Next Generation of Banking: Bolder

NEXT GENERATION
OF BANKING.
CUSTOMER EXPECTATIONS ARE EVOLVING
& BANKS NEED TO KEEP UP
THE LATEST INSTALLMENT OF OUR:
Near Future Of Series

ABOUT.
At LHBS, we believe in continuously observing and
learning from what’s happening in the market.
We’ve created our Near Future Of (NFO) series which
consists of inspiration and insights reports designed to
highlight what is happening today and how it can
share tomorrow for brands, businesses and entire
industries.
This issue explores the key challenges of traditional
banks, and evolving consumer expectations in the
world of banking and ﬁnance to help legacy
organizations to identify opportunities for
differentiation and adding customer value.
We hope you enjoy this deck and ﬁnd inspiration
for your innovation process.
DISCOVER DEFINE DEVELOP DELIVER
LHBS // NFO: NEXT GENERATION OF BANKING INTRODUCTION.
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CONTENTS.
CONTEXT
CHAPTER 01: BANKS NEED TO BE BOLDER
- AN INCREASING IRRELEVANCE
- DIFFERENTIATE ON CUSTOMER EXPERIENCE
- THE 5 KEY EXPECTATIONS INFLUENCING
TOMORROW’S BRAND EXPERIENCE
+ BEST PRACTICES
EXPLORE YOUR OPPORTUNITIES
P 07
P 20
P 27
P 35
P 64
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LHBS is a marketing & innovation firm with
offices in Berlin and Copenhagen. We help
clients to understand today's emerging
customer expectations and to shape their
business offerings for tomorrow.
www.lhbs.com
Kathleen McCaffrey
Analyst at LHBS
lhbs.com | kmc@lhbs.com
Once run by a few large banks, it has been taken over by
smaller, more nimble and technology-driven disruptors
who are putting the power back into the hands of
consumers.
Banks need a more customer-centric way to do business
and to differentiate themselves in new ways.
This report will explore the most crucial changes
happening in the finance industry, and how legacy
banks need to act today to be around tomorrow:
• Banks need to be bolder by standing for a value or
experience that differentiates them from the crowd.
• Banks need to be faster by identifying and
transforming both simple & complex processes to
responsive, more customer-focused experiences.
• Banks need to be smarter by harnessing their mass of
customer data for more personalized experiences and
adapting external technologies and knowledge.
THE FINANCE INDUSTRY IS EVOLVING.INTRODUCTION.
INTRODUCTION.LHBS // NFO: NEXT GENERATION OF BANKING
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CHAPTERS
INTRODUCTION.LHBS // NFO: NEXT GENERATION OF BANKING
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BANKS NEED TO
BE BOLDER.
BANKS NEED TO
BE FASTER.
BANKS NEED TO
BE SMARTER.
CHAPTER 1 CHAPTER 2 CHAPTER 3
CONTENT.LHBS // NFO: NEXT GENERATION OF BANKING
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CONTEXT OF THE BANKING INDUSTRY
CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING
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The majority of consumers do still trust traditional banks more than newer digital
payment solutions such as Apple Pay, Google Wallet, PayPal etc.
86%OF CONSUMERS DO STILL TRUST
IN THEIR TRADITIONAL BANK
HOWEVER…
Source: Civic Science, 2017
- 08 -

THE NUMBER OF CONSUMERS TRUSTING MORE IN DIGITAL
SOLUTIONS IS GROWING THROUGH THE GENERATIONS
BABY
BOOMERS
GENERATION X MILLENNIALS GENERATION Z
8% 14% 20% 25%
Source: Civic Science, 2017
- 09 -

Consumers are turning towards alternative
banking solutions mainly because
traditional banks aren’t keeping up with
them, and as a result…
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THINGS ARE
SHAKING UP.SHAKINGSHAKING
- 11 -

A RESULT OF SHIFTING EXPECTATIONS HAS SEEN A
HUGE INCREASE IN BRANCH CLOSURES AND FINTECH
INVESTMENT IS GROWING EXPONENTIALLY.
No. of global FinTech deals
HAS RISEN sharply from
1800 to 2700 in just one
year.
Total global investment in
FinTech ventures REACHED us
$97.7 billion between 2010 and
2017.
Source: Accenture analysis of CB Insights
- 12 -

JEFF
YABUKI.
“The only thing advancing
faster than technology is
consumer expectations.
…New entrants are
redefining financial
experiences and challenging
incumbent financial
institutions by driving
technological innovation in
pursuit of meeting changing
consumer expectations.”
PRESIDENT
AND CEO,
FISERV.
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“Banking is necessary.
Banks are not.”
FOUNDER OF
MICROSOFT.
BILL
GATES.
Even back in 1994, ﬁeld leaders were taking
notice of the banking industry shift…
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Source: The Millennial Disruption
Index
Consumers are anticipating
the ﬁnancial world of
tomorrow, AND believe that
innovation will come from
outside the industry.
33%
OF MILLENNIALS BELIEVE
THEY WON’T EVEN NEED A
TRADITIONAL BANK
Today, your consumers are
catching on - and some
traditional banks are yet to
respond…
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SO WHAT CAN BANKS DO?
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CHAPTER 01 WILL EXPLORE
THE NEW EXPECTATIONS
BANKS NEED TO ADDRESS
TODAY TO STILL BE AROUND
TOMORROW.
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01.
BANKS NEED TO
BE BOLDER.
Today’s generations have choice.
One in three Millennials are willing to
switch if a better option comes their
way - and it will. Fintechs are
expanding well into the industry with
billions of dollars of VC investment.
They are not only meeting today’s
consumers’ greater expectations of
brands, but are helping them to
reimagine how banking and managing
their money could be.
Traditional banks need to compete on
customer experience, identify their key
differentiators and cut through the
noise to communicate them to their
audience.
LHBS // NFO: NEXT GENERATION OF BANKING
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“Now we will see the possibility
of what we call a 'Kodak
moment', where increasingly
banks become irrelevant to
their customers.
Banks can avoid that, but they
have to act now, and what
they really need to do is think
about innovation, but also
transformation, doing
something radically
different.”
ANTONY
JENKINS.
FORMER CHIEF
EXECUTIVE
OFFICER OF
BARCLAYS.
BANKS NEED TO BE BOLDER.LHBS // NFO: NEXT GENERATION OF BANKING
- 20 -

WHY ARE TRADITIONAL
BANKS BECOMING
INCREASINGLY IRRELEVANT
TO CONSUMERS?
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RESEARCH HAS REVEALED THAT
NO OTHER INDUSTRY SUFFERS
FROM SUCH A PROFOUND LACK
OF DIVERSITY IN TERMS OF
BRAND CHARACTERISTICS THAN
BANKING
EVEN OIL INDUSTRY BRANDS ARE
MORE DIFFERENTIATED.
Source: Clear: Brand Desire Survey
LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE BOLDER.
- 22 -

Every bank in the recent Clear study
was seen as being highly
“organized” and “sensible.”
There isn’t anything wrong with this,
but it became clear it is very rare to
ﬁnd a bank who stands for much
else.
PERSONALITY
PROFILES OF
MAJOR BANKS.
Source: Clear: Brand Desire Survey
BANKS NEED TO BE
BOLDER.
LHBS // NFO: NEXT GENERATION OF BANKING
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MILLENNIALS’ PERCEPTIONS OF THEIR BANKS.
53%
of Millennials don’t think
their bank offers anything
different than other
banks.
“I don’t see the
difference between
my bank and all the
others.”
ALL
FOUR
of the leading banks in
the US are among the 10
least loved brands by
Millennials.
Four leaders: JP Morgan Chase,
Bank of America, Citigroup & Wells
Fargo
Source: The Millennial Disruption Index
- 24 -

are more excited about new,
ﬁnancial offerings from the likes of
Google, Amazon, Apple, PayPal or
Square than by their own banks.
73%OF MILLENNIALS
- 25 -

THE TOUGH LESSON:
You don’t stand out
and 1 in 3 of (your) Millennials have said they’re
open to switching banks in the next 90 days
- 26 -

TRADITIONAL BANKS NEED TO BE
BOLDER BY DIFFERENTIATING ON
A KEY CUSTOMER EXPERIENCE.
- 27 -

“Customer experience is fast
becoming the new battleﬁeld”
GARTNER PREDICTS:
and by 2020 it will become the largest driver
of customer acquisition between businesses.
Source: Gartner
- 28 -

If you consider any top FinTech banks today, it’s very likely you
can also associate one thing they do well, more speciﬁcally, one
experience they are known for above all else…
- 29 -

Flexibility to suit
needs.
Real-time access -
100% mobile.
Limiting global fees
for limitlessness.
Secure spending.
It’s not just coincidence.
You need to ﬁnd your key differentiating experience if
you want to stand out from the noise.
- 30 -

Your customer’s last great experience from any
industry is their new benchmark for your business.
- 31 -

“To stand a chance, banks need to become differentiated
by reinventing the relevance of the experience they
offer within consumers’ lives.”
RENATA VARGA, SNR. CONSULTANT AT LHBS SAYS:
- 32 -

THIS GENERATION ARE LOYAL TO
EXPERIENCES, NOT TO BRANDS.
Source: Prof. Rodrigo García de la Cruz
- 33 -

HOW CAN BANKS DIFFERENTIATE ON
CUSTOMER EXPERIENCE?
BANKS NEED TO BE BOLDERLHBS // NFO: NEXT GENERATION OF BANKING
- 34 -

HERE’S THE 5 KEY
SHIFTS IN EXPECTATIONS
Recent research reveals ﬁve evolving expectations of
a brand experience that today’s Millennial
generation want to see from banks:
- 35 -

5. Convenience
through
connectivity
TODAY’S CONSUMERS WANT…
2. Customization
1. Real-time
services
3. To be valued
4. Banking
partner
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EXPECTATION 1
TODAY’S CONSUMERS WANT
REAL-TIME SERVICES.
- 37 -

Source: Accenture - Beyond Digital
of young adults want tools to
help them monitor their
monthly budget, with real-time
adjustments based on their
spending.
59%
- 38 -

Source: Fiserv, Harris Poll 2016
Average of overall
population Millennials
Gen Xers (37-51
years old)
93%76% 85%
Younger generations expect faster payments, saying it is at least somewhat
important that payments they make are made in real-time.
- 39 -

The new ﬁnancial product called
Hoot is a debit card with added
features for instant access to
individual information and analytics
via a small screen, Bluetooth and a
physical button.
The card can be connected to
smartphones, which enables the card
owner to display their image on the
screen on the card. The button can be
pressed to receive details about bank
details, spending habits and ﬁnancial
tips.
DEBIT CARDS FOR
MILLENNIALS.
EXPLORE SIGN
BEST PRACTICE.
LHBS // NFO: NEXT GENERATION OF BANKING // BANKS NEED TO BE BOLDER.
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MOBILE BANKING
WITH VOICE.Garanti Bank - one of the largest
private banks in Turkey - brought a
conversational interface to it’s app
for faster access to simple tasks.
Garanti bank integrated the virtual
assistant and more natural language
understanding technology of
Nuance’s Nina into their app, iGaranti.
This enables customers to enquire
about their funds, make transfers, get
exchange rates among other
functions through conversational
voice recognition.
EXPLORE SIGN
BEST PRACTICE.
- 41 -

EXPECTATION 2
CUSTOMIZATION.
- 42 -

of Millennials are
interested in real-time
and forward-looking
spending analysis.
of shoppers think info their
get from retailers is relevant -
but 90% of organizations say
they are focused on
personalizing the CX.
of Millennials feel their
bank understands
them ﬁnancially.
40%48% 5%
ONLY
Source: Forrester Research
- 43 -

Swiss-based Bank Cler recently
launched a 100% mobile banking
app. “Zak” makes it simple for users
to save, pay and control their
money, and create their own
personal ﬁnance goals.
The user-friendly design makes it
simple to drag-and-drop custom
amounts of money within one’s
account to various “saving pots” for
different goals, for example holidays, a
new car etc.
EXPLORE SIGN
ZAK - YOUR NEW
BANKING PARTNER.
BEST PRACTICE.
- 44 -

MANAGING MONEY
TOGETHER. Fintech startups are developing
customized services to customers,
where they can link accounts with
that of their partners and organize
accordingly.
These services reflect new types of
personal, financial and relationship
needs of Millennials.
Honeydue and Honeyfi, for example,
offer an option for couples to link their
accounts to the app, where they can
decide what to share with their
partner, and then organize and track
their finances in the app itself.
EXPLORE SIGN
BEST PRACTICE.
- 45 -

EXPECTATION 3
TO BE VALUED.
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MILLENNIALS’ PERCEPTIONS OF THEIR BANKS.
8/10
Millennials switch banks to
obtain better rewards for
completing speciﬁc goals.
“Value my
time and you
value me.”
The #1 way Millennials say their
bank can be a valued partner is
by rewarding their loyalty (60%
want their bank to be a
partner/friend).
#1TIMES
Source: Kasasa, Shep Hyken - customer service expert & NYTimes bestseller
- 47 -

DBS - a Singapore-based bank - had the
lowest customer satisfaction scores of
any bank in Singapore.
COO Paul Cobban started running a
series of cross-functional workshops,
each lasting 5 days with the goal of
improving processes. The metric chosen
to improve was the customer hour, and
the company ended up saving 250
million wasted customer hours each year.
“One year later, we had the top customer
satisfaction scores in Singapore,” Cobban
says.
BEST PRACTICE.
HOW DBS REACHED
FIRST PLACE.
EXPLORE SIGN
- 48 -

The Ant Forest App by Chinese mobile
payments leader Alipay turns
mundane ﬁnance activities - such as
paying bills - into a greener act.
It also rewards users who opt for more
eco-friendly activities such as taking
public transport and walking to work.
Users collect “energy points” and
compete with friends to grow their
virtual tree, and in response real trees
will be planted in Inner Mongolia or
Gansu province.
BEST PRACTICE.
BANK FOR GOOD.
EXPLORE SIGN
- 49 -

EXPECTATION 4
A BANKING PARTNER.
- 50 -

53%
of Millennials say they have
no-one to turn to for
financial guidance.
78%
of consumers would be
interested in receiving
financial advice or guidance
from their bank, however…
only 28% said they currently
receive financial advice.
Source: LendIt Fintech USA,
1.3x
Millennials are 1.3x more
likely to turn to a financial
advisor than Gen Xers.
Now with digital means,
customers are 10x more
likely to engage with banks
vs. non-digital customers.
- 51 -

“Gen Zers want stability, they want
partnership, they want their bank to
feel like part of their squad.”
Source: Civic Science
- 52 -

Santander bank launched “Prosper
and Thrive”, a content hub to help
Millennials navigate the financial
world.
The aim is to give younger customers
access to practical advice for financial
well-being and digestible descriptions
of financial jargon without it sounding
like it’s coming from a traditional bank.
They partnered with several content
businesses including SapientRazorfish,
Contently and Newscred.
EXPLORE SIGN
SANTANDER’S CURATED
CONTENT HUB FOR
MILLENNIALS.
BEST PRACTICE.
- 53 -

Orange are looking to provide
optimized customer experience and
banking services through their
network of things by harnessing
artiﬁcial intelligence such as
chatbots powered by IBM's Watson.
The Orange chatbot will apply
machine learning to gradually
understand more about the user, like
future needs and wants, along with
projected spending habits. They’re
programmed to detect emotion
through 'sentiment analysis' where
the customer may require human
advice over machine.
EXPLORE SIGN
BEST PRACTICE.
ORANGE BANK
CHATBOTS.
- 54 -

EXPECTATION 5
CONVENIENCE THROUGH
CONNECTIVITY.
- 55 -

“Disruption is coming
not from new products,
but from new services
that enable consumers
to simply bypass legacy
processes.”
JOANNA
BAKAS.
MANAGING
PARTNER, LHBS.
- 56 -

MILLENNIALS
Consider an “easy
to use smartphone
app” a primary
factor when
selecting a bank.
This falls to 16% for
older generations.
Are open to having
a virtual meeting
(video chat) with
their ﬁnancial
advisor.
75%
MILLENNIALS ARE READY FOR
THE CONVENIENCE THAT
COMES WITH DIGITAL.
32%
Source: Intelligent Environments - Generational Shift
- 57 -

62%
Of consumers believe that
the best brands make their
lives easier.
92%
Of young adults would
choose a bank for its’ digital
services.
72%
Of UK Millennials now use a
banking app. This number
drops to 45% for the overall
adult population.
Source: CustomerThink, 2017
- 58 -

Millennials are three
times more likely to
open a bank account
on a phone vs. in a
branch.
x3
Source:Source: American Bankers Association
- 59 -

Yolt, the multiple account
management app from ING has
become the ﬁrst to connect customers
through Open Banking.
It’s allowing users to view and manage
all their bank accounts from multiple
banks on one simple interface. This will
give users more insight and control over
their money.
BEST PRACTICE.
YOLT CONNECT
UNDER OPEN
BANKING.
EXPLORE SIGN
- 60 -

ABN AMRO, a Dutch banking group
has piloted several wearable items
connected to customers’ current
accounts for easy, on-the-go
payments.
The wearables include a ring, watch,
bracelet or keyring, each of which can be
connected to the customer’s account for
easy, contactless payments at many
locations worldwide.
BEST PRACTICE.
ONE BANK’S
WEARABLES
RANGE.
EXPLORE SIGN
- 61 -

Source: MX
To understand today, banks should observe how other
customer-centric organizations outside of the industry act and
follow in their footsteps. They need to allow themselves to be
shaped by customer demand in order to shape their
tomorrow.
By acting less traditionally and exploring more digital, more
two-way, more real-time experiences, banks can remain
relevant to customers by giving them what they want, when
they want it.
- 62 -

WANT MORE
SIGNS?Start your signmesh demo today and stay
updated on the latest brand innovations.
.com
LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE BOLDER.
- 63 -

NOW IT’S YOUR TURN.
- 64 -

Disruption is a buzz word with real and tangible consequences.
What or who will challenge your business, and when? Do you want to
explore where your strengths and vulnerabilities lie?
Contact us for a one day opportunity-exploration workshop to better
prepare for the future of your business.
OPPORTUNITY WORKSHOP.
JOANNA BAKAS
Managing Partner
+49 151 6462 0741
jb@lhbs.com
BOOK YOUR
SCHEDULE NOW
- 65 -

ABOUT.
A marketing & innovation ﬁrm, we work primarily with
legacy organizations to adapt their customer value
proposition to meet emerging customer expectations.
Together with our clients we discover business
opportunities and deliver integrated customer offers for
products, services, experiences and communication.DISCOVER DEFINE DEVELOP DELIVER
Explore further on our website, and
discover more industry insight reports.
- 66 -

THANK YOU.
You can explore more industry insights
reports on our website.
- 67 -

Next Generation of Banking: Bolder

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