Defining Tomorrow: What’s Next in Financial Services

Capitalizing on Disruptive Trends in 2016

P R E S E N T E D B Y

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Trust is at the heart of the relationship between

financial institutions and their customers.

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Millennials want to invest their money with banks

that relate to them and align with their values.

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Now is a crucial time for banks to provide flexibility that

caters to Millennials — the next generation of investors.

Financial institutions are in the business of risk management, not

innovative disruption. Tomorrow’s successful financial institutions

are those that balance traditional risk with innovation, and align

with customer values to further drive differentiation in a crowded

field. By investing in relationships with customers today, banks can

reap the dividends of loyalty tomorrow. In order to do this, banks

must learn from successful startups while safeguarding the wealth of

the digitally connected consumer.

The Most Disruptive Trends of 2016 Revealed

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Of the top trends, we see the following 3 as particularly

critical for successful financial institutions this year.

2 0 1 6 M O S T D I S R U P T I V E T R E N D S

T H E AVATA R G E N E R AT I O N

I N T E R N E T E V E RY W H E R EH Y B R I D L I V I N G S I X T H S E N S E

M E A N I N G F U L C O L L I S I O N S

U S E R- G E N E R AT E D P R O D U CT S

T H E P R I VACY E XC H A N G E

L I F E D E S I G NT H E N E W

T R I BA L I S ML I T T L E B I G

B R A N D S

I N T E R N E T E V E R Y W H E R E

For many banking customers, the local branch is no

longer the central hub. Tellers are being replaced by

the greater convenience and control afforded by online

banking. In the past 10 years, online banking has

increased dramatically; over a third of customers at

major U.S. banks regularly use mobile banking,

including 43% of 18- to 29-year-olds.1 The clear

direction is for financial institutions to accommodate

customer demand for complete control at their

fingertips, anytime, anywhere.

1

1 http://www.slideshare.net/YairCarmel1/2014-digitalinspired-trends-in-the-financial-services-industry-banks-card-payment-companies-insurance-and-comparison-aggregators-35362483

I N T E R N E T E V E R Y W H E R E

Of course, the rush to mobile banking presents

challenges for privacy and security. Customers

demand convenience, but it must be tempered

with smart innovation. Banks need to ensure

that the “next big thing” in mobile banking is not

the next big data breach.

1

The Rapid Rise of Mobile Banking and Decline of Bank Branch Locations

An increase in mobile banking among consumers has given

banks little choice but to cut locations or reduce services. In

2014, banks experienced a record year in closures.

1 8 . 4% D E C L I N E

6,9

87

5,6

93

I N 2 0 0 9

I N 2 0 1 4

M O B I L E B A N K I N G I S O N T H E R I S E …

… W H I L E T H E N U M B E R O F U . S . B A N K S

C O N T I N U E S T O D E C L I N E

3 9 % of consumers in 2014 ages 18 to 35 would consider switching

to an online-only bank.

33%

I N 2 0 1 3

I N 2 0 1 4

39%

+ 6 %

Sources: CNBC, 24/7 Wall St.

I N T E R N E T E V E R Y W H E R E

Opportunity

As the Internet is increasingly entrenched in everyday life, future customers will expect to

conduct 24/7 banking based on their lifestyle. Maintaining loyal customers will require

banks to respond with systems that allow people to complete most financial transactions

on their mobile devices as seamlessly as ordering an Uber. This means designing with

convenience in mind to create a seamless, user-friendly experience.

This focus on convenience does not diminish the importance of security; banks that

address both stand to gain the most. Customers expect to easily conduct more and more

of their banking on a mobile device. At the same time, they are very aware of the potential

risks of mobile banking, notably identity theft. The greatest opportunity for banks, then,

lies in the balance between innovation and risk.

1

L I T T L E B I G B R A N D S

Trust is at the heart of the relationship between

financial institutions and their customers.

Shaken by ongoing banking scandals in recent

years, customers demand financial stability and

the best-in-class service that they have come to

expect from other industries. Big banks must

manage their vigilance against risk while being

steadfast in finding ways to improve the

customer experience.

2

L I T T L E B I G B R A N D S

An ever-growing number of financial startups

are focused on enhancing the customer

experience in ways that big banks simply cannot.

With high regulatory and capital barriers,

though, these disruptive companies have much

to gain from partnering with established firms.

For big banks, leveraging the agility of startups

presents an opportunity to better relate to their

customers and create brand affinity that will

result in a sticky consumer.

2

L I T T L E B I G B R A N D S

Opportunity

Unencumbered by the inherent risk aversion and entrenchment of big banks, financial

startups, have paved the way for larger institutions to begin to integrate customer

experience innovation into their own platforms. By creating smart partnerships with

startups, big banks can piggyback on the rapid innovation and appealing user experience

exhibited by many startups, while providing startups with capital, test cases, and setting

themselves for potential acquisitions down the road. In turn, this helps big banks appeal

to a new generation of consumers who expect their banks’ user experiences to be as

intuitive and efficient as anything else on the market.

2

L I T T L E B I G B R A N D S

Opportunity

Leveraging local resources is another promising approach. For example, Lending Club

has partnered with more than 200 community banks to offer loans to small businesses

that have been traditionally neglected by big banks. There are certainly inherent risks on

both sides, but these creative partnerships may present new opportunities for banks

willing to consider them.

2

L I F E D E S I G N

Baby boomers have begun to pass down their life

savings and, over the next 30 years, more than

$30 trillion in wealth will be transferred from one

generation to the next.2 This represents

incredible investment potential for financial

institutions, if only they can keep the next

generation as customers. Unfortunately,

Millennials who gain control of an estate often

eschew traditional financial advisors. Banks

must work harder to appeal to the next

generation and maintain brand loyalty.

3

2 https://www.putnam.com/dcio/content/wealthManagement/4038-trillions-in-wealth-transfer-could-be-a-business-game-changer

L I F E D E S I G N

Millennials want to invest their money with

banks that relate to them and align with their

values. With this generation, transparency goes a

long way. They are accustomed to siding with

brands that share their values and that can adapt

to their ethos. Ethical and conscientious

considerations play an increasingly important

role in how Millennial customers choose to

invest their money.

3

Sources: Bloomberg, CNBC, DealBook - New York Times, Forbes

The Current Landscape of Financial Advisors and Millennial Professionals

An estimated $30 billion inheritance will transfer from Baby

Boomers to Millennials. Millennials are expected to spend $200

billion in 2017 and $10 trillion in their lifetime.

M I L L E N N I A L P R O F E S S I O N A L

F I N A N C I A L A D V I S O R

29%of Millennials seek

professional finance advice.

7 1 % of Millennials asked

family for financial advice.

4 5 % of Millennials turned to

friends for financial advice.

70%of financial advisors do not

seek clients under age 40.

The average age of a financial

advisor is 5 0 + .

L I F E D E S I G N

Opportunity

Millennial consumers want to trust that their bank is a secure partner. Transparency on

the part of financial institutions goes a long way toward fostering that kind of

relationship. But more is needed to build lasting relationships. Now is a crucial time for

banks to provide flexibility that caters to the lifestyles, identities and values of the

Millennial generation. Otherwise, Millennials are likely to look beyond the big banks to

find the customer experience they expect.3

To be successful in generating and maintaining loyalty among the next generation of

customers, financial institutions must position themselves as collaborators in personal

life design. Millennials are information-seekers who want total control at their fingertips

as well as the peace of mind that a transparent banking institution provides.

3

3 https://newsroom.accenture.com/news/younger-generations-far-more-open-to-branchless-and-alternative-banks-accenture-survey-finds.htm

What’s the New Banking Ecosystem?

H U M A N -T O - H U M A N

H U M A N -T O - B A N KH U M A N -T O -T E C H

The banking ecosystem—like many

other industries—is shifting

dramatically to be simpler, more

accessible, more real-time and more

transparent. In short, it is becoming

more human-centric.

Here is how the industry is re-

imagining its processes and services

to place the customer’s unique

needs and motivations in the center.

The New Banking Ecosystem

• Increased use of person-to-person, digital payment platforms that further

eliminate transactional friction.

• More and more people will rely on each other for capital as the sharing economy

and peer-to-peer lending increase in significance.

• Financial institutions will facilitate person-to-person lending and leverage

partnerships with local banks to reach new customers.

H U M A N -T O - H U M A N

• As digital banking becomes more prevalent, Millennial customers will

increasingly trust algorithms and “robo-advisors” while shying away from

traditional investment advisors.

• Mobile banking and trading services will allow customers to complete 90% of

financial transactions in 30 seconds or less.

• Fingerprint identity sensors and other digital security modules will help guard

against data breaches and identity theft and continue to maintain the

convenience that customers desire.

H U M A N -T O -T E C H

• Customers will trust transparent banks that align with their lifestyle and values;

the exodus from institutions that engage in opaque practices will accelerate.

• Customer experience will demand more attention as an integral investment and

factor into ROI measures as institutions seek new, better ways to provide services.

• Banks will focus on hiring innovators from startups, tech companies, and

agencies while putting guardrails to mitigate risk in the these new types of teams.

H U M A N -T O - B A N K

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