Presented on P.World event - 3rd International banking forum in Belgrade (Serbia)

1. Creating a New Digital Finance Experience
- from online service to online sales & e-commerce
Alexey Kazakov
Head of Electronic banking, OTP bank, Russia
Special for P.World event
– 3rd International Banking Forum, Belgrade, Serbia

2. RETAIL BANKING. WHERE ARE WE NOW?

3. Russian retail banking: Current state
Russia market overview
Russia market overview
- Overall retail credit portfolio volume >9 700 000 000
000 rubles (~225B Euro). Y2Y growth: 23%
- 205 000 000 cards issued overall, >26 mln – credit
cards. Y2Y growth: 6%
- Major players: Sberbank (>30% market share),
VTB24, Tinkoff CS (online bank), Alfa bank, Russian
standard bank
OTP
OTP Bank Russia – TOP 15 Retail bank
Russia – TOP 15 retail bank
- holds 2nd position in POS landing segment. Market share is about 20%.
Credit portfolio is almost 50 Bln rubles (Q2’13) –more 1,1B EUR
- holds 6th position in Credit cards segment. Market share is 4,1%,
portfolio more then 40 Bln rubles (Q2’13) – more 0,9B EUR
- Presence and network: 3 700 cities, 157 branches, 32 000 POS
locations
Sources:
- official data from Russian Central Bank
- market review from Frank Research Group for OTPbank
3

4. Online retail banking in Russia: Key figures
TOP-5 most USED online functions





42558
Mobile, internet payments
Utility payment
Transfers to e-money (PayPal, QIWI, etc)
TP2G payments (traffic police, taxes)
Domestic transfers (VPP, MCMS)
TOP-5 most GROWING online areas





Online banking TURNOVER, mln EUR
Online request for a card delivery-at-home
Online deposits and loans
Mobile applications with geo-locations
P2P transfers (on phone#, card#)
Individual pre-scored offers
2017F
740
674
13744
2012
158
188
9870
2011
107
135
3198
2008
40
42
1
10
100
Internet-bank
1000
10000
SMS-banking
100000
Mobile bank
Online banking USERS, mln
25
22,2
20
TOP-5 TRANDS in online banking





E-invoicing online shopping
Direct debit from other cards
UX interface re-design
Expenses categorization PFM
Credit registry request
15
9,9
10
8
5
2,4
0
2012
Mobile bank
Sources:
- J’son and Partners market research, Apr 2013
1,9
0,7
2017F
SMS-banking
Internet-bank
4

5. OTP RU online retail banking: Key achievements

OTPdrekt - Internet,
Mobile and SMS banking
User activity dynamics, units/quarter
Unique logins
Transactors

According to “Markswebb
Rank and Research” agency
report in 2013, OTPdirekt
is:
•
TOP-10 in mobile
banking (IOS,
Android)
•
TOP-30 in internet
banking
+130%
+424%
Q1 '12
Q2 '12
Transaction ,units /quarter
Service payment
Intraclient transfer
Domestic transfer
Intrabank transfer
TOTAL
Q3 '12
Q4 '12
Q1 '13
Q2 '13
Q3 '13
Q2' 13
Q3' 12
SMS bank ussage /quarter
Templates & oths
DEPOSIT
LIST
CARD
CREDIT
+113%
KURS
REKV
UP
BAL
+540%
Q1 '12
Q2 '12
Q3 '12
Sources:
- Own data sources, Oct 2013
Q4 '12
Q1 '13
Q2 '13
Q3 '13
Q1' 12
Q2' 12
Q3' 12
Q4' 12
Q1' 13
5

6. Lack of “online” culture
Russia population is about 143 000 000 people … BUT, only
13
%
- of Russians uses online banking services
3%
2%
5%
20%
21%
23%
it is too expensive for me
it is not enough secured
No reason/need
13%
48%
61%
I don't know how to use it
It is not a convinient for me
4%
1%
Phone call
Physical locations
Internet, Mobile, SMS
I don't know what is it
Social media
E-mail, internet site chat
Sources:
- National research agency (ФОМ) , 2012
- Statistical data, OTPbank RU, 2013
6

7. Major challenges
What prevent people from getting online banking experience?
Lack of Usability
Lack of Convenience
Lack of Trust Transparency
• Inconvenient and unfriendly user interfaces, too many
legal and official terms in forms. Too many fields should
be filled
• Personal visit to bank is always needed, difficulties with
generating (recovering) passwords, scratch cards (OTP,
token )should be in a pocket, too much of security, etc.
• Online service is unstable (not really 24/7/365), incorrect
fin info (not up-to-time), visible bugs, too many hidden
restrictions, no relevant feedback from service (Is my
transaction proceeded?)
Lack of Productivity
• “It is better to call to a bank than to navigate inside”, not
all browsers are supported, no mobile versionapplication
Lack of Customer care
• no (or late) feedback from a bank support, irrelevant help
on problems resolution, no demo and education
materials, unfriendly user manuals (papers, terms …)
Sources:
- Markswebb Rank & Report, «Internet Banking Rank 2012»
7

8. Case Study #1 – Yandex. Dengi & Sberbank
Short PIN for login under
same device (no pword)
Well organized menu –all
functions on “finger tips”
Fast launch - most required
information on main page
Navigation is adopted to
particular platform & UX
Most convenient type of
keyboard for each task
8

9. Usability: Everyday payments go much simple
Custom and pre-set
templates
Visualization of
selected payment
source
Structured service
payment catalog
with contexts search
“Favorites” and Last
payments
Add note or capture
to a payment
Recently used
amounts
1
Pre-delinquency
reminder
Geo-location service:
Bank’s and Partner’s
places
9

10. Схема процесса
Usability: E-invoicing for forced e-commerce
Client should not think about payment transfer requisites …
E-invoicing – bank fills up a payment bill, and client
just may to accept or decline it in one click in web or
mobile!
• Utilities, internet, mobile payments
• P2G payments (taxes, police)
• P2P transfers (money sharing, sending money to
relatives or friends)
• Calendar based notification and recurrent
payments
• Payment confirmation by web, SMS or via Mobile
bank (push)
• Online and even offline purchases - Merchant
sends payment request to a client webmobile
bank via integration provider (aggregator) or
directly
10

11. Convenience: Balance bw security and usability
Think about clients’ insights, when you start to expand online banking:
•
•
•
Single combination of
loginpassword and
phone number for all
channels
Templates sharing
between web, mobile,
SMS and even
kiosksATM
Cardaccount or even
online banking channel
itself could be blocked
on similar way in any
channel or device
Transaction limits for
one channel, could be
adjusted in other
channels
Mobile bank
Control
Payments, transfers, reports, fin information
•
Access
blockage
Transaction
limits
Management
Mobile phone
management
Management
Creation
Templates
Access
blockage
Control
11

12. Case Study #2 – RSB and Alfa-bank
Online services should NOT be sold offline way …
• Loginpassword delivery on air (SMS) – NO tokens, NO scratch cards …
• Access recover block with SMSMobile or on web interface (card number and key-word are
required)
• Using SIM-card and device data for harmonization bw usability and security:
No need to re-authorize for fin
info enquiry, but you have to do
it for paymentstransfers
Mobile payment on internet
bank templates without
mandatory authorization
Transactions on small amounts
(or “one-more payment”)
without mandatory SMS
confirmation
12

13. Transparency: Electronic wallets
How to attract new clients from online and … by online process:
Electronic Wallet (EW) – technical “account” in IT
systems, with prepaid “balance”, which might be
opened, filled and debited without KYC
•
•
•
•
•
•
Sources:
Market data, 2012
10% of Russians uses EW, 34 mln. EW are issued
EW is mostly used for instant payments, P2P
transfers, online shopping
Max limittransaction – 15 000 RUR (350 EUR), Max
monthly turnover – 40 000 RUR (930 EUR)
In 2011 e-wallets became get a legal basis (161FL)
in 2012 e-wallets top-up come closely to 300B RUR
(7 000 mln EUR)
In 2012 Russian banks start to open own e-wallets
with a target to e-commerce expansion and new
client acquisition from online and via kiosksATMs
13

14. Case Study #3 - Sales model for “walk-in” clients
Usage of e-wallet technology could convert 100% visitors of bank’s locations – to online
product users (and Bank’s clients!):
• “Short – scale” based on e-wallet
• “Full – scale” based on regular accountcard online access (Internet, mobile, SMS)
OTP - Existing sales scheme
Branch,
POS
location
Client submit
application to
loan, card,
deposit, etc.)
Not approved
Approved !
FULL-SCALE functional
- Payments transfers form ANY source
- Credit funds usage
- ALL fin info for ALL products
- ALL features
Open contract to
ACCOUNT CARD
Client scans QR
at POS location
branch and
download
Mobile
application!
Push clients to
Identification in Branch or
POS via
individual pre-scored offers
individual pre-scored offers
Client is interested
in using Payment
transfer services
OBLY
Open online
contract to
ELECTRONIC
WALLET
Simple
authentification
SHORT-SCALE functional
- E-wallet balance
- Payments
- Transfers
- SOME features
OTP - New sales scheme - to be launched in 2013 - 2014
14

15. Case Study #4 - “invite a friend” sales model
Usage of e-wallet technology could push your existing clients to spreadshare money
with their friends (not banks’ clients yet) and give an opportunity to turn them to new
clients in a minutes!
Not your client yet
Client #1 log-in to
Mobile App or use
Web page
Client #1 choose
“Send funds to a
friend” and add
participants from
Address book
Approved !
Friend #2 receive
SMS with transfers
details and links to
App Stores and Bank
Web page
Approved !
Client #1 Fill up
transfer form with
amount and push
“Send”
Confirmation
SMS/email/notification
Your client already
Transfer is done.
Friend is able to
opendownload
Mobile App and get
access to funds
- Amount
+ Amount
New clients on boarding process
Friend is #2 able to
download App or
go to web form by
following link
Friend #2 goes thru
simple registration
process for contacts
data validation
• Alias for access (simple
enough to remember)
• Demographic data
• Contact data (mobile
number, email - to be
validated)
• Password Code (simple,
but secure)
Friend #2 open Ewallet, and become
a Client #2
Welcome SMS, e-mail
15

16. Customer care: Single-entry-point support
You can not control customer satisfaction, wout communication management …
Communication channels
Branch
Level 1:
Customer
support team in
Contact center
(24/7/365)
Level 2:
Professional
support team in
IT OPS
(24/7/365)
Contact Centre
Cooperation in issue
resolution
Online chat
E-mails
Cooperation in customer satisfaction
Social medias
News updates
Online products team
Training &
educational
materials
News about
functional
changes
Incentive
programs
for usage
increase
16

17. Case Study #5 – TCS, RSB, Alfa,Sberbank
Rotate, resize filter a map
objects for better result
Issue with smth just – call to
bank directly from Mobile app
Route calculation - find a way and
arrange proper time is simpler
Find closest point of loan repayment
(partner) or a place with special offers
Get a welcome wizard on first
launch, shake device for help screen
Check branch open hours
and query online
17

18. Customer care: Social media
Social media is not about direct sales, because there are no BUYERS in SM …
Know your customers, be aware where they are and
be a friend to them, especially, when advice is
needed.
Gamification – is a power tool to explain complex
things (or products!) on a most simple language for
widest audience
“Help, Care, Entertain” – use different social medias
for appropriate tasks:
•
•
•
for being transparent and getting more respect
for teasing and getting customers to be involved
for education and advertising
18

19. Case Study #6 – Ubank (AUS)
People like to be “not worse” than neighbors. Let’s monetize it …
1. Type down info
about themselves on
website (6 steps)
2. Obtain information how many people
like you on your
neighborhood
3. Learn how much
money they spend
and how much is
transmitted to
deposits
4. Choose a personal
financial plan
5. Share your
accomplishments
with a friends on
Social Media
19

20. Case Study #7 – Westpac bank (NZL)
How to get new clients and sell deposits widely - make a “virus” App
1.
2.
3.
4.
Download the application to your Smartphone
Open deposit account remotely
….
Press the RED button, and top up you deposit
on $5 instead of "impulse buying“ during
shopping
5. Share your success with friends thru Social
media
20

21. E-BUSINESS. WHAT IS THE NEXT?
“The future has already arrived. It's just not
evenly distributed yet”
William Gibson

22. Digitality - is today's reality!
Russia population is about 143 000 000 people, again, and …
45
- of Russian people goes online at least once a 24 hrs.
Monthly figure is even higher - 57%
22
- overall number of active Smartphone users in Russia.
BTW, in first half of 2013, >7 mln devices have been sold
%
m
National research agency (ФОМ) , June 2013
J’son & Partners Consulting, for Google, 2012
Market research done by “Svyaznoy” retail network, June 2013
… it is a proper time for mobile payments innovations!
22

23. Cards – are “granny's payment too”

Plastic cards are enough expensive (to
accept) for a Merchant

… Inconvenient for a Customer (how many
card do you have in your pocket?)

… low protected - In e-commerce world all
traditional card protections (PINChipEMV)
are zero


Cards' branding is disappearing. If a
Card linked to electronic wallet (QIWI,
PayPal) or to online shops account
(AppStore, Google play) - all money are
in one secured place
Customer just need ONE password to
access them all
Now it is matter “Who?”, but not “with What?”
23

24. Merchant – a major “customer” for payment innovations


Merchant resists to
payment innovations in
acceptance, if there isn't
long-term and transparent
value (lower MDR, loyalty
features, etc.)
Any equipment for
acceptance brings freedom
restriction for a Merchants
and exchange it to a
dependency on external
factors (internet
connection, physical
damages, etc.)
MS, Chip, NFC
Devices (HW)
Issues
Devices (HW)
Card systems
Acquirers
Banks
Banks
Customers
Merchants
Apps (SW)
Alternative PS
Apps (SW)
Banks
“On-air” banking: less infrastructure and 3rd parties – minimum costs and fees
24

25. Digital world brings more opportunities

Mobile technologies allows to
implement the best user experience
(UX), constantly adapted to suit the
needs of specific customers;

Delivery speed of innovation to gadgets
and Apps is a maximum.

In online world various technologies
could be used to ensure a balance
between security and usability.

Digital security provides the necessary
speed and stealth design in response to
(or even ahead of the curve) to fraud
activities
Rapid adaptation, best UX, scalable technologies – key features of digital banking
25

26. Case Study #8: Extra convenience with
!!!!!
Payment service, bases on QR codes

Ideal for the Customer - quickly and
safely - just one click to start the
application

Beneficial to the Merchant – low (and
most importantly - a transparent)
merchant discount rate without
additional fees

A great opportunity to do
experiments with a customers loyalty
- merchant can configure, run, and
analyze a promotional company
himself

QR reading from smartphonetablet
or from cheap, modern-look and
completely secure device
2
%
fee
1
M
users
26

27. Case Study #9: Extra profit with
Payment service, bases on direct debit
from Customer account

Extremely beneficial to the
Merchant and still - no cash;

Convenient for the Customer confirmation with a single
password;

Fast growing network - all
acceptance places on the
interactive map;

Can be used as mobile applications
or being integrated with a
traditional cash-desk solution

0% .25$
<10$
>10$
10K
merchants
Additional free services - P2P
transfers, etc.
27

28. Case Study #10: Purchase as a tweets with
!!!!!
Online purchases with Twitter and
AmEx

Register a card on AMEX Sync;

Find special offers from partners of
American Express on Twitter;

Place a #hashtag with the name of
the special offers (eg #
AmexFlowersShop);

Get a discount on next purchase
with AMEX cards in this store
OR

Pay off the full purchase
(confirmation comes from @
AmexSync). Goods will be delivered
right to a home
28

29. Case Study #11: Why NFC IS DOA (“dead on arrival”)
Payment application + "beacon»
(beacon) base on BLE (Bluetooth low
energy) technology
•
Easy to start: no additional
equipment - "beacon" is connected
to USB (and Bluetooth exists in
each Smartphone);
•
Hands-free payments – it is enough
verbally confirm a payment from
PayPal account
•
Individual offers and discounts –
right at a time when they may
excite the customer (based on
inside-building geo-positioning)
•
Safe, it's PayPal
iBeacon в IOS 7 payments standard from
Apple is close?
29

30. Case Study #12: Converting loyalty to payments innovations
Pure loyalty – The Customer returns to a
particular Merchant for personalized service
and special benefits:
•
Tie a Starbucks card to the mobile
application;
•
Proceed payment by barcode on the
screen:
•
Apply instant discounts and gifts from
payment application (coupons are stored
in the Apple Passbook);
7
K
locations
In U.S. Starbucks mobile application
integrated with Square Wallet
-
Check-in in a shop
Let a system to recognize you
Say your name to a cashier
That is ALL!
30

31. Payments should be invisible
Nobody really like to DO a payment. Ideal purchase:
Come in – Choose – Take away …
… Some settlement stuff (which nobody really doesn't want even to think about)
31

32. Thanks for your attention!
Alexey Kazakov, a.kazakov@otpbank.ru
О группе ОТП
Дирекция розничных бизнес - технологий, ОАО
«ОТП Банк»