Putting "You" back into Value using analytics to shift antagonism to advocacy

1. Putting "You" back into Valueusing analytics to shift antagonism to advocacy Kevin Jury IBM Global Business Services Financial Services Sector Lead Partner 03 Nov 2011

2. Most Banks are driving simplification and modernisation activities as they progress their journey from multiple system environments DISTRIBUTION (Cust / Channel) DISTRIBUTION (Cust / Channel) Simplification MANUFACTURING (Product) OPERATIONS (Process) OPERATIONS (Process) People & Process Bank Bank Information Application Modernisation Application Enablement MANUFACTURING (Product) Infrastructure

3. Which is inching the Banks closer to the customer but is not maximising the value and speed of ROI DISTRIBUTION (Cust / Channel) • Good individual decisions made at the time • Solid delivery being achieved with costs being reduced • Most of these ‘new’ offerings still have the bank at the centre … not the customer • Disparate products, processes and channel interactions mean that customers are not reaping the rewards from the value exchange • The premier customer experience is still not being delivered nor seems achievable • The intelligence to run a business on data driven decisions has still not materialised OPERATIONS (Process) MANUFACTURING (Product) Bank 3

4. Why are the Banks only getting some of the potential benefits….

5. Why are the Banks only getting some of the potential benefits….

6. Recent Studies show…… “clients do not trust banks to offer products and services that are in the clients’ best interests” • The customer experience is better but not as good as it can/should be but remains bank/product centric • Banks need to gain a deeper understanding of their clients – what they value, what they need and what they expect • As such, banks must find a way to reconnect with their ever-evolving clients 6 6

7. 61% Segmentation/targeting 46% Awareness/education 45% Interest/desire 54% Action/buy 41% Use/enjoy Transaction focused Bond/advocate 40% Relationship focused Banks are still focused on transactions and not relationships ... • Looking at the customer lifecyclewe see banks using data primarily to segment and sell, not to generate awareness, stimulate interest and create customer “tribes” • It has been easy to get sales and segmentation data Missedopportunity Source: IBM Institute for Business Value, Global Chief Marketing Officer Study October 2011.

8. CEOs and CIOs are both highly focused on insights, clients, process and people … Financial Services CEO focus over the next 5 years Customer Experience 89% Getting closer to customer1 78% Insight and intelligence Information and insight People skills 83% 77% Client intimacy Secure Confidence Trust 72% People skills FlexibilityAgility Growth 71% Insight and intelligence 72% Risk management 67% New or different channels Cost Containment 62% Internal collaboration & Communications 53% Enterprise model changes 48% Revenue model changes Intelligent Process Management 47% Revenue model changes Sustainability Social Media 44% Enterprise model changes 43% Industry model changes 32% Industry model changes Source: 2010 CEO Study Q13: “Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years?” (n=1,523); 2011 CIO Study,Q13: “Where will you focus IT to help your organization’s strategy over the next 3 to 5 years?”; Global sample (n=3,018); Banking (n=311)

9. Bank executives want to run their business on data-driven decisions • Until recently most companies focused their analytics capabilities on reducing redundant reporting, data simplification, database consolidation and other efforts to create leaner information platforms • Business executives want scenarios and simulations to provide guidance on best actions to take • Business executives want better ways to understand, apply and communicate insights

10. The quest for better client insight?..........and barriers to gaining this insight Mature Markets Emerging Markets % Note: Question asked:. What are the biggest barriers to collecting additional client information to achieve the level of insight needed by the bank? Select up to 3 Source: IBV EIU Business Analytics in Banking Survey 2010; n = 235

11. So what should we be solving for? • How do we leverage the valuable data we have? • Are we creating a bespoke product variant or bundle for the client? • Do the branch/contact centres have any more insight about the client they’re dealing with than before? • Is the client being treated as individual / a segment of one? • Are we making better use of data to understand credit risk? • Is data streamed real-time to support data driven decisions and modelling? • Are productivity improvements being identified and being applied across all relevant processes / operations? • Are clients that are affected by incidents being informed pro-actively? • Does the Bank know the best channel/mechanism to push calls-to-action to for each client?

12. As a result, IBM’s point of view is that banking solutions need to become instrumented, interconnected and intelligent… Drive a simplified and streamlined agile enterprise that balances growth, efficiency and business resiliency An opportunity for banks to think and act in new ways. = In other words : • To ultimately use information for innovation! • To establish organisational DNA that strives to supplement current data with future data and create “relevant content” for customers • To shift from a culture of decision-making by intuition to decision-making with science • To innovate and adapt, to develop products that don’t just meet, but anticipate your customers’ needs + Develop enterprise-wide capabilities to enable informed judgment, client-centricity and profitable growth + Achieve compliance objectives while mitigating operational risk, fighting crime and optimizing financial returns 12

13. What do we need to do? • Gather less data, get better alignment to needs, be “right here right now at the right time”

14. What do we need to do? • Gather less data, get better alignment to needs, be “right here right now at the right time” • Digitise the Distribution, Manufacturing and Operations platforms in a way that significantly drives simplification across the platforms Distribution Brand Affinity Self Service Branch Contact Centre Online Mobile Customer / Channel Reduced Cost Increased Efficiency Manufacturing Operations Quick Offer to Market Mortgage Loan Personal Loan ML Process Overdraft Process Savings Process Cheque Shares Pers Loan Process Product Process VARIANCE OFFER

15. What do we need to do? • Gather less data, get better alignment to needs, be “right here right now at the right time” • Digitise the Distribution, Manufacturing and Operations platforms in a way that significantly drives simplification across the platforms Distributin Distribution Brand Affinity Self Service Branch Branch • Put the customer at the heart of everything the Bank does • Treated like an individual / bespoke offerings • Portfolio based decisioning enables the Bank to make better offers and the client feel valued • Customer satisfaction / Emotional attachment • Desire to do more with the Bank • Why don’t you know that? -> how did you know that? Contact Centre Contact Centre Online Online Mobile Mobile Customer / Channel Fulfilment Needs RELEVANCE Reduced Cost Increased Efficiency Treatments Financials Analytics Manufacturing Operations Quick Offer to Market Mortgage Loan ML Process Personal Loan ML Process Overdraft Process Savings Process Cheque Rules Instantiation Shares Personal Loan Process Product Process OFFER VARIANCE Analytics is the missing link that will enable the maximum benefits to be realised from all of the work that has been undertaken – without it, the results will only ever be a portion of what they could be

16. Lets close the trilogy and create the guided customer sales and service experience” – lets create that part Digital and part Human customer experience 3 Imaginea scenario where…… 5 The product engine analyses the total value of the client to the Bank and assesses the suitability of the standard credit card products The customer confirms acceptance of the offer and provides a small amount of data (that the Bank doesn’t already have) to complete the application 1 A customer logs on to online banking 6 4 Fulfilment is executed automatically via STP and the client is provided with a printable set of credit card details they can use immediately whilst the card is dispatched in the post The decisionengine determines that a credit card with a lower annual fee and an interest rate 50bps lower than standard is appropriate and will be of interest 2 The website recognises from browsing info that the customer is looking for a new Credit card 7 One well serviced and delighted customer “The best way to get started is to stop talking and begin doing” Walt Disney 16