

Digital Banking Strategy
Consumers expect end-to-end digital delivery of
products and services, from initiation to fulfillment.
The Digital Banking Strategy will need to focus on
enhancing the customer experience to provide
multiple options to interact and transact business with
the bank.
Traditional branch-based banks will need to re-define
who is a customer because this will shape how the
bank applies its Digital Banking Strategy.
In the new Digital age where, through the use of social
media, banks can touch individuals far outside of their
branch footprint, a customer should be considered as
anyone who comes to your website to shop, or who uses
your ATM, or who cashes a check at your bank, etc.

Digital Banking Strategy Roadmap

16

Redefining the Customer

If we re-define the customer as anyone who comes to your
website to shop, or who uses your ATM, or who cashes a
check at your bank, etc., rather than as defined in a
traditional branch-based banking model as someone who
has an account with the bank, then the digital banking
customer experience will be different than what it is today.
Some points to consider:
Can your banks customers with no existing account apply for
a credit card or open a new checking account online and receive
immediate notice of approval?
Can your banks customers with no existing account apply for
a personal line of credit or auto loan online and receive immediate
notice of approval?
Can your banks business customers who have established
checking accounts with the bank complete the enrollment for
BOLB online?

Digital Banking Strategy Roadmap

17

Digital Banking Strategy and Social Media

74% of online adults use social media, which has the
potential to provide up-to-date and inexpensive access to
customers opinions about your bank, your competitors, the
banking industry, which products and services customers
want, what customers dont like about their banking
experiences, etc.
But on a cautionary note, banks must be careful, because
social media today is still largely unregulated.
Nevertheless, there are two main types of Social media,
and each presents different opportunities for banks in this
space:
Social Media forums for advertising and pushing the organizations
brand, products, services, reputation, etc.
Social Networking forums for connecting with consumers through a
digital format
Digital Banking Strategy Roadmap

18

Social Networking and Social Media

Social Networking forums for connecting with
individuals through a digital format.
In the digital age, many individuals spend more time
connecting and communicating with others via Social
Networks (e.g., Facebook, Twitter, Instagram, LinkedIn, etc.,)
than they do in person.
These social networks are primarily designed to make
connections and build relationships with other individuals,
and to share ideas, opinions, perspectives, etc.
Banks should NOT try to use social networks as sales tools,
because this is not how customers view this medium.
Rather, banks must view social networks as a global
community relations venue to foster and enhance trust,
visibility, and value in the organization to the digital
community.
Digital Banking Strategy Roadmap

19

Social Networking and Social Media

Social Media on the other hand, are forums to share
information with a broad audience as a media relations
tool (e.g., YouTube). However, unlike traditional media
relations formats, the communications are two-way
individuals have the opportunity to give their opinions
about your brand, customer service, policies, pricing,
etc.
Social media is a communication channel similar to newspaper,
magazines, radio, etc., and should be used to push the
organizations brand, products, services, reputation, etc.
Social media functions as a truth in advertising forum similar
to an online Better Business Bureau, because customers have
the ability to comment on the validity of whatever claims banks
may make in this space.
Digital Banking Strategy Roadmap

20

Digital Messaging and Marketing

In addition to Social
Networks and Social
Media, Traditional banks
competitors are gathering
and analyzing customers
online search data to
understand their buying
and preferences.
habits
And through
the use of Big Data gathered from
partnerships with Google, Bing, Bankrate.com,
Lendingtree.com, TrueCar.com, etc., these
competitors are able to tailor targeted offerings
to customers far outside of their branch
footprint each time they engage the digital web
Digital Banking Strategy Roadmap
21
whether via mobile or computer.

Implications for Traditional Branch-Based Banks

Since Traditional branch-based banks Competitors
are already providing integrated Digital delivery of
banking products and services, traditional banks
will have to adopt a digital banking strategy in
order to survive.
The challenge, then, for a traditional bank will be to
realistically evaluate its strategic options for going
digital.
There are basically three options:
Pioneer/Innovator Approach
Early Adopter Approach
Late Adopter Approach
Digital Banking Strategy Roadmap

22

Implications for Traditional Branch-Based Banks

Pioneer/Innovator Approach
Benefits:
Set the standard by which others are compared
Later entrants are compared usually unfavorably to
the pioneers
Pioneers become the generic brand for the industry

Downside:
Extremely expensive strategy. Requires large
infusions of funding for R & D, customer focus groups,
beta testing, etc.
There will be some R & D efforts that will be discarded
because they are not accepted by the marketplace.
Digital Banking Strategy Roadmap

23

Implications for Traditional Branch-Based Banks

Early Adopter Approach
Benefits:
Close behind the Pioneers, they benefit from the
research and customers reactions to the early
prototypes.
Better able to utilize lessons learned to tweak
products and services for the next phase of delivery.
Still able to get in on the early market acceptance
of the new technology (e.g., UPS began electronic
tracking of packages after Federal Express).

Downside:
Still a costly proposition, but not nearly as
expensive as the Pioneer approach.
Digital Banking Strategy Roadmap

24

Implications for Traditional Branch-Based Banks

Late Adopter Approach
Benefits:
Least costly strategy with minimal risk because the technology
already exists, and customers expectations are already
established.
Not a bad strategy if you have a loyal customer base that will
wait around for you to offer what is already available from the
pioneers and early adopters.
Can tweak the product based on historical data and
experiences of Pioneers, and create a successful niche that
customers want.

Downside:
Always in catch-up mode.
Customers who demand the latest technology will likely move
on to banks and non-banks with more progressive offerings.
Digital Banking Strategy Roadmap

25

Future Trends in Digital Banking

Chase Bank has already unveiled the next generation of ATMs which
use a mobile phone to authenticate the user.
Banks are experimenting with allowing users to use their mobile
devices to send withdrawal messages to ATMs, and then dispense the
money when the customer drives through the ATM (like ordering
movie tickets online and then pick up at the theater).
Expect to see more banks partner with new digital payments vendors
such as Apple, Samsung, and Google to offer these payment options
to merchants and customers.
Facebook is poised to launch its new P2P payment feature that allows
individuals to send money to any friends on Facebook.
Mobile banking applications for Small Businesses are already in
various stages of development and deployment.
Virtual branches are being deployed with no live agents, and where
customers can access interactive video terminals and ATMs to speak
to live agents to withdraw money and handle various banking needs.
Digital Banking Strategy Roadmap

26

Choices for Traditional Branch-Based Banks

The Digital delivery of banking products and services is already a
reality.
Like it or not, your customers will compare their digital banking
experience to shopping on Amazon, iTunes, eBay, Southwest Air,
etc., and to their digital experiences with large banks that already
have robust digital banking offerings.
Traditional banks cant just push out mobile apps and capabilities to
customers and call it a digital banking strategy. Customers expect
a seamless integration of the entire online banking experience from
initiation to fulfillment. If they are forced to drop off somewhere
along the digital experience to print documents, call a
representative, and/or visit a branch, you have lost the customer.
In the new digital world, banks will have to understand that
customers do business online 24/7, 365 days a year. As such,
banks will need to have 24/7 online chat capabilities and call
centers available to assist customers who encounter problems
online.
Digital Banking Strategy Roadmap

27

Choices for Traditional Branch-Based Banks

Most traditional banks have some digital banking
capabilities, but they are not equal to what the major
competitors offer, and they are not effectively connected to
an enterprise digital strategy that offers a seamless
customer experience consistent with the digital marketplace.
Traditional banks will need to re-think their current business
models and realign their traditional branch delivery systems
around the customer, rather than the branch, to realize the
benefits of a true enterprise digital banking strategy. This
will be no small task, because there will be stakeholders
throughout the organization who will resist such an effort.
There is continued digital convergence across all banking
customer touchpoints and segments that must be considered
in any digital strategy. The implications are much broader
than mobile capabilities.
Digital Banking Strategy Roadmap

28

Choices for Traditional Branch-Based Banks

In order to transition to a successful digital banking strategy, top
leadership will have to embrace the organizational and cultural
changes that such an undertaking will require.
There will need to be tight coordination, collaboration, and
engagement among stakeholders in all areas of the bank to guard
against a stove piped and piecemeal digital strategy
implementation.
The traditional bank must decide whether it wants to be a
Pioneer, an Early Adopter, or a Late Adopter in the digital banking
strategy space.
Traditional banks will need to partner with data accumulators and
aggregators to gain deep insights into customers needs, wants,
browsing histories, purchase patterns, etc., in order to tailor
targeted product and service offerings to satisfy these needs.
Traditional banks will need to re-define customers in the new
digital age of social networking, social media, and digital
advertising.
Digital Banking
Strategy Roadmap
29

Next Steps for The Traditional Branch-Based Bank

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