This document summarizes a presentation about how mobile innovation is creating a new phase of competition in financial services. It discusses how mobile will change financial institutions by affecting what, where and when they market. Financial institutions will need to offer "NeoChecking" accounts designed for mobile, use mobile apps as a new marketing platform, and engage customers during mobile shopping moments. This new environment creates challenges and opportunities for financial institutions to acquire and retain customers.

1. The Impact of Mobile on the Future of
Retail Banking
21 June, 2013 Confidential 1
Ron Shevlin
Senior Analyst, Aite Group
John Balose
Principal Market Manager, ACI Worldwide
Our software underpins electronic payments
throughout retail and wholesale banking,
and commerce, all the time, without fail.
Debi Harrison, Director Customer and
Operations Manager, Watford

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@rshevlin

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@rshevlin
Theme
Mobile innovation is creating
a new phase of competition
in financial services

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@rshevlin
Agenda
• Why change now?
• How will mobile change FIs?
• What is the new phase of competition?

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-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Federal Reserve Bank
Bank return on equity

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Bridging the ROE gap
Source: Boston Consulting Group
Current
ROE
Cost
reduction
Pricing Growth
8%
Historical
ROE
+3-4%
+1-2%
+1-2% 13-16%

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Deposit account service charges
32.0
34.0
36.0
38.0
40.0
42.0
44.0
2008 2009 2010 2011 2012
US$ (in billions)
-19%
Source: Novantas

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The NII challenge
Source: http://www.bankregdata.com/allIEmet.asp?met=NII
2.62%
1.27%
1.46% 1.42%
>$50B
(n=35)
$5B to $49B
(n=125)
$1B to $5B
(n=471)
<$1B
(n=5,881)
2012 Non-Interest Income (% of assets)

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I have seen
the future…

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How mobile changes FIs
• What FIs market: NeoChecking accounts
• Where FIs market: Mobile apps
• When FIs market: Mobile shopping

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The Debanked
Mainstream consumers who
willingly opt out of the
traditional banking system

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NeoChecking accounts

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NeoChecking accounts
• Mobile-first design
• Point-of-decision input/feedback
• Blend prepaid, debit, and credit

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Digital receipt
provides real-time
feedback to
consumers on their
purchase along with
contextual
transaction insights.
Spend tracking
tracks how fast
consumers spend
month-to-date
compared to
historical spending
patterns.

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Mobile apps:
The new marketing platform

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Frequency
of use
per week
Average User Retention (90 days)
3.5
15% 55%
Streaming music
Social games
Dating
Social networking
Photo & video
Deals
Communication
News
Sports scores
Weather
Financial
Music
Health/
fitness
Retail
Education
Food & drink
Travel
Source: Flurry
Financial apps “loyalty”
1
9

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People pay to download apps…
Source: Gartner
5.02
8.14
11.85
16.43
21.67
2012 2013 2014 2015 2016
Worldwide mobile paid apps downloads (billions)

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…just not finance apps
Source: Distimo
2,280
350
270
210
30
Games Entertainment Photography Utilities Finance
# of paid apps within category to reach the Top 25

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Why not?
• Financial services customers are used to free
• Not important as games, entertainment
• Inadequate marketing

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“When we speak with app developers, many are
concerned about monetization or platform
fragmentation, but the number one problem
they face is getting their apps noticed.”
Canalys Senior Analyst, Tim Shepherd

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Apps: The new marketing platform
In-app purchases
from free apps
71%
iPhone Apps Revenue
(February 2013)
Paid revenue
24%
In-app purchases
from paid apps
5%
Source: Distimo, March 2013

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No data in the selected period

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Mobile apps revenue triple play
• In-house developed
• Third-party developed
• In-app purchases

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The old moments of opportunity

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The new moments of opportunity

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JIMMY CHOO
$400
Can I afford it?
How should I pay?
Can I get an offer?
What did others pay?

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How mobile changes FIs
• What FIs market: NeoChecking accounts
• What/Where FIs market: Mobile apps
• What/Where/When FIs market: Mobile shopping

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@rshevlin
Theme
Mobile innovation is creating
a new phase of competition
in financial services

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@rshevlin
Third wave of competition
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2025
Location
Rates
Performance

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• Monthly fees
Costs Benefits
• Penalties
• Service fees
• Interest earned
• Rewards redeemed
• Savings generated
TBO: Total Benefits of Ownership

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How mobile changes marketing
Demographics Behavior
Creative Analytics
Old New
Data
Skill
Competency
Persuasion EngagementPhilosophy

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New changes=New challenges
• Analytics
• Data integration
• Application integration

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@rshevlin
Theme
Mobile innovation is creating
a new phase of competition
in financial services

44. © Copyright 2013 Aite Group, LLC 44
@rshevlin
Aite: Partner, Counterpart
Aite Group (eye-tay) is an independent research and advisory
firm focused on business, technology and regulatory issues and
their impact on the financial services industry.
Ron Shevlin
Senior Analyst
rshevlin@aitegroup.com
www.aitegroup.com
Twitter: @rshevlin
Blog: Snarketing2dot0.com

45. Mobile is the New Opportunity
21 June, 2013 Confidential 45

46. What challenges do you face?
• Internal Challenges – ROE and NII
‒Multiple channel management platforms
‒Multiple secure user messaging systems
‒Inconsistent user experience
‒Different call center support capabilities
‒Varying levels of risk management and security
• External Challenges
‒Evolving technology and device
requirements
‒Changing consumer preferences
‒Fraud threats
‒Lack of brand differentiation
‒Customer acquisition and
retention
46

47. Why does a good mobile banking strategy matter?
• Drive business results and
address challenges
‒(OLB Only vs. OLB +Mobile)
• Improve operational
efficiencies with a single
platform
• Support the consumer
experience to the channel
of their choice
47
*Zions Bank Mobile Banking Impact Study

48. Transactional
History
Account to
Account xFer
Platform Convergence
48
User Admin
Account
Services
Account
Transactions
User Profile
Entitlements Balances
Security
Stop
Checks
Payments and
Transfers
Bill Pay
Online
Services
Reports
Secure
Messaging
Desktop Banking Features
Mobile Banking Features
 Faster implementation
 Easier FI administration and
configuration
 Lower TCO
 Create and deliver new functionality
across all channels / user interfaces
 Desktop features available to
mobile users
PFM
User
Experience
Targeted
Marketing
Common
Interface
Next
Generation

49. Enable Consumers with a
Feature Rich User Experience
49

50. Consumer Preference with the Triple Play
50
Fully Integrated Browser,
Downloadable App and
Text Banking
Control All User Interfaces
with
Common Admin and
Configuration Tools

51. Smartphone Features with the Downloadable App
51
Downloadable App
• Account and
Transaction History
• Bill Payment
• Account to Account
Transfers
• PFM
• User Profile
Administration
• Remote Deposit
Capture
• ATM/Branch Locator

52. Drive Transactions to the Mobile Channel with RDC
52
Integrated Remote
Deposit Capture (RDC)
utilizing Smartphone
hardware
Reduce routine teller
check transactions at
the branch which
reduces costs
Enable for both
consumer and
business segments

53. Sales and Service Channel of
Preference
53

54. Enable Smartphone Technology with a Downloadable
App
• Market your brand with an app store
presence
• Serve the demand for downloadable apps
• Leverage smartphone features
54

55. Targeted Offers to Maximize Your Marketing Efforts
Target just mobile
users with specific
offers
Build, deliver and
manage your
promotions with self
service tools

56. Service Your Consumers
56
Enable your users to
complete their self
service needs in their
channel of preference
Control their rights with
entitlements specific to
the mobile user
Maximize your
investment in your
digital channels and
minimize your support
costs

57. Thank You!
Questions?
Ron Shevlin
Senior Analyst, Aite
John Balose
Principal Market Manager, ACI
Worldwide

58. For more information, email
communityfinancial@aciworldwide.com