miklos+dietz+-+bank+of+the+future_lendit+presentation+vfinal

7/26/2019 Miklos+Dietz+-+Bank+of+the+Future_LendIt+presentation+vFinal

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Bank of the FutureDiscussion on the latestbanking and digital trendsand their implications

April 11-12, 2016



McKinsey & Company 2|SOURCE: McKinsey

In the next decade, we will see the emergence of a unified mobile

ecosystem of 24 trn, most of the world's customers

B a n k i n g

D

a t a c om p ani e s

DATA

COMPANIESData

Customer ownership

Talent pool

Difficult to monetize

Limited emotionalconnection withcustomers

TELCO

Owns the channel

No emotionalconnection withcustomers

BANKING

Data

Trust

Regulation

Slow reaction

RETAIL

Data on customers’buying habits andspending

Lack of dailycustomer contact



McKinsey & Company 3|SOURCE: McKinsey

Primarilyfront end

Full

Primarilyback end

Value

chain

Niche player

Narrow spectrum

Typical broad

banking spectrum

Offering

Broader than banking

Ecosystemorchestrator

White-labelback-officeoperator

In the new ecosystem banks will have to fundamentally rethink their

business model and they have three strategic options to go after

Fully digitizeduniversal bank

ILLUSTRATIVE


http://slidepdf.com/reader/full/miklosdietz-bankofthefuturelenditpresentationvfinal 4/14McKinsey & Company 4|

An option is to become an ecosystem owner bank ILLUSTRATIVE

SOURCE: McKinsey

Niche player Ecosystemorchestrator

White-labelback-officeoperator

Fully digitizeduniversal bank



An option is to become an ecosystem owner bank ILLUSTRATIVE

SOURCE: McKinsey Panorama



Banks need to proactively follow innovative ideas from inside and outside

banking, including ideas from thousands of FinTech startups


Retail

Institutional

RETAIL ASSET

GATHERING

C/A

B2C

PAYMENTS

LENDING

CAPITAL

MARKETSAND AM

CASHMANAGEMENT

LENDING

B2BPAYMENTS

SELF-LEARNINGEFFICIENT

OPERATIONS

E2E

PROCESSES

INNOVATIVE

ORGANIZATIONAND CULTURE

DISTRIBUTION

MARKETING

DIGITIZED ADMINAND SUPPORT

NEXT GENERATIONRISK AND PRICING

2-SPEED IT

CUSTOMER

SERVICE



RETAIL ASSET

GATHERING

C/A

B2C

PAYMENTS SELF-LEARNING

EFFICIENT

OPERATIONS

E2EPROCESSES LENDING

INNOVATIVE

ORGANIZATION

ANDCULTURE

DISTRIBUTION

MARKETING

CAPITAL

MARKETS

ANDAM

DIGITIZEDADMIN

ANDSUPPORT

NEXTGENERATION

RISKANDPRICING

CASH

MANAGEMENT

LENDING

2-SPEEDIT

B2B

PAYMENTS

CUSTOMER

SERVICE

Banks need to proactively follow innovative ideas from inside and outside

banking, including ideas from thousands of FinTech startups


ILLUSTRATIVE

OUTSOURCED/

SAAS SERVICES

CRYPTO-CURRENCY

MARKETING AND LOYALTY

SOLUTIONS FOR SMEs

E-COMMERCE /

E-TRAILER

DIGITAL PRODUCT

AND IN-APP PURCHASES

ADVERTISEMENTS

AND DISCOUNTS

SOCIALIZING FINANCE AND

USER GENERATED CONTENT

GAMBLING

AND GAMING

INNOVATIVE LENDING

PLATFORMS

P2P AND CROWDSOURCING)

PERSONAL FINANCIAL

MANAGEMENT

BIG DATA DRIVEN

SCORING AND LENDING

NEXT GENERATION

INSURANCE

CLOUD BASED

SERVICES

B2B SERVICE

PROVIDING

FINANCIAL

MANAGEMENT

AND LENDING

Link LikeLove

E2E SERVICE IN

SELECTED VERTICALS

REINVENTED

REMITTANCE

CROWD INVESTMENT

AND ADVISORY

NEXT

GENERATION

PAYMENTS

P2P PAYMENTS

FINANCIAL

INCLUSION



McKinsey & Company 8|

Digital players in China are at the forefront of creating such ecosystems

by expanding their core capabilities

SOURCE: McKinsey

e-Commerce

Online

search

Social

media

Ad

union

IM

payment

Security

Financialservices

Entertainment

Smart devices

O2O

ads

Yu’e Bao: AuM

$93+ billion

Sesame Credit: credit score for

300+ million

Alipay:

800+ millionNumber of registered accounts

Ant Micro Loans: SME loans

$12+ billion

WeBank: Total loan credit line for

SMEs: $300+ million

WeChat: Social and mobile wallet app with

650+ million monthly active users




Several core elements of the new business model are visible

across the value chain, but it’s not easy for banks to adapt

SOURCE: McKinsey

Control the retail value chain

One-stop Shop for Corporates

Robo-advisory

Emerging post-trade services in CMIB

Self-learning e-operations

Big data-based real-time risk management

Augmented reality-based servicing

Fully personalized and automated customer servicing




Fintechs have six markers of success which make them easy to achieve

this transformation, well ahead of banks

SOURCE: McKinsey

Advantaged modes of customer acquisition

Fintech attackers need to find ways to attract customers cost-effectively, e.g. via partnerships anddistribution agreements, an alternative way payments POS attacker Poynt is increasing its scale

Step-function reduction in the cost to serve

The erosion of the advantages of physical distribution make this a distinctive marker for the disruptiveFinTech attackers, e.g. FinTech lenders have up to 400 bps cost advantage over banks

Innovative uses of data

Big Data and advanced analytics allow Fintechs to experiment with new credit scoring approaches

and to understand customer needs or “next best actions”, e.g. by leveraging social media data

Segment specific propositions

Successful Fintech attackers will cherry pick from banking products and excel only in that segment,e.g. Wealthfront targets fee-averse Millenials who favor automated service over human advisors

Leveraging existing infrastructure

Fintech attackers embrace “co-opetition” and find ways to engage with existing ecosystem of banks,

e.g. Lending Club’s credit supplier is Web Bank, PayPal’s merchant acquirer is Wells Fargo

Managing risk and regulatory stakeholders

Regulation is a key swing factor in how Fintech disruption could play out as once these attackersreach scale they will attract more regulatory attention and the ones lacking the required capabilitiescould easily fail

1

2

3

4

5

6




Financial attackers can choose from three different strategic directions

SOURCE: McKinsey

Compete with

and disruptthe banks

Disintermediate the customer

ownership of banks

Cooperate

and partnerwith banks

5-10

20-30

60-75

%Share offintechs

1 3

2




True transformation and innovation in banking can only be achieved

through banks partnering with Fintechs along three pillars

Customer acquisition and retention – banks bring large,established customer bases, while non-banks give accessto ‘sticky’ and innovative products to increase involvement

Regulatory and risk management – banking players havesophisticated practices, which non-banks will likely needgoing forward entering the financial services option space

Refining and scaling new tech – collaboration providesan opportunity to pressure test innovations and expand tonew markets or demographics

NOT EXHAUSTIVE

SOURCE: McKinsey




Partnerships between start-ups and banks take many different forms

SOURCE: McKinsey

Degree of

affiliation

High

Low Access to technology – e.g., PayPal Sandboxallowing developers to test PayPal applicationcomponents; Metro Bank agreement to use Zopa’s

P2P platform to expand lending services to its clients

Investment in products – e.g., Santander agreementto purchase up to 25% of Lending Club’s totalorigination for 3 years

Alliances – e.g., Santander and Funding Circlepartnership agreement to transfer leads of loans thatSantander is not able to finance

Funding – e.g., Credit Suisse led $165 M Series D

financing for Prosper based on a $1.9 B valuation

Acquisition – e.g., BBVA purchase of Simple andHolvi




2015 global net profits by industry, USD trillion

Bankingand asset

management

1.3

Printing &publishing

0.1

The financial industry has a much larger profit pool than recently disrupted industries

This business transformation heralds the largest industry transformation

in history and provides a great opportunity for innovation

SOURCE: World Industry Service

1 Excluding motor vehicles 2 Transmission of sound, images, data or other information via cables, broadcasting, relay or satellite

Communi-

cations2

0.5

Retail sector1

0.7

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