keynote: why are innovations critical for banks & insurances?

THIS IS AWESOME ©2016 1

Frankfurt, 12th of October 2016

Presented byStefan F. Dieffenbacher

Keynote: why are Innovations critical forBanks & Insurances?


Company builder helping corporates to build up new digital business.

Focus: revolutionary, new offerings.

About me: Stefan Dieffenbacher

Currently running two companies:

Strategy / Exeuction Advisory focused on digital helping corporates to take their next step with their existing digital channels.Focus: evolution of existing.

Active investor through THIS IS AWESOME / private –currently active shareholder in four additional companies & startups.

Heavy background in FS:


Why innovation is critical in banking & insurance

Digital is both a major thread as well as a *glorious opportunity* for Financial Services

The thread


The thread: stability of large organisations is decreasing

Source: Innosight / Richard N. Foster / Standard & Poor's

Average company lifespan on S&P 500 Index (in years)

(each data point represents a rolling 7-year average of the company lifespan)


Do you remember the world’s largest company in 2007?


Nokia


The new leader: Apple.

Funnily enough, Apple is deriving most value from it’s mobile phones –an industry Nokia previously dominated.Picture: Future Apple headquarter

THIS IS AWESOME ©2016 11New Apple

Apple has 2x as much cash as the US Government

Source: Forbes, 2015

The new leader: Apple.


Similar to Apple changing mobile phones, digital disruption has turned around many industries


The *glorious opportunity*


FinTechs have followed a very simple pattern thus far: they go where the money are. Especially to payments…

Source: McKinsey 2016

Customer segments and product of leading financial technology companies in 2015, % of total


Venture-Capital Investments in FinTech have recently accelerated.

Globally, nearly $23 billion of venture capital and growth equity has been deployed to fintechs over the past five years, and this number is growing quickly: $12.2 billion was deployed in 2014 alone.

Source: McKinsey 2016

Global investments in financial technology, $ billion


The FinTech landscape by componentResult: component-based banking

Disintermediation? Rather “component-based banking”.

§ Ever more complex business models. § New players will enhance banking. § Banks will open their ecosystems to

play in an ever increasing complex landscape.

Latest version can be purchased here: https://www.venturescanner.com/financial-technology


BlockTech in Financial ServicesResult: component-based banking





FinTechs in GermanyResult: component-based banking





A view on the InsureTech MarketResult: component-based insurance

Disintermediation? Rather “component-based insurance”.

§ Ever more complex business models. § New players will enhance banking. § Insurances will open their ecosystems

to play in an ever increasing complex landscape.

Source: Swiss Finance + Technology Association, 2016


FinTech is a *glorious opportunity*: massive creation of value for customers & plenty of money to be made

Source: Let's Talk Payment, December 2015

Startups attacked large players and took market-share of these.

But also (and probably mostly!), they have created new markets!


Top-level: what is happening?Klaus Schwab has summarized it well…


A perspective on the Financial Services industry:the amount of changes will only accelerate.

Our expectations as consumers are set by our online experience from services such as Facebook, Google or Amazon

Margin pressure: banks & insurranceby the lowest interest rates we have seen in 2.000 years

Banks & Insurance companies are under pressure because their offering is fundamentally undifferentiated

Disruption pattern: startups put themselves in-between the customer and the company (i.e. check24)

User Experience is driving value in a new way – and most startupsunderstand customer-centricity

Regulators are opening up: i.e. PSD II forces the banks to open up their data; full disclosure of insurance commissions will arrive soon

Industry changes leading to further

FinTech & InsureTechinvestments

Customers don’t want to be ‘told’ anymore: they don’t come to branches anymore - buy how can advice as the key point of sales be digitized?

Exponential technologies are driving change; convergence of several disciplines from software to devices to biotech


What to do?


Mind the chasm


Mind the chasm –but avoiding the realities of the markets is not a solution!

Compared to other branches, banks are here

This is where banks should be


Mind the chasm –but avoiding the realities of the markets is not a solution!

Here is where agile happens Compared to other branches, banks are here

This is where banks should be


Everything changes depending on whether you are working on a castle or a speedboat type of challenge, including:

§ Org structure§ People & their capabilities§ Approach§ Technology setup§ Customer approach§ Etc.

The remainder of this presentation will focus on castles.

Define your starting position: are you solving a castle or a speedboat type of challenge?

Your existing digital channels / banking platform / products / services.

Any future innovative or disruptive products or services.

Most castle’s (aka. large organisations) are trying to solve speedboat issues with their castle operating procedures. That is their prime point of failure.


The critical business needs: Banks need to build up digital capabilities based on 5 pillars

Data—driven digital insights

Robust analytics & BI based on centraliseddata infrastructure

Data-driven segmentation & Value Proposition Design

360° single customer view

Comprehensive data ecosystem, including 3rd party APIs

Digital Marketing

Data-driven, real-time segmentation & cohort analysis

Data-driven customer-life-cycle management

Targeted digital (performance) marketing

Digitally enabled operations

Operational-excellence enablers

Operations are designed to support customer journeys

Streamlined and automated fulfillment processes

Digitized sales and service interactions

Customer Experience excellence

Clear brand positioning & brand amplified by a purpose

Customer-centric experience design & processes

Omni-channel experience delivery

Journey consistent front-to-back, end2end

Smart technology setup

Digital enablers

Digital Talent Management

Value-driven Organisation & governance

Test-and-learn culture

Flexible IT architecture (i.e. SOA) with clear messaging

Scalable application architecture

Agile delivery to market

Flexible IT infrastructure

The basics: security & privacy

We feel honoured McKinsey copied this model in the following article: Cutting through the noise around financial technology, Feb 2016: http://bit.ly/1Rtz0AF


The basics: security & privacy





The critical business needs: Banks need to build up digital capabilities based on 5 pillars






Digital Marketing

Data-driven, real-time segmentation & cohort analysis














Digital enablers




Since banks are increasingly becoming IT companies, it is no wonder that the entire list of digital capabilities is ultimately IT driven – and thus part of the IT function!



The opportunity landscape in InsureTech

Source: Guy Weismantel, http://bit.ly/2d9jSiW

Source: Startup Bootcamp Insurance London, 2016

We understand the points of focus as banks & insurance companies.

But how do we execute?


1. IT needs a fitness program






Digital Marketing

Data-driven, real-time segmentation & cohort


















Digital enablers





IT needs a “fitness program” to enable banks to support future strategies.

Any strategy is useless without the fundamental ability to execute.

Banks typically have two major concerns:§ Speed of IT (due to the

weaknesses in their IT setup – see left)

§ Weaknesses in developing value-driven roadmaps


2. Existing tools are not ideal to prepare for value-drivenprioritization and execution

Startups: the Business Model Canvas nor related models do not explain how to translate to execution.

Corporates: Difficult to orchestrate and integrate corporate & IT-Strategy.

1. Introduction 2. Basic Challenges

a. Growing customer needs b. Regulatory requirements c. Competitive & cost pressure d. Digitizing of the environment e. IT risks and IT security

3. Effects of the challenges on the IT strategy a. Standardization, sourcing, scalability b. Integration architecture and innovation c. Complexity reduction (IT has grown historically) d. Information security & privacy e. Handling it innovations

4. Dealing with the challenges a. Objective dimensions of it b. Portfolio training in it and orientation of portfolio

5. IT norming strategies a. Standard b. Non-Standard

6. Division specific areas of action and transformation a. Transformation of the bank b. Private customers c. Corporate customers d. Financial markets e. Comprehensive bank controlling f. Credit processes

7. IT specific fields of action a. IT governance b. Changes in sourcing model & reducing the vertical integration c. Continuous development of IT functions

i. Increasing the maturity of requirements management ii. Increasing the maturity of Project Management iii. Increasing the maturity of Architecture Management iv. Increasing the maturity of control functions v. Increasing the maturity of provider control vi. Increasing the maturity of Innovation Management vii. Increasing the maturity of Application Development & integration viii. Increasing the maturity of Information Security Management &

Data Protection d. Establishment on an IT group e. Integration of business critical event-management f. Authorization management g. Talent Management h. Processes and method i. IT risk management

8. Measurability of the IT-strategy a. IT costs b. IT architecture management c. Human resource development d. IT operations e. IT projects


2. Value-focused conversations






Digital Marketing

Data-driven, real-time segmentation & cohort














We need a smart dialogue

across business, IT and

Marketing how these fields

integrate and how these need

to be managed.


2. We need one common & simple language between IT & business: Customer Journeys enhanced with their implications are an ideal means to this end

Customer Action

Front-end

Backend

Support processes

Interaction with Bank personnel

1 2 3 4 5We need a simple and value focused tool both IT and business understand

The customer journey is ideal:§ Almost all bank processes are

driven by customers§ With very few customer

journeys, 90% of the value-functions of the bank can be mapped

The customer journey needs to be enriched with system and staff interactions

Thank you.


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