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Banking Under Attack
Startups that want to eat your business ….
and what you might do to avoid it.
1
Andris K. Berzins
April 2015
Image copyright of Home Box Office Inc.
Who is Andris K. Berzins?
• MBA
• Consultant
• Entrepreneur
• Investor
• Advisor
• Volunteer
• NOT a banker
Text
The waves of change
Coming to a bank near you
Mobile & data pervasive
• Smartphone
penetration reaching
saturation
• Always on
• Apps and mobile
browsing maturing
Mobile overtaking online
Mobileinteractionsas%oftotal
Online interactions as % of total
Source: Bain & Company presentation on digital reinvention in retail banking, 2015
Personal identity device
• The smartphone will
become THE identity
device
• Viability driven by security
improvements
• Improved authentication
• Device locking on theft
• NFC and Bluetooth for
micro-location
Low trust in banks
“to do what is
right” dropping
even further…
… while technology
companies enjoy
very high trust.
0%
20%
40%
60%
80%
2009 2014
71%71%
29%
34%
Banks
Technologycompanies
Source: Edelman Trustbarometer 2014 survey (EU)
Less trusted
%ofEUconsumerstrustindustryto“dowhatisright”
Share of consumers
using mobile apps
rose 19% globally
2013-14
Making every
interaction ever
more important
Less face time
Source: Bain report on banking customer loyalty (2014)
Expectations of
speed of service
and delivery are
different
Especially among
younger
consumers
Consumers want it now
The competition
is different this
time round
Includes large
technology
companies and
hungry startups
Fresh competition
Person-person
micropayments are
evolving rapidly
Using smartphone and
phone number as identity
device is critical for this
application
Venmo & Monea
Often deployed as a layer
over traditional banking
system - innovation is in
user experience
Technology and big data
has pulled an industry out
of the shadows and into
the light
Even with heavier regulation
and censure, Wonga profit
in 2013-4 was 12.4%
Payday & consumer
micro-loans
These services often target
the “under-banked”, a
separate customer segment
Rethinking the banking interface for small
businesses & collaborative organizations
Holvi
Person-business loans enabled by big data
Bondora & Mintos
Offers retail investors diversified loan portfolio
with attractive rates
More mature US market shows where part of
competitive advantage lies - in lower costs
Bondora & Mintos
These new players
are able to “outsource
compliance” and take
advantage of “start
from scratch” cost
base
But primary customer
benefit is SPEED OF
DECISION
Source: Goldman Sachs Future of Finance report, March 2015
Cost advantage merely
allows profitability at
much lower volume
Social network-enabled, pre-production,
viral, pre-paid product funding
Combines market
testing of innovations
with financing of
production
Crowdfunding
For vendor this is
unsecured financing for
first run manufacturing
Inherent network effects
drive success of funding
campaigns
Peer-to-peer
money transfer
Competes with
international money
transfer services
Transferwise
Excels in guerrilla
marketing with
anti-bank message
Competing in
this new race
Traditional banks have
some distinct
competitive advantages:
• Big data
• Customer service
organization
• Branch networks
• Low funding costs
Play to your strengths
• Fraud prevention
• Account relationship management and awareness
• Spot issues related to corporate changes, market
conditions
• Enhance customer relationships through positive
interactions
• Proactive churn prevention
• Analysis of historical pre-churn behavior can enable
warning and prevention service to be deployed
• New income streams
• Advisory services for retailers using consumer
spend data to improve retail locations and
advertising targeting
Big Data Opportunity
Use your well-trained customer
service staff but make sure they
are empowered to make
decisions to help clients
Branch visits are opportunities
to WOW the customer and
sell new products
Customer Service & Branches
Look for opportunities to make
the service more convenient by
allowing clients to avoid branch
visits if they wish
Even simple stand-alone
technologies like Qminder can
change the customer experience
The adoption of Bluetooth low
energy beacons by the Apple
and Android ecosystem brings
huge opportunities
The mobile and physical
experiences can now be brought
together at a micro-location level
The iBeacon Opportunity
Think automated VIP priority
queues, reinvention of the ATM
experience, instant electronic
document delivery…
Risk-taking is generally
not rewarded in banking
careers, to say the least
But taking risks is essential
to tackle the new
competitive reality
Take more risks
Need to fund small risks,
expand what succeeds
Need to change reward
mechanisms and culture to
encourage risk-taking and
tolerate failure
Many new financial products may do better launched
under a distinct brand
Think multiple brands &
geographies
Banks may need to cannibalize their own products
before competitors do, and better to do that under a
separate brand
Smaller country banks need to take advantage of
licenses that allow them to sell financial products all
over the EU, this is a great opportunity
Andris K. Berzins
+371 29568157
www.akberzins.com
akberzins@gmail.com
Questions & Discussion

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Banks under attack: Presentation to SEB Bank Baltics management about the #FinTech revolution

  • 1. Banking Under Attack Startups that want to eat your business …. and what you might do to avoid it. 1 Andris K. Berzins April 2015 Image copyright of Home Box Office Inc.
  • 2. Who is Andris K. Berzins? • MBA • Consultant • Entrepreneur • Investor • Advisor • Volunteer • NOT a banker
  • 3. Text The waves of change Coming to a bank near you
  • 4. Mobile & data pervasive • Smartphone penetration reaching saturation • Always on • Apps and mobile browsing maturing
  • 5. Mobile overtaking online Mobileinteractionsas%oftotal Online interactions as % of total Source: Bain & Company presentation on digital reinvention in retail banking, 2015
  • 6. Personal identity device • The smartphone will become THE identity device • Viability driven by security improvements • Improved authentication • Device locking on theft • NFC and Bluetooth for micro-location
  • 7. Low trust in banks “to do what is right” dropping even further… … while technology companies enjoy very high trust. 0% 20% 40% 60% 80% 2009 2014 71%71% 29% 34% Banks Technologycompanies Source: Edelman Trustbarometer 2014 survey (EU) Less trusted %ofEUconsumerstrustindustryto“dowhatisright”
  • 8. Share of consumers using mobile apps rose 19% globally 2013-14 Making every interaction ever more important Less face time Source: Bain report on banking customer loyalty (2014)
  • 9. Expectations of speed of service and delivery are different Especially among younger consumers Consumers want it now
  • 10. The competition is different this time round Includes large technology companies and hungry startups Fresh competition
  • 11. Person-person micropayments are evolving rapidly Using smartphone and phone number as identity device is critical for this application Venmo & Monea Often deployed as a layer over traditional banking system - innovation is in user experience
  • 12. Technology and big data has pulled an industry out of the shadows and into the light Even with heavier regulation and censure, Wonga profit in 2013-4 was 12.4% Payday & consumer micro-loans These services often target the “under-banked”, a separate customer segment
  • 13. Rethinking the banking interface for small businesses & collaborative organizations Holvi
  • 14. Person-business loans enabled by big data Bondora & Mintos Offers retail investors diversified loan portfolio with attractive rates
  • 15. More mature US market shows where part of competitive advantage lies - in lower costs Bondora & Mintos These new players are able to “outsource compliance” and take advantage of “start from scratch” cost base But primary customer benefit is SPEED OF DECISION Source: Goldman Sachs Future of Finance report, March 2015 Cost advantage merely allows profitability at much lower volume
  • 16. Social network-enabled, pre-production, viral, pre-paid product funding Combines market testing of innovations with financing of production Crowdfunding For vendor this is unsecured financing for first run manufacturing Inherent network effects drive success of funding campaigns
  • 17. Peer-to-peer money transfer Competes with international money transfer services Transferwise Excels in guerrilla marketing with anti-bank message
  • 19. Traditional banks have some distinct competitive advantages: • Big data • Customer service organization • Branch networks • Low funding costs Play to your strengths
  • 20. • Fraud prevention • Account relationship management and awareness • Spot issues related to corporate changes, market conditions • Enhance customer relationships through positive interactions • Proactive churn prevention • Analysis of historical pre-churn behavior can enable warning and prevention service to be deployed • New income streams • Advisory services for retailers using consumer spend data to improve retail locations and advertising targeting Big Data Opportunity
  • 21. Use your well-trained customer service staff but make sure they are empowered to make decisions to help clients Branch visits are opportunities to WOW the customer and sell new products Customer Service & Branches Look for opportunities to make the service more convenient by allowing clients to avoid branch visits if they wish Even simple stand-alone technologies like Qminder can change the customer experience
  • 22. The adoption of Bluetooth low energy beacons by the Apple and Android ecosystem brings huge opportunities The mobile and physical experiences can now be brought together at a micro-location level The iBeacon Opportunity Think automated VIP priority queues, reinvention of the ATM experience, instant electronic document delivery…
  • 23. Risk-taking is generally not rewarded in banking careers, to say the least But taking risks is essential to tackle the new competitive reality Take more risks Need to fund small risks, expand what succeeds Need to change reward mechanisms and culture to encourage risk-taking and tolerate failure
  • 24. Many new financial products may do better launched under a distinct brand Think multiple brands & geographies Banks may need to cannibalize their own products before competitors do, and better to do that under a separate brand Smaller country banks need to take advantage of licenses that allow them to sell financial products all over the EU, this is a great opportunity
  • 25. Andris K. Berzins +371 29568157 www.akberzins.com akberzins@gmail.com Questions & Discussion