designing next generation internet banking

Copyright © 2005 Accenture. All rights reserved.

Next GenerationMobile and Internet Banking

Copenhagen, November 17th 2005

Copyright © 2005 Accenture. All rights reserved. 2

Next Generation Internet BankingNext Generation Internet BankingNext Generation Mobile Financial ServicesNext Generation Mobile Financial Services


What happened?

1995 2000 2005

Internet Bankingspendings (banks)

forecast

forecastNumber of

Internet Banking

user

• In the late 1990s Internet Banking was thought to signal a revolution in banking distribution. Banks invested heavily in the development of the Internet channels.

• During dotcom fallout, it became apparent that Internet Banking was not the panacea banks had thought it to be. Between 2001 and 2004 Internet Banking investment growth experienced a significant slowdown.

• Nevertheless the customer base for Internet Banking was growing stadily over the last 5 years


In 2007 Internet and Mobile will be the dominant channels besides the branch

Primary Retail Banking Channel 2007

Branch 61%

Internet 24%

Don't know 3%

Self Service Terminals 3%

Mobile 9%

• Managing a bank account is the most popular online banking activity

• Internet Channel is the bankaccess to their most profitable clients

• Several banks in Europe and US are already highly effective offering Next Generation Internet Banking solutions with sales and earnings increasing up to 80%last year

Source: Forrester Research

European Internet banking customers numbers will increase at a compound annual growth rate of 9.1 per cent between 2003 and 2007

0

20000

40000

60000

80000

100000

2003 2004 2005 2006 2007

Inte

rnet

ban

king

cus

tom

ers,

'000

s

Source: DataMonitor:eBanking Strategies in Europe


Banks key pain points and opportunities regarding Internet Banking

Internet Banking user experience & functionality not comprehensive

Consumer confidence in security starts to reduce

Enhancing Internet Banking to become a sales channel

Internet Banking can be a driving part of an integrated channel mix

„Fixing“ existing problems Realizing existing opportunities

Internet Banking processes not realized as STP

Internet Banking solution not stable/scalable/flexible enough

Develop products and services customized to the Internet channel


Even leading Internet Banks are not in the top range in all functional categories

Accenture 2005 benchmark of banks with leading Internet Banking offerings shows these banks offer a comprehensive set if functionalities but differ in the various categories.

Product Fulfillmentfunctionality 1 62 3 4 5

Bank W

Bank S

Bank H

Bank P

Legend (achievement grade of functionality):Grade 1: 0%Grade 2: 20%Grade 3: 40%Grade 4: 60%Grade 5: 80%Grade 6: 100%

Bank N

Account Management

Source: Accenture Web Banking benchmark 2005

Bills and payments

Loans

Cards

Trading

Portfolio Management

Markets

Insurance

Personalization

Bank U

Alert Messages

Collaboration


When comparing authentication methods 3 different dimensions need to be analyzed: Security level, total costs and usability

• Authentication is the most visible security element to the customer and needs to be treated very thoroughly.

• Banks need to select their authentication methods according to the local market and their client needs• Selected authentication methods need to be continuous analyzed if they still fit the current situation.

Source: Celent, Accenture

Low High

Low

High

Total costs

Secu

rity

leve

l

UsernamePassword

TAN List

Challenge response(paper based)

Mobile deviceToken

MobileTAN/OTP

TAN List+ BEN Software PKI

HW Token

HW PKI

Low High

Low

High

Usability

Secu

rity

leve

l

UsernamePassword

TAN List

Challenge response(paper based)

Mobile deviceToken Mobile

TAN/OTP

TAN List+ BEN

Software PKI

HW Token

HW PKI


Example: Mobile Token


Internet Banking solutions with a state-of-the-art architecture can be implemented rapidly

• State-of-the-art IB solutions fulfill at least four criteria

• Based on international standards

• Model Driven Architecture

• Build according the SOA architecture stack

• The architecture itself has been tuned for high performance (both throughput and scalability)

• Todays Internet Banking solutions need to build on a component approach

• The abstraction of the design and build allows the underlying architecture to evolve without impacting the application

• Single components can be used to enhance or update the solution without replacing the entire platform

• Segment based differentiation and multi-branding for Internet Banking

• Standardized Internet banking offering – solution acquired not developed

• Adopted out-of-the box approach

• Started implementing Meridea packages in the beginning of August, 2005

• Piloted from 1st of September 2005

• Live on 27th of October 2005 in Singapore

• Total Effort < 1000 Mandays

Example of out-of-the-box Internet Banking installation


Improving the Internet Banking to a sales channel is one of the key concerns and opportunities of banks today

2. Advisory

3. Online contract closing

4. Needs driven offering

1. High usage frequency

5. Straight Through Processing

• Dialog with the customer

• Even if channel is anonym, customer information can be gathered

• Allow user to purchase as many bank products as possible online without physical paper involved

• limited by local regulations

• User needs to accept the Internet Banking offering as a state-of-the-art and easy-to-use offering

• The more daily Banking tasks the user executes via Internet Banking, the more he is approachable via Internet Banking to purchase banking products

• Fast response to client requests is key to high rate of completed sales processes

• STP is the base for quick and cost saving processing

• Users expect to get offers which consider his personal need

• offers do not necessarily include bank products only

• Use process integration of different channels to increase overall sales

• With proactive and reactive support of Internet clients via other channels sales rates can be increased


Channel mix will change in the future

• Average European Retail Bank- Simple online bank with low Online

banking penetration- The costly service channels are forced to

serve customers even for the simplest products

- Lot of manual transactions and processes

• Future Retail Bank- Rich online banking functionality with

high user penetration- Online bank can handle all simple

transactions but also expanding to management of more complex products

- Growing use of mobile channel- Service channels concentrate on

complex interactions and/or products- STP ratio for all transactions very high

Web

Simple

Com

plex

, Tim

e co

nsum

ing

Sim

ple,

Qui

ck

Complex

Call Center

ATM

Branch

Product Complexity

Inte

ract

ion

Com

plex

ity

Current Accounts Savings Credit Cards P&C Insurance Consumer Loans Mortgages Pensions

Web

Simple

Com

plex

, Tim

e co

nsum

ing

Sim

ple,

Qui

ck

Complex

Call Center

ATM

Branch

Product Complexity

Inte

ract

ion

Com

plex

ity

Current Accounts Savings Credit Cards P&C Insurance Consumer Loans Mortgages Pensions

Mobile


Northern Europe is leading in usage of Internet Banking

Usage of Internet Banking and Brokerage in selected European countries 2004. Percentage of population between the age of 16 to 74 years.

World class banks in terms of Internet Banking offerings

Source: Eurostat

7%

8%

9%

10%

12%

18%

22%

26%

35%

35%

40%

45%

50%

Lithuania

Portugal

Slowenia

Ireland

Lativa

Austria

UK

Germany

Estonia

Luxemburg

Sweden

Denmark

Finland • Sampo- Most successful Internet Banking

provider in terms of self-service-ratio. 3rd largest bank in Finland.

• Nordea- Biggest Internet Banking provider in

Nordic

• Wachovia- Leading Internet Banking provider in

the US

• Bank of America

- Successful Internet Banking provider in the US

• HSBC- Leading Internet Banking provider in

the UK

• Postbank- German Internet Banking provider

award winnerSource: Accenture


Next Generation Internet Banking

Next Generation Mobile Financial ServicesNext Generation Mobile Financial Services


How do we structure Mobile Financial Services?

Mobile Financial Services

Mobile banking services regarding accounts (transactions based)

Mobile banking services regarding depots (transaction based)

Mobile information services (no transactions)

MobileBanking/

Accounting

MobileBrokerage

MobileInfo services

P2P(People to People)

P2B(People to Business)

Payment at the Point of sales (POS)

Payment at a machine (e.g. ticket machine)

• Micro-payments

• Macro-payments

Mobile BankingProcessing of banking services where the bank customer uses a mobile device like a mobile phone or a PDA

Payment between two (private-) person

P2O(People to Online)

Mobile PaymentProcessing of payment transactions where at least the payee is using a mobile device for initiating, authorization and realization of payment

P2M(People to machine)

Payment of online-or mobile services

Message based (e.g. SMS)

Protocol based (Online browser for WAP, HTML)

Application based (e.g. Smart Client, application on SIM card)


Mobile Banking channels

Messaging

Simple to handle SMS to be used for bank or investment alerts

WAP Push for sending links to browsing services (included in message)

MMS for high quality marketing

Browsing

Online banking and investment services

More functionality, better user interface, services based on newest network and browser technology

Extends web functionality to be used on mobile phones

Smart Clients

On- and offline usage of banking and investment services

Extended functionality for end user

Local storage of personal and bank related information

Rich graphical capabilities to be used for branding purposes

High potential for innovative services

Basic phones

Enhancedphones

Smartphones


Consumers use value added services on their mobile phones

20042005

20062007

20082009

$0

$5 000

$10 000

$15 000

$20 000

$25 000

MEA S America N America Europe Asia-Pacific

Regional Mobile Content Revenues ($m), 2004-2009

Source: ARC Group, Mobile Transactions, March 2005


Mobile Banking today offers a full range of benefits for financial institutions

Improve Market Position and Brand Image• Strengthen brand positioning as innovative and future-oriented• Actively build the journey from eBanking to mBanking, ahead of competitors

Increase Customer Retention• Offer state-of-the-art services• Offer customers another channel communicating with the bank

• Create a status symbol

Acquire New Customers• Target customer which value mobility and real-time-control of their financials

• Target young customers

Grow Revenues and Profits• Exploit cross-sell potential within the customer base

• Recognize customers’ willingness to pay for mobile services

Save costs in reduced call center usage• Migrate customer from using the call center to using mobile banking

• Already a small percentage of migrated customer can save a lot money


Different mobile channels offer different advantages and need tobe customized to different user groups and functionalities – in general we see the future in combining SMS and SmartClient

• Low security level• Limited functionality• Enhanced usability via a

thin Java applet possible

• Ideal for basic functionality with low security requirements (alerts, account balance, stock price, etc.)

• Online & Offline capability• Low data traffic - low costs• Highest level of functionality• Secure HTTP Connection• Secure local storage of data• Personalised and branded

end user experiences• Over The Air (OTA)

installation and automatic updates

• Ideal for innovative & complex requirements requiring a high level of security

• Feature potential covers all aspects of Internet Banking

• Security level correlates to the configuration of the browser

• Functionality constrained by the limitations of the browser

• Performance usually be poor

• Online mode only

• Acceptable for basic functionality

• Provides maximum reach to customers as most phone have browsing capabilities already

SMS Banking Smart Client Mobile Browsing

+ +


Take aways

1. Banks need to include their Internet Banking into a strategic channel mix with clear channel roles and objectives

2. Banks need to enhance the Internet Banking to a sales channel leveraging its full potential

3. As a solid foundation banks need to first fix their existing problems and issues with their current Internet Banking solution

4. Mobile Banking will grow to a complementary channel for low complex services and will be successful based on the SmartClient technology


Backup


Most countries are still in an early stage regarding the mobile Payment life cycle

20%

40%

60%

80%

100%

USA FranceCanada

Czech RepublicHong Kong

Sweden, UK

Germany

Switzerland,The Netherlands

China

Italy

Finland,Japan

Spain

Austria,Norway,Singapore,Korea

mPaymentmaturity(relative)

0%

Embyonic Early Stage Developing Advanced Mature

Market maturity stageSource:Accenture 2005

ADL 2004


Categorizing mPayment into 4 different Use Cases

We only consider P2x user cases, which means that the payment sender is always a person and not a business. B2x user scenarios (payment sender is „mobile Business“) are no subject of this consideration.

Use Case Explanation Example Comp. Payment Methods

P2P (Person to Person) Payment interaction between two person predominantly in a private environment

• Portion on restaurant bill• Portion of present• Coffee cash box• Pocket money

• Cash• Money transfer

P2B (Person to Business)

Payment interaction between a customer and a business partner „face-to-face“

• Payment in a shop• Taxi

• Cash• ec/Credit Card• money transfer

P2M (Person to Machine)

Payment interaction between a customer and a machine (e.g. vending machine) with which the customer gets in contact directly

• Cigarette machine• Stamp machine• Ticket machine• Vending machine

• Cash• ec/Credit Card

P2O (Person to Online) Payment interaction between a customer and an online (Internet) or mobile trading platform

• Concert tickets• Ring tones• Video clips

• ec/Credit Card• money transfer• ePayment


Win-Win situations for all stake holders

• Looking for sales drivers in the form of new services such as mobile payment, in order to promote sales of devices or to open up new revenue streams

• Mobile payment will add to the value of mobile phones, and will position them even more firmly at the heart of everyday life.

MobileOperator

DeviceManufacturer

• Looking to realise contactless payments by using suitable chips, partly in response to increasing marginalisation by the card issuers.

• In this way, they are simplifying the payment process on the basis of the cashless payment procedures currently in use - card-based solutions and electronic payment networks

Credit CardAssociations

• Strongly promoting cashless payment transactions, using precisely such commonly-found technologies as mobile phones, in a bid to save on costs.

• Cash logistics costs can be reduced by up to 10%.

• In the UK alone, this would represent annual savings of several hundred millions of pounds

Banks

• Are attracted by the further reduction in costs per payment transaction offered by a mobile payment system.

• The key is that their businesses do not incur any more sizeable costs for the POS infrastructure.

Retailers

Co-operation is fundamental for success• Banks, credit card companies, handset manufacturers and telecommunications companies in Europe could achieve

sweeping success with the right innovative co-operation model• One-industry approaches fail (e.g. SIMPAY)• We can learn from Asia how to successful co-operate in this fieldVERY BUSY – WHAT IS THE SHORT MESSAGE HERE ?


Banks need to focus their Multichannel integration on the process level

Plattform

Data Process

• Data are shared between different channels

• E.g. call center agent can see what client is doing or did in the Internet channel

• One plattform (architecture, applications) for all channels

• Client processes can be performed via different channels

• E.g. loans application can be started in the Internet channel, adviced in the branch and closed via the call center

Implementing Multi Channel Integration on a process level:

• Provide better and consistent customer experience when using different channels for the same service/process (e.g. loan application)

• Realize long-term cost savings

• Share content and knowledge between different channels


The costs of serving the customer

- How many calls does your call center receive monthly? - How many of the calls are about routine queries (provision of services,

balance of next bill…) and could be handled through mobile self-service?Estimated saving / interaction: $xx

- How many paper-based bills are sent monthly?- How many of these could be replaced by mobile bill?

Estimated saving / bill: $xx

Time

In Europe a typical inbound call to contact centers

costs $5,50 *)

Cost per

Personal selling and service

Call center€ 5

€ 2

contact

€ 5

Pocket the PotentialSmartClientTechnology

*) source: Gartner


• A conclusion is needed.

• Furthermore a slide with a question mark

designing next generation internet banking

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