SMU Digital Banking Case Study: Branchless Banking & Payments in this Region (Singapore/South East Asia)

It is the mobile age. Smartphones and tablets have become incredibly popular in such a short span of time; providing access to internet services to a larger and broader demographic audience. The proliferation of social media, cloud applications, and e-commerce have redefined the banking expectations and needs of a customer. Therefore the mobile/internet channel is fast becoming a banking distribution channel that banks should focus on.

As this goes on, the widening of gap between customers and financial services would be inevitable. This leads to opportunities for new products, services, or even a new kind of "bank" to compete, disrupt the industry, and fulfil that demand.

The seminar will look at the importance, business model, implementation for mobile branchless banking & payment in this region (Singapore/South East Asia).

This presentation was given at Singapore Management University (SMU)

Transcript

1. Branchless Bank in this Region Singapore Management University SKBI Seminar, Feb 2015
2. TM Lee @tmlee Purdue 2012 Co-founder of CoinGecko
3. What is a Branchless Bank?
4. Branchless Bank Distribution channel strategy used for delivering financial services without relying on physical bank branches.
5. Branch Activity Preferences Open Account: 75% Buy Products: 65% Get Advice: 59% Deposit Funds: 58% Replace a Card: 37% Resolve an Issue: 36% Withdraw Funds: 26% Transfer Funds: 19% Research Products: 16% Check Balance: 6% http://novantas.com/wp-content/uploads/2013/10/consumers_stepping_away_branches.pdf
6. Branch Activity Preferences Apply for a loan: Branch Apply for a mortgage: Branch Apply for credit card: Internet Research a loan: Internet Research a mortgage: Internet Research a credit card: Internet http://www.pwc.com/en_US/us/financial-services/publications/viewpoints/assets/pwc-reinventing-banking-branch- network.pdf
7. Novantas (Banking Analytics & Advisory) shows that customers are broadly moving online for basic banking activities, yet still prefer the branch for high-value transactions. ~ Consumers in Motion: Stepping Away from the Branch
8. Is Branchless Banking Important? Branch Cost is Increasing (Declining ROI) http://www.pwc.com/en_US/us/financial-services/publications/viewpoints/assets/pwc-reinventing- banking-branch-network.pdf
9. The rise of the digital consumer and the high-cost infrastructure of physical banking locations are leading to a declining ROI for branches. If the branch model stays on its current course, it will become a financial burden to banks, cutting deep into cross-channel profitability. ~ Rebooting the branch: Reinventing branch banking in a multichannel, global environment
10. Millennials • Fastest growing consumers • Fight for lifetime loyalty • Mobile/Internet first • Want intimate banking relationship • Be in control • Different! Source: http://thefinancialbrand.com/43186/millennials-banking-research-facts/
11. “According to metric provider OpenSlate, 24-year old YouTube sensation PewDiePie, who narrates and records his gaming sessions, earns an estimated $5.4M per year from brands who advertise on his YouTube channel, which has 26.7 million subscribers. PewDiePie is part of multi-channel network Maker Studios, which was acquired by Disney earlier this year for $500 million.” - $25K for a 6-sec Vine video? Millennials Are Cashing In On Social Influence. Millennials are Influenced Differently
12. Is Branchless Banking Important? Growing Market Share of Millennials? http://www.pwc.com/en_US/us/financial-services/publications/viewpoints/assets/pwc-reinventing- banking-branch-network.pdf
13. Something has to change
14. Banks are pressured to redefine branches and optimize distribution channels
15. Millennial market share penetration Growing smartphone & internet penetration Gateway to developing nations Low cost infrastructure Scalability Mobile is a viable digital distribution channel.
17. Strive for 100x better...
18. Rethink Banking App in a Smartphone Expenditure Tracking Peer-to-Peer Payment Merchant Adoption Simple Bank
19. Rethink Banking App in a Smartphone Expenditure Tracking Peer-to-Peer Payment Merchant Adoption Simple Bank
20. Expenditure Tracking (Importance) • Overspending is a problem • Over S$10.42 billion in loans • Credit/Debit Card has no Display • Smartphone comes to the rescue!
21. Smart Categorize Set Personal Budget Pay Cue Indicator Warning Swiped Complete History Caution Good Saving Advice Invest Remaining Budget?
22. • Moven ◦ Moven Debit Card + NFC Card ◦ Expenditure Tracking ◦ App Alert ◦ Expenditure Analysis ◦ Multiple Cards Expenditure Tracking (Existing Player?)
23. Expenditure Tracking (Existing Player?)
24. • Acorns ◦ Invest Loose Change ◦ Automated Portfolio Management ◦ Connect Debit/Credit Cards ◦ Fees ($1/month, 1% annual fee) Expenditure Tracking (Existing Player?)
25. Expenditure Tracking (Existing Player?)
26. Expenditure Tracking (Revenue Model) • Advertisement on Products to help consumer better spend • Sell/Suggest Investment Vehicles • Sell/Suggest Insurance Products • Auto-Invest Micro Amount from savings
27. Expenditure Tracking (Is It Possible Here?) • Challenging • Policy on Customer Data • Cash Based Society • Data Scientists • Big Data + Machine Learning
28. Peer-to-Peer Payment Allows individual members to complete financial transactions with one another without cash/check.
29. Peer-to-Peer Payment (Importance) • Money is digital • Contact Book Integration • Send money to friends & family (Social) • Network Effect • Onboard “Pay By Phone” Behavior
30. Peer-to-Peer Payment (Example Use Cases) • Paying friends over meal • Getting paid by a service (ie. Uber, Airbnb)
31. Peer-to-Peer Payment (Existing Player?) • Yes, Venmo! • US Only • Strong Network Effect • Debit/Credit Card • Connect Bank via ACH (Free)
32. Peer-to-Peer Payment (Is It Possible Here?) • Yes, DBS Paylah! ◦ DBS Only ◦ Free ◦ UX Problem • Kashmi ◦ New Player ◦ Bank Agnostic + Debit Card ◦ Top Up & Withdrawal Fee
33. Peer-to-Peer Payment (Revenue Model) • Probably Zero Revenue • Transaction fee may be unreasonable • Unless used by Enterprises
34. Merchant Adoption • Direct Payment • Over POS System • Over E-Commerce Platform • Merchant Acceptance
35. Merchant Adoption (Importance) • Additional Utility for Consumer • Mobile Wallet Convenience • Source of Revenue
36. • Takes a transaction fee as a cut • Full stack: Fee can be competitive • Offer no fee if merchant choose not to withdraw (store the fund) • Loyalty Programme (Deals, Referral) Merchant Adoption (Revenue Model)
37. • AliPay • Apple Pay • Google Wallet • PayPal Merchant Adoption (Existing Player?)
38. Merchant Adoption (Is It Possible Here?) • Cash Based Society • Proprietary POS system • Transaction cost (vs. Cash) • Needs Network Effect
40. Problems with Existing Banking App • Slow • Friction • Feature Bloat • Minimal Mobile Integration • User Experience
41. Simple Bank • Can’t fit an entire E-banking into mobile • Reduce Friction • Focus on “On The Go” features ◦ Look up balances ◦ Pay people ◦ Credit Report • Mobile app as a simple switch • Web app remains as the banking hub
42. Security Pin Overview Pay People (P2P) Check Balances Total > $100? Total <= $100 2 Factor Send Check Loan Eligibility Recent Expenditures (Summary) Complete History 2 Factor View
43. Simple Bank (Is It Possible Here?) • Yes! • Same E-Banking App • Redefined User Experience • Understand Customers’ Behavior • Security VS Convenience
44. P2P Payment Remittance Simple Bank Expenditure Tracking Merchant Adoption Multi-Player Mode Builds network effect Piggyback on network Single Player Mode Global Gateway Save & Invest
45. Not quite done yet.. Is mobile alone sufficient?
46. Mobile as a distribution channel will streamline the majority of a customer’s banking need Not a silver bullet, there is only so much Mobile can do
47. Long Queue, a common sight, a problem Traditional branches are still relevant but it is surely going to disappear in the next few year
49. Hipster Bank Branches
50. Branch of the Future • Limited Advisory (Complex Products) • Minimal Staffing • Relationship Building • Demo Products • Flagship Branch (Reinforce brand) http://www.capgemini-consulting.com/the-future-of-bank-branches
51. Leading banks are moving away from “managing branches” and instead are “managing distribution” across all of the bank’s channels. ~ Rebooting the branch: Reinventing branch banking in a multichannel, global environment
52. - Brand - Product Advisory - Demo - Relationship Building - Check Balances - Expenditure Tracking - P2P Payment - Simple Banking - Banking Hub - Stock Trading - Manage Bills - Setup Automated Payment - Complex Banking - Manage Portfolios Mobile > On The Go Web > Complex Branch > Relationship
54. Who’s going to win in this distribution layer? Traditional Banks or Startups
55. Startup acts as a shell. Powered by a Traditional Bank.
56. Finish.
57. • Bank 3.0: Why Banking Is No Longer Somewhere You Go But Something You Do by Brett King http://www.amazon.com/Bank-3-0-Banking-Somewhere- Something-ebook/dp/B00AWSCC6A • Rebooting the branch: Reinventing branch banking in a multi-channel, global environment http://www.pwc.com/en_US/us/financial- services/publications/viewpoints/assets/pwc-reinventing-banking-branch-network.pdf Recommended Readings
58. Image Credits To :- http://www.dbs.com/annualreports/2012/img/customers3.jpg http://a4.mzstatic.com/us/r30/Purple4/v4/c4/3e/a3/c43ea345-bc74-0570-af6a-ff30bd317b3b/screen568x568.jpeg http://a2.mzstatic.com/us/r30/Purple6/v4/c2/f2/fc/c2f2fc01-4ebd-7692-0a15-ec04f1dfd540/screen568x568.jpeg http://www.jayleywoojiaqi.com/2011/06/invite-frank-by-ocbc.html http://www.dbs. com/newsroom/DBS_officially_launches_second_Remix_Branch_upping_the_ante_to_cater_to_students_and_y oung_adults_MIGRT http://www.straitstimes.com/breaking-news/money/story/posb-rolls-out-improvements-branches-cut-waiting- times-customers-20140203 https://www.veooz.com/news/GqHw9e.html http://blogs-images.forbes.com/gregpetro/files/2014/11/apple-pays-growth-curve-the-ramp-will-take-time.jpg http://www.thedrum.com/uploads/news/tmp/77017/alipay.jpg https://tctechcrunch2011.files.wordpress.com/2012/02/galaxy-nexus.jpg https://www.dbs.com.sg/personal/landing/paylah/images/promo-thumb-1.jpg http://e27.co/wp-content/uploads/2014/12/kashmi-header-final.png http://upload.wikimedia.org/wikipedia/commons/4/4f/Credit-cards.jpg http://i.i.cbsi.com/cnwk.1d/i/tim/2012/06/19/MacBook_Pro_15inch_3533010905.jpg http://friendlybooking.com/wp-content/uploads/2014/11/Chinatown-the-CBD-Singapore-Neighbourhoods-31.jpg https://www.apple.com/jobs/global/images/hero_retail_store_santamonica.jpg