Monetizing Mobile:How to deliver value

from improved customer experience

Mark SchofieldPartner, Toronto

Bain and Company

2

Housekeeping

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IntroductionMark SchofieldPartner, Toronto, Bain and Company

•15+ years of experience in consulting

•Co-lead on Bain’s Retail Bank of the Future perspectives

•Extensive work on retail bank customer experience

•Led Retail Bank engagements in Canada, USA, Australia, South East Asia and UK

Objectives for today’s discussion

•How are banks adapting?

•How can banks accelerate the pace atwhich they capture the digital dividend?

•How are customer behaviors changing and how is this creating a digital dividend?

• Customers are rapidly embracing mobile• This creates a digital dividend - lower costs, higher sales, better loyalty

Retail banking is changing

fastThree actions to drive great experiences and bottom line successRequires a

newway of

working

Key themes for today

• Success requires changing the old bank, while building the new• Leading banks focused on three actions

- Migrate high cost service: Eliminate ‘bad and avoidable volumes’ in branch/call centers- Digitize sales experiences: Deploy exceptional mobile sales experiences - Adapt traditional channels: Transform the physical network

• The difference between winners and losers is in the ‘how’ not the ‘what’ – it’s a change management issue

• Requires new ways of working in “Hothouses” with customers and employees to develop Rapid, Radical and Repeatable solutions

Our perspectives rely on proprietary research with customers and banks

Voice of the Customer Voice of the Bank

Loyalty in Retail Banking (NPS) Survey

• Annual proprietary research on customer loyalty with ~200K retail banking consumers in 25-30 countries

Retail Bank of Future (RBoF) Survey

• Bi-annual benchmarking research on internal digital capabilities; ~100 banks participating

10

20

30

40

50

60%

10 15 20 25 30 35 40 45 50 55%

Online interactions as a percentage of total interactions

Mobile interactions as a percentage of total interactions, 2013 and 2015

The retail bank landscape is changing fast; mobile is now the most prevalent channel

Mobile exceeds online

Onlineexceeds mobile

South Korea Netherlands

China

Mexico

Hong Kong IndiaSingapore

AustraliaUSAUK

France

Japan

Poland

Germany

Canada

2015

2013

Spain

Source: Bain/Research Now NPS surveys, 2013 and 2015; Bain/GMI NPS surveys, 2013

0

4

8

12%0 24 28 32%

Six interactions

in last

quarter

Percentage of US respondents, 2015

Online routine

Six interactions

in last

quarter

Mobile app

routine

ATM

Mobile browser routine

Branch routine

Online sales/service

Mobile sales/service

PhoneBranch

sales/service Chat/video

In the US, mobile is consistently more likely to delight

Increasing likelihood to delight

Decreasinglikelihood to annoy

MobileOnlineATMBranchPhone

Notes: Responses on a scale from -5 to 5 for “To what extent did the interaction increase or decrease your likelihood to recommend your bank?”; Likelihood to delight = percentage of respondents answering ≥4; Likelihood to annoy = percentage of respondents answering ≤-1Source: Bain/Research Now US NPS survey, 2015

Delightful banking experiences are easy

“What’s the primary reason [this mobile] increased your likelihood to recommend your bank?”

Source: Bain Retail Banking NPS and Interaction NPS Survey (2015); USA - N=4641

Everyday banking experiences are core to NPS

0

20

40

60

80

100%

Interaction frequency

Reported change on likelihood to recommend bank, by interaction (percent of respondents)

Pay bill Deposit money

Tran

sfer

to

FF

Sale

s

Srvc

s

24 2 424 4Frequency in past year:

Significantly increasedSlightly increased

Significantly decreased

Slightlydecreased

Did not change

Change in likelihood to recommend bank:

Source: Bain Retail Banking NPS and Interaction NPS Survey (2015); USA - N=4641

0

10

20

30

0 1 2 3 4 5

Avg. # of branch interactions

Avg.

# o

f m

obile

inte

ract

ions

Germany

SwedenFrance

UK

Netherlands

Australia Canada

USA

Average number of mobile and branch interactions (average of individual banks) per respondent per quarter, 2015¹

As a result, banks are migrating customers from branch to mobile

All countries are moving away from

branch transactions to exponentially more mobile transactions

¹ Sweden data is based on survey conducted in Q1 2016, Germany mobile interaction includes onlineSource: Bain/Research Now NPS surveys, 2015

Getting it right is valuable, for both profitability and loyalty30-40% REDUCTION IN COSTS… … AND A MATERIAL LIFT IN LOYALTY

0.0

0.2

0.4

0.6

0.8

$1.0B

Traditional bank distribution cost base in US $B, 2015

Cost today

1.0

Avg. costs after transformation

0.6-0.7

~1,000 ~600Branches today:

0

10

20

30

40%

Traditional bank Net Promoter Score in US, 2015

Avg. Bank NPS

25

Avg. NPS after transformation

35-40

~15% ~10%% branch only users:

Source: Bain analysis

Clear end state emerging, but the approach to deliver is critical

30-50% reduced costs in branch & contact

centre

30-50% of sales through a mobile

30-50% fewer; smaller and different branches

MIGRATE HIGH COST SERVICE

DIGITIZE SALES EXPERIENCE

ADAPT TRADITIONAL CHANNELS

“HOTHOUSE” APPROACH FOR AGILE CHANGE TO ACCELERATE ADOPTION

60-70% OF BRANCH TRANSACTIONS ARE BAD AND AVOIDABLE

70-80% OF CONTACT CENTRE TRANSACTIONS ARE BAD AND AVOIDABLE

0

20

40

60

80

100%

Branch transactions

Branch transactions

Bad and avoidable

transactions

High value transactions

0

20

40

60

80

100%

Contact centre transactions

Call centre transactions

Bad and avoidable

transactions

High value transactions

Service: 60-80% of transactions are bad and avoidable

Source: Bain analysis

MIGRATE HIGH COST SERVICE

Service: There is a proven playbook for service migration

Migrate simple transactions

Streamline business cash management

Simplify the cash ecosystem

Optimize internal processes

Optimize workforce scheduling

Prevent calls

Enhance self service and routing

Improve front line capabilities

Optimize workforce

11

2

3

4

5

2

3

4

CHAPTER CHAPTER

Service: Radical digitization requires changing customer behaviors

“Mobile first”• Make everyday banking

“one touch” easy on mobile & other digital channels

• Systematically eliminate friction end-to-end across policy, communication, process, product, etc.

• Use Agile principles for the overall effort (not just tech development)

“Front-line led”• Teach customers how

to use the digital capabilities

• Focus on making it easy for consumers and saving them time

• Hothouses perform rapid experiments with customers to learn what works and roll it out

NPS + CostLeadership

Service: Results can be delivered fast

0

50

100

150%

Over the counter transactions

Time 0

100

Target

70-80

0

50

100

150%

ATM transactions

Time 0

100

Target

110-120

0

50

100

150%

Digital signups

Time 0

100

Target

130-150

0

50

100

150%

Branch sales

Time 0

100

Target

100

NORTH AMERICA EXAMPLE

5-10% lift in employee engagement through Hothouse process

Stable customer satisfaction through transition

End state target of ~20-30% over the counter reduction

End state target of ~10-20% increase in ATM usage

End state target of ~30-50% increase in Digital Signups

Objective is to maintain branch sales levels despite fewer tellers

Source: Bain experience

0

20

40

60%

30%

Nethe

rland

s

57

UK

55

Swed

en¹

52

Japan

46

Polan

d

43

India

42

China

42

Germ

any

42

Hong K

ong

40

Singa

pore

38

Sout

h Kor

ea

34

US

33

Spain

32

Austra

lia

31

Canad

a

29

Braz

il

28

Franc

e

20

Mexico

13

Percentage of purchasers using mobile & online channel for purchase, 2015

30%

Digital Sales: ~30-60% of sales are now done outside of the branch

Mobile

Online

¹ Sweden data is based on survey conducted in Q1 2016Source: Bain/Research Now NPS surveys, 2015

Digital Sales: Digital sales are set for explosive growthILLUSTRATIVE

100%

50

03-10 years 5-15 years 5-20 years (until obsolete)

US Banking 2013(6-8%)

Airline tickets (72%)

2013 US Data

Books (72%)

Music (91%)

Newspapers (46%)

Apparel (19%)

Retail overall (11%)

US Banking 2015 (30-35%)

Digital sales penetration

Time

INTRODUCTION GROWTH MATURITY

Source: Euromonitor, Federal Reserve, Recording Industry Association of America, company annual reports, Research Now, Bain analysis

Digital Sales: Customers prefer topurchase via digital channels

0

20

40

60

80

100%

Actual Preferred

Channels for opening account used vs. preferred

0

20

40

60

80

100%

Actual Preferred

Channels for opening account used vs. preferred

0

20

40

60

80

100%

Channels for opening account used vs. preferred

Actual Preferred0

20

40

60

80

100%

Actual Preferred

Channels for opening account used vs. preferred

CANADA US AUSTRALIA UK

OPENING TRANSACTION ACCOUNT

Online OtherPhoneATMMobile/Tablet Branch Mail

Source: Bain Retail Banking NPS and Interaction NPS Survey (2015); USA - N=4641, Canada N=3004, UK N=3964, Australia N=3203

SuperiorCustomer

Experience

Branding & positioning

• Creation of overall brand awareness both inside and outside of the branch

• Innovation center for the bank

1

Customerrelationship management

• Convenience, "feel good" andtrust development

5 Consultation for complex customer needs

• Mortgage loans • Security advisory services• Insurance

2

Customer enabling for online & mobile banking services

• Availability and functionalities of online and mobile banking applications

• Technical issue resolution

Live assistance

• Physical (in-person) support on transaction kiosk handling

• Transaction issue resolution (of online/mobile banking services)

Network: Role of physical network evolving

34

Network: Number of branches decreasing in major markets

-40

-20

0

20

40%

Change in branch numbers 2010-14 (2010 as 100%)

Netherlands Spain

-26

Germany

-11

Italy

-9

Sweden

-6

US

-4

UK

-4

France

-3

Australia

1

Canada

4

-35

Source: ECB; British Bankers Association; Haver; Datastream

Network: Formats design evolving to support customer experience

Products and services Process and technology

People and behavior Design and construction

Data and insight

Network: Physical network portfolio evolving to hub and spoke

0

20

40

60

80

100%

Pres. Future Pres. Future Pres. Future Pres. Future

"How many branches of each format do you currently have, and how do you see its number evolving during the next 3-5 years? " (% by branch type)

Global average

APAC EMEA Americas

Full service

Kiosk/ATM

Satellite

Flagship

Small/medium business

Advisory

NETWORK OPTIMIZATION PLANNED IN EMEABRANCH FORMATS

Flagship stores in high traffic locations increase perceptual scale

Flagship store

Consumer oriented branches focused on basic product sales

Satellite branch

Transaction kiosk fully automated and with only limited offering

Self-service kiosk

Specialist advisory branches focused on critical segments (business/affluent)

Advisory shop

Source: Bain Retail Bank of the Future Benchmarking

Success demands a different way of workingCUSTOMER

“BACK” APPROACH

FRONTLINELED

DESIGN

HOTHOUSE ENABLED

• Listen to customers and respond through feedback loops

• Frontline teams designing the change to create pull within the organization

• Create an environment to “prototype at scale” and then rapidly deploy successes system wide

1

3

2

ACCELERATED RESULTS

• Teams anticipate risks and focus on critical few actions to resolve while also developing execution plans alongside initiative design

5

AGILE METHODOLOGY

• Agile approach, supported by central teams, drives continual design, test and learn

4

A “hothouse” can provide the conditions for success

SETUP FOR SUCCESS

Design, mobilize and launch Radical new ideas in Hothouse regions

Launch quick wins to build momentum in the organization

Bundle initiatives and rollout nationally

Test, learn and refine actions, codify best practices and create change experts

Conduct diagnostic, align on goalsand vision, setup team, and generate ideas

RAPID ACTIONS

RADICAL ACTIONS

REPEATABLE CAPABILITY

ROLLOUT NATIONALLY

CREATE AN ENVIRONMENT FOR RADICAL TESTING AT PILOT SCALE:

Idea Generationworkshop

Rapid designacceleration process

Radical‘hothouse’ pilots

Test & RefineToolkit

National rolloutmanagement

Recap - Key themes for today• Customers are rapidly embracing mobile• This creates a digital dividend - lower costs, higher sales, better loyalty

Retail banking is changing

fastThree actions to drive great experiences and bottom line successRequires a

newway of

working

• Success requires changing the old bank, while building the new• Leading banks focused on three actions

- Migrate high cost service: Eliminate ‘bad and avoidable volumes’ in branch/call centers- Digitize sales experiences: Deploy exceptional mobile sales experiences - Adapt traditional channels: Transform the physical network

• The difference between winners and losers is in the ‘how’ not the ‘what’ – it’s a change management issue

• Requires new ways of working in “Hothouses” with customers and employees to develop Rapid, Radical and Repeatable solutions

Q&A

Thank You!