Enabling Innovations on self service channels to reduce costs and drive revenue

1. Enabling Innovations on self service channelsto reduce costs and drive revenue Javier Hermida CR2 www.CR2.com

2. The importance of innovation in Self-Service Banking www.CR2.com • Reduce costs • Drive new revenues • Increase Customer Satisfaction • Acquire New Customers • Ensure customer Stickiness & Brand Loyalty • Treat the customer consistently

3. The customer has left the building!… and he is not coming back ! www.CR2.com • The World is moving to Self Service • Shopping - Physical and online • Travel – Check in and Reservation • Music – Funding & Purchasing • Banking ?

4. Bank 2.0 www.CR2.com • Bank visits have declined in the US by 20% in the last decade • 88% of Swedes did not visit a bank branch in 2009 • 6 out of 10 people who use Twitter use mobile banking to manage their bank accounts • 95% of US banking customers own a mobile phone • By 2015 1 in 5 adultswill use Mobile Banking as their primary channel

5. Five low-cost activities consume more than 80% of branch time 21.1% withdrawals 81.7% 20.0% deposits 19.8% enquiries 15.5% Business deposits Passbook updates 5.3% The Branch – Self Service & Selling Time analysis of a typical branch Sales activity 18.3% Services activity Source: Darja Bank 5

6. 80% of all transactions should be self service CRM Branch ATM SMS Internet Of the 23% of transactions which go through the branch, 82% are low value transactions Leaving just 4.4% of customer transactions available for CRM 6

7. 80% of all transactions should be unassisted CRM Branch ATM SMS Internet 20% of transactions which go through the branch. Leaving just 4.4% of customer transactions available for CRM 81.7% of branch transactions are for low value transactions where no CRM is applied 7

8. 80% of all transactions should be unassisted CRM Branch ATM SMS Internet Of the 40% of transactions which go through the branch, 80% are low value transactions Leaving just 8% Of total customer interactions available for selling in the branch 8

9. How do we reach High potential customers in the branch? Requires a teller Service can be automated High value, one-to-one Interaction required Low value, secure transactions: Withdraw cash Deposit cash Statement Balance etc 9

10. One size fits all What is the Greatest weakness in today’s Self Service banking ? www.CR2.com

11. The Key to Innovation on Self Service – Segment Segment Segment • Offer Appropriate Transaction mix and branding to clustomer segments both on Internet and ATM, eg. • Not on us – Cross Sell and Acquire non customers • High Net Worth • Mass Affluent • Students • Personalise !

12. Cross selling the customer on self service Google does it with a lot less information Banks process 50 Billion transactions per year on ATMs alone. Think of how much customer information banks have but do not use. You know who your customers are but you treat them like you don’t ! Google processes 23 Billion searches per year; their advert revenue is driven off very little information.

13. Why banks have difficulties to sell at the self-service channels? www.CR2.com

14. A traditional legacy problem

15. Innovating at the Self Service Channels with BankWorld One channel, multiple devices

16. Mortgage High Net WorthInternet Banking StudentDebit CardOpportunity Car Loan Opportunity Personal Loan Opportunity Insurance Cross-Sell Opportunity Internet Banking Deposit Account Screen 3 Ad campaign chosen based on demographic … … and delivered to ATM 4 6 No interest shown. Proceed with service and feedback to Profile Card read to obtain Customer Profile 1 Name: John Smith Acc No: 667 389 245 Sort Co: 78-00-21 Bank: ABank Age: 22 Address: 18a Shore Court Yes chosen. Initiate sale 5 Demographic-based Campaigns on ATM Select relevant campaign 2

17. Segmentation on ATM

18. Segmentation on Internet Segmentation on Internet

19. Migrating transactions from the branch to the self service channels Why & How

20. Self Service Banking- reducing the cost to serve by 20% ? Can we? “The right multichannel strategy can lower a bank’s cost-to-service by 20 percent” According to a recent report from the Boston Consulting Group; “A multichannel strategy can complement the branch network and bolster a bank’s local market share. In our experience, it can boost new account growth by 10 -15 percent, improve cross selling by 2 -5 percent, and reduce attrition also by 2-5 percent and also reduce the cost to serve by 10-20 percent.

21. COST COST AND MORE COST - Average Cost per transaction Self service transactions cost up to 10 times less than branch transactions Source BAI

22. How to reduce the cost of doing business? • Move away from people intensive branch, teller and call centre channels to the electronic channels • Use your branch staff more effectively to sell and assist • Reduce the cost of running the systems: Single Platform • Lower the cost of instruction acquisition by migrating regular payment instructions or account enquiries to self service • Increase your fee income for customers that choose manual processing • Open up payment services to non customers and increase fee revenues

23. Broaden The Transaction Mix On ATMs eg. Personalised Payments Move remittances from branch counter to the ATM Personalise the payment options per customer, Assign Nicknames and make them available on all channels Reduce the cost of acquiring the instruction Reduce the risk of STP failure by eliminating paper based form being re–keyed for a SWIFT or other electronic transfer Make remittances a self service only business 23

24. Personalised Payments & Remittances– cont. Improve customer service by making the transaction available 24 x 7 x 365 Encourage the use of the self service channel through appropriate pricing policies Empty the branches in order to focus on sales activity 24

25. Opening up payment services to non customersBill Payments for Non Customers

26. Leverage your existing Infrastructure Open up payment services to non customers ATM is your most popular channel – but also a significant investment There is a large no. of unbanked customers who wish to make payments with Cash Examples are utilities, School fees, Govt services etc. Other examples FX exchange, money vouchers Create new sources of fee income by offering these payment services on the ATMs There is also an opportunity to generate revenues from the customer or the billing party It utilises existing infrastructure

27. Reducing the cost of Fraud

28. Costs Revenue Merchants fraud: $10 Billion in USA $9 Billion in 2004 to $21 Billion in 2009 Ave transaction 16.6 / month / ave value $38 / 44Billion Txs in 2009) 1-1.5% interchange fee Buy Buy Identity theft: $1 Billion in USA $2.5 Billion in Canada $6 Billion in Australia BANK Potential growth: 6 out of 10 transactions are cash 171 billion cash Txs in 2009 Banks: $20 to reissue card $160 per incident Debit card losses in USA: $1.24 Billion $ $ $ $ $ 10 10 10 10 10 Fraudsters are full time, focused and are technically competent Potential threat: PayPal

29. Customer Loss Card is linked to current account Total loss of balance Bounced cheques Inability to access funds while travelling Cost of fraud prevention Cost of fraud Often loss of account Loss of card revenue Often all foreign transactions are stopped (High Value) Often even local transactions are stopped Significant fees lost Cost of investigating fraud Consequences for the customer & bank of debit card fraud • Customer Reaction • 30% close account with the bank irrespective of who is at fault < Home

30. Decoupled cards Card Account is linked to a funding Account Customer has immediate control over the level of funds in the card account This real time control is managed through the Mobile or Internet Channels This significantly lowers the risk of loss of funds 30

31. User Card control StopCARD #1 Cancel Send 1 StartCARD #1 Cancel Send 3 Sorry. Card #1 is Inactive 2 31 < Home

32. 1 5 2 Pay 1500.00 To 999999123456 ? 4 3 Cancel Approve One Time Password Post Transaction verification Online one time password (OTP) and Post transaction verification (PTV) The convenient way Browser Transfer money to: Amount: . 999999123456 1500 00 Continue >

33. If I am not alerted, there are no transactions happening on my account! If I do not authorise it, there are no transfers from my account CR2 approach - Peace of mind banking My cards are active when I decide to use them

34. In conclusion “The right multichannel strategy can lower a bank’s cost-to-service by 20 ++ percent” By reducing transaction processing costs by migrating transactions from the branch to self service channels By opening self service channels to non customers and generate new revenues By reducing the cost of fraud By reducing IT infrastructure costs 34

35. Traditional approach • Multichannel integration is a legacy problem. • It compromises security • It increases costs & complexity • Increases time to market • Compromises the customer experience One Channel – Multiple Devices CR2 Approach • One channel, one bank, multiple devices • Consistent Service • Personalised Service • Low value Transaction Migration • Segmented Sales on Self Service Operations Gateways

36. The importance of innovation in Self-Service Banking www.CR2.com • Reduce costs • Drive new revenues • Increase Customer Satisfaction • Acquire New Customers • Ensure customer Stickiness & Brand Loyalty • Treat the customer consistently

37. www.CR2.com Innovation Demonstration • Segmentation on ATM, Internet, Mobile • Not on us • VIP • Mass Affluent • Selling on ATM’s – Rapid product deployment • Personalised Payments • Cardless access to Accounts • Electronic Cheques – Cash-o-Gram • Card on Card Off