IS IT A BIRD? IS IT A PLANE? - NO, IT'S A BANK BRANCH - Retail Banker International
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September 2015 Issue 717 www.retailbankerinternational.com
IS IT A BIRD?
IS IT A PLANE?
NO, IT’S A BANK BRANCH
● FEATURE: Standard Chartered
● DIGITAL: CIBC
● ANALYSIS: Consumer Credit
● COMMENT: Dave Lewis, Alpha Insight
RBI 718 September.indd 1 02/10/2015 10:33:41
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Retail Banker International EDITOR’S LETTER
CONTENTS
3 COMMENT: DAVE LEWIS, ALPHA INSIGHT More choice & more banks does
Dave Lewis examines the current UK
banking market and how its customers
not automatically mean more
are becoming more accustomed to
digital alternatives competition
4 DISTRIBUTION: VIRGIN MONEY
T
Virgin Money has started rolling out its
new ‘Lounges’ across the UK, focused he ongoing investigation by the And there is the growing band of smaller
more on giving something back to its challengers and start-ups: OneSavings Bank,
consumers, rather than profit. Patrick
Competition and Markets Authority
Brusnahan investigates (CMA) into the UK’s retail banking Atom, Starling, CivilisedBank et al and just
market continues to fascinate. the other day another new entrant appeared
6 FEATURE: STANDARD CHARTERED
The latest note to be released by the CMA, on the scene in the guise of Secco Bank.
Throughout the entirety of 2015,
Standard Chartered has implemented on 24 September, was a summary of evidence The argument beloved of the analysts
changes across the board. How is the taken from TSB. goes something like this: the big banks have
restructuring process affecting the
bank? Xiou Ann Lim and Sruti Rao
I am obliged to TSB. Its evidence was can- unwieldy legacy IT systems, costly real estate
report did and, in part, advanced an argument I and horrendous compliance issues.
have been trying to get across for some time. The new players are small, nimble, inno-
8 DIGITAL: FNB
The note said: “TSB fundamentally vative, niche, and will have the winning cul-
South Africa’s oldest bank, First
National bank, is embracing the newest believed that more choice did not equal more ture of an Apple or a Google.
of technologies and is reaping the effective competition.” On the first point: the cost-income ratios
rewards and garnering acclaim for it.
Robin Arnfield reports
There seems to be an almost evangelical of the big 5 average out at about 63%; Vir-
belief on the part of the current government, gin, TSB, Bank of Ireland and NAB UK aver-
10 COMMENT: JOHN LUNN, MOORHOUSE the regulators, consultants and the new start- age out in the mid to high 60s.
The United Kingdom is one of the few ups that more players in the current account On the point of nimbleness and product
markets that is hanging on tightly to the
free current account model. However, market will, by definition, lead to more innovation, Tesco Bank took about four
people are now turning towards the effective competition. years to launch a current account and Sains-
charged model, whether their consumers
like it or not. John Lunn argues
Perhaps the emphasis ought to be placed bury’s has yet to dip its toe into that water.
on the word ‘effective’. As for the respective mobile bank offer-
11 DIGITAL: BANK LEUMI I’d go further and agree with the gist of ings – as things currently stand – can anyone
Bank Leumi is well on its way to TSB’s evidence: it rejected the commonly really suggest that the new players offer a
becoming a digital-first brand in Israel.
Patrick Brusnahan writes held view that the current banking model is better mobile banking experience or greater
outdated and will not survive. functionality than, say, Barclays or RBS?
12 DIGITAL: CIBC
I’ll make the less than bold forecast that The new players yet to launch have work
CIBC has been ahead of the pack in
Canada with regards to digital. It the Big 5 are not yet quaking in their boots to do and are up against big players with
launched Canada’s first mobile banking about the majority of the start-ups. deep pockets.
app and the country’s first NFC-enabled Not a week seems to go by without wildly I cannot help but think back to recent
mobile payment. What next? Robin
Arnfield reports outrageous claims being made by one other Raiffeisen Bank investor presentations; it
vested interest arguing that Barclays, HSBC, seems only yesterday but was in fact circa
15 ANALYSIS: CONSUMER CREDIT
Lloyds, RBS and Santander have had their 2010-2011.
Patrick Brusnahan writes on the
recovering consumer credit market day. It wanted to grow its retail business in
in the UK and how it’s improving its There are the larger challengers, for exam- Central and Eastern Europe – but, it argued,
reputation ple, Bank of Ireland UK, Virgin Money, NAB many of its target customers were frustrated
UK (Clydesdale/Yorkshire) and retailers such by traditional branch banking and the inflex-
as Tesco Bank, Sainsburys Bank and M&S ibility presented by banking in a physical
Bank. branch. (continued overleaf)
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www.retailbankerinternational.com September 2015 y 1
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NEWS: COMMENT Retail Banker International
Challenger banks and the corporation tax surcharge
Treasury officials discuss the proposed corporation tax surcharge with the challenger bank bosses, hoping
to increase competition in the marketplace. Simon Cadbury discusses the changes unveiled by George
Osborne, the UK’s Chancellor of the Exchequer, and whether or not they will make a difference
L
(continued from page 1) So it launched Zuno, a new digital bank ast week, the bosses of Britain’s leading challenger banks met
offering a comprehensive range of services online, on mobile to win with Charles Roxburgh and other Treasury officials to dispute
next generation, internet-savvy customers. Zuno would expand its the proposed corporation tax surcharge.
customer base and support its ambitious business growth objectives. This meeting follows months of debate and opposition
Fast forward to September 2015 and Raiffeisen has just disposed from the challenger banks. This is unsurprising given the surcharge
of the still loss-making Zuno subsidiary, but no matter. threatens to give the more well-established and highly subsidised
It will be no surprise to see one or more of the established Big 5 high street banks an unfair advantage over challenger banks and
snapping up some of the current digital start-ups – in or about 2018- newcomers to the highly competitive financial services industry.
2019 would be a fair guess - and hopefully the challengers will be First unveiled during Chancellor George Osborne’s Budget in July,
able to cash out for a healthy profit. the new tax will mean an 8% banking tax surcharge, on top of
By then perhaps, Clydesdale/Yorkshire might finally have found corporation tax, on lenders’ profits in excess of £25m ($37.8m).
new and rather more enthusiastic owners than NAB. This would favour larger players in the industry since, due to the
In an attempt to be positive for the UK challengers: at the margins Chancellor’s reduction of the bank levy, bigger banks are expected
and where an underserved niche of the market is served, there is to pay less overall. Meanwhile, the smaller challengers would have
indeed a fantastic opportunity. to pay more than ever before in tax.
Shawbrook and Aldermore, for example, grew their loans to cus- This financial stranglehold is therefore dangerous to challenger
tomers at CAGRs of over 80% and 50% in the period from 2012 banks, and poses a threat to their crucial role as competitors and
to 2014. disruptors within the industry.
The new players are successfully growing their net interest margins It’s been a record year for challenger banks and the increasingly
(NIMs) ahead of the big 5 largely due to the type of customers they emergent FinTech industry. For example, earlier this year, Intelli-
have been targeting. gent Environments announced a partnership with the UK’s first ever
One thing is certain: the market is going to remain hugely fun to digital-only bank Atom to deliver a unique mobile banking solution
cover and become even more cluttered. to the market.
Challenger banks, in partnership with FinTech companies have
Level Playing Field? been undoubtedly leading the way in disrupting the financial servic-
Not content with unprecedented political support and encourage- es industry through innovation. In fact, according to a recent survey
ment and assistance from the regulators, the new players are mump- by Interim Partners, an interim management staff provider, more
ing and moaning about the way their profits are to be taxed. than three quarters of banking sector executives believe challenger
The challenger banks have mounted a vociferous campaign alleg- banks have a significant technological edge over high-street rivals.
ing that the established lenders will have an unfair advantage over However, this position is likely to be damaged unless the tax
challenger banks and start-ups relating to the banking tax surcharge. surcharge proposals are reconsidered. The UK FinTech sector is
What they need, they argue, is a ‘level playing field’. currently working hand-in-hand with challenger banks to develop
UK finance minister George Osborne announced in July that the innovative and, crucially, market-leading, competitive products for
new tax will mean an 8% banking tax surcharge, on top of corpora- banking customers. With these higher taxes in place, challenger
tion tax, on lenders’ profits in excess of £25m ($37.8m). banks may struggle to invest in such innovations to the degree they
Leaving aside the rather obvious point that many of the challenger are currently able to.
banks will not make a profit of £25m for some time – Metro Bank During last week’s meeting, a tiered structure for the tax was pro-
for example is yet to break even – the challengers and start-ups are posed, and it was also argued that the rules governing the amount
unlikely to win this arguement. of capital that can be held by the larger banks need to be changed in
It is a bit rich to claim that Osborne’s modest proposal will some- order to level the playing field. However, definite reconsiderations
how stifle the UK fintech sector or strangle at birth the many new have yet to be confirmed, and early reports suggest little movement
banks at varying stages of the licensing process. at present.
The new players would no doubt welcome some kind of tiered The implications of the tax surcharge for the emergent Fintech
structure for the banking surcharge; no doubt they would welcome sector in the UK are clear, as are the implications to challenger
Osborne penalising the established players by varying the amount of banks and their customers. Although it remains to be seen what the
capital they need to hold. long-term outcomes will be, hopefully a solution can be arrived at
I expect Osborne to stand his ground and he will be right do so. < whereby the government’s desire for a “more vibrant and competi-
tive banking sector with new banks and more innovation” can come
to fruition. <
Douglas Blakey
Douglas.Blakey@retailbankerinternational.com Simon Cadbury
2 y September 2015 www.retailbankerinternational.com
RBI 718 September.indd 2 02/10/2015 10:33:44
Retail Banker International COMMENT: DAVE LEWIS, ALPHA INSIGHT
Moving to the digital interface requires
a higher level of process monitoring
Having survived the financial crisis seven years ago, the UK’s retail banking sector now faces a more long-
term set of challenges.Dave Lewis, director of Alpha Insight, looks at the digital issues facing the retail
banking industry in the United Kingdom and how banks can serve its digital-savvy consumers’ needs
A
longside the ever-growing and Inevitably, banks are seeking to satisfy the but without the benefit of business context,
increasingly complex requirements requirements of their ever-more tech-savvy they are of little use. Alerts may be triggered,
of the regulatory authorities, the customers by moving to predominantly but who knows what they mean in terms of
banking market is chang- digital interaction. It is a strategy that relevance to critical business operations?
ing rapidly as customers opt makes obvious sense, yet carries
to access services digitally – with it the implicit promise Looking outside the box
especially via smartphones. to consumers of rock-solid If banks are going to provide customers with
As well as having to reliability and efficiency the experience they now demand, they must
adapt to this huge shift in payment and transac- ask what their systems are supposed to do
in demand, the banking tion processing, which for clients and how that is to be measured.
market is also seeing must be fulfilled. Fail- It is a question of deciding what is really
major disruption with ure to do so will incur important from among the billions of pos-
the emergence of new severe reputational and sible metrics – of applying the right business
challenger banks, finan- financial damage. logic. All banks have monitoring tools, but
cial technology compa- Relying on existing most are bogged down in the detail. They
nies and new payment sys- generic monitoring solu- lack the real-time view of what is really criti-
tems. It is now possible, for tions may seem reassuring, cal which would give banks the chance to
example, to pay by Twitter. but to be on top of the entire intervene before processes collapse.
end-to-end system requires a more What a bank needs is a tool that sits on
Digital migration advanced form of business logic that is fully top of conventional monitoring solutions
This year, the industry body, the BBA, embedded and supplies the correct business and has the logic and intelligence to com-
expects the number of transactions com- context. prehend the bigger picture so it can predict a
pleted on mobile phones to hit 895 million, This is especially necessary when banks, failure, allowing the bank to take preventive
compared with 427 million conducted in particularly the larger ones, are burdened action that removes the threat before dam-
branches. Indeed, last year, transactions in with complex and inflexible IT systems that age is inflicted.
branches declined by six per cent. By 2020, have been built and acquired in piecemeal It should establish key metrics and meas-
the BBA expects 2.34 trillion transactions layers over the last 20 years. Such systems ure performance against them, building
will be conducted via mobile devices. are hard to integrate with a digital front-end them into a dashboard, supplying business
As an indicator of how mobile banking so that customers can be provided with a context and insight.
has taken off, the BBA cites the 22.9 mil- coherent and seamless experience. In simple terms, the bank monitors what
lion banking apps that have now been Indeed, without advanced solutions, the matters, taking conventional end-to-end
downloaded by UK bank customers, a rise of complexity of legacy banking systems, exac- flow monitoring and boosting its value many
8.2 million in one year. A recent Euromoni- erbated by constant out-sourcing of func- times by applying its own business logic to
tor survey also backs this up, placing the UK tions, makes truly meaningful end-to-end put key metrics in context.
at the upper end of rankings that measure transparency near-impossible and leaves Such a solution will tell the user at a
different countries’ use of smartphones for banks vulnerable to failures. glance which of their critical processes is
banking services. Some 36 per cent of UK If we consider the recent high-profile working well and what they should be wor-
consumers had used their device for this pur- failures of major UK banks to complete rying about. It can quickly be implemented
pose in a single month. payments, we can see the scale of the prob- as an add-on, without the need to overhaul
Besides the technological challenges, lem. Institutions with complicated systems an entire IT estate.
banks of all sizes also have to face up to monitoring millions of transactions have If a bank has this end-to-end view of its
declining rates of satisfaction among their been unable to sort the wheat from the chaff processes and fully understands how they
customers, who now expect them to provide when critical processes are heading towards interlink and function, it will have greater
the same fast and simple mobile or online failure. reassurance that in an age of 24/7 online and
interactions that they enjoy with established The lack of transparency means nobody mobile banking, it is providing customers
digital retailers, for example. In Capgemi- really understands what is critical. When with the services they want.
ni’s 2015 World Retail Banking Report, the market conditions lead to a sudden spike All the more vital in an age when banks
UK registered a decline in satisfaction lev- in activity, such as a significant increase in have to become truly digital organisations,
els between 2013 and 2015, dropping 2.4 transactions, they never know if the system using speed, reliability and convenience as
points to 73.9 in the Customer Experience is coping until a problem hits them. important differentiators in a very competi-
Index. Banks may have sophisticated dashboards, tive market. <
www.retailbankerinternational.com September 2015 y 3
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DISTRIBUTION: VIRGIN MONEY Retail Banker International
Virgin Money refusing to lounge about
While a common thread in retail banking is either the stripping down of bank branches, or a shuttering of
them entirely, Virgin Money has decided to take a new approach. The launch of the lender’s Virgin Money
Lounges is trying to bring a cushier experience to bricks-and-mortar banking. Patrick Brusnahan writes
B
ranches are not very popular at the one solitary ATM, the building looks noth- Brodie said: “We found there was a power
moment. More than 600 branches ing like a bank. between the concept of a lounge and the
in the UK are set to close this year Features include comfortable seating, free concept of a store and, increasingly, these
(according to the Campaign for computer usage (on desktops and iPads), tea concepts were starting to come together into
Community Banking) – a significant increase and coffee facilities, a virtual fish tank, and one experience. It was a case of ‘How do
from the 479 closed in 2014. New banks even a self-playing piano. Financial features you start to bring the concepts together and
coming into the market, such as Atom Bank, include on-site staff and huge touchscreens make them more powerful as a one, rather
Mondo Bank and Starling Bank, have decid- to browse and learn more about products. than two separates?’
ed to ignore the branch entirely and focus on Downstairs is where the tie-in to Virgin “The first one we did was in Glasgow. We
being either online- or mobile-only. Atlantic begins. The seats resemble those of moved a store which was in the secondary
However, Virgin Money is putting greater an aeroplane and there are even video screen or tertiary part of Glasgow and moved it to
focus on its stores and its new Virgin Money windows to make it seem as if the room is a prime site right in the middle of Glasgow.
Lounges which are ‘about more than money soraing through the air. We moved the store there and put the lounge
and banking’, according to the bank. It is certainly impressive, but why go to and created a very similar experience to [the
With six locations already set-up in the such lengths to provide an alternative bank- Haymarket lounge]. That does work for us.
UK, including a new airline-themed lounge ing experience? It’s quite symbolic of the general industry
in Haymarket, London, and another set When speaking to RBI, Brian Brodie, sales push away from product selling and hard
for Sheffield early next year, Virgin Money and marketing director at Virgin money, selling to something which allows the cus-
seems to consider the method to be the way said: “Firstly, the brand is synonymous with tomer to feel able that they can buy from us.
forward. being different and this is one of the mani- It’s more led by them than led by us and we
festations that have of that different. We think that’s where financial services needs to
Consumer comforts definitely wanted to do something which move to.”
Upon first entering the Haymarket lounge, is about giving something back to the con-
one thing comes immediately to mind. Bar sumer. It wasn’t just about buying a product Feedback and moving forward
from us, it was about an experience. While it remains early days, the new lounge
“What’s better than to have people engag- concept has been receiving very positive
Virgin Money ing with the brand in a social way rather feedback. According to Brodie, every cus-
Virgin Money, formerly Virgin Direct, was than in a commercial way? We believe that’s tomer that uses the lounge brings half a per-
launched in 1995 and is currently in three more endearing for a customer. son with them (on average). This is due to
markets (the UK, Australia, and South Africa). “If you think about us, we’re not the big- the lounge not being a selling zone and cus-
Its American arm entered into dissolution in gest bank in the world, so therefore we have tomers ‘don’t feel under any pressure when
2010. to figure out how we’re going to acquire they come in here’.
Virgin Money began plans to become new customers and this is one way of doing Brodie said: “Of course, that has a com-
a retail bank in 2007 with an attempt to it. However, this isn’t just about acquiring mercial benefit for us because, inevitably,
purchase Northern Rock. However, it was customers; it’s rewarding existing customers. people come into the experience and link
nationalised by the British Government in That combination is quite powerful.” it with their financial needs. The next time
February 2008. they need a savings product, we’ll be first
As a result, Virgin applied for its own Origins in their minds. So it works for them and it
banking license from the FSA (now known as This approach first emanated from the works for us. Everybody is better off.”
the FCA) in 2009 and gained one through the acquisition of Northern Rock by Virgin The reason Virgin Money was able to do
acquisition of Church House Trust the next Money. Before the move, Virgin Money was make a move such as this was due to the
year. It eventually bought Northern Rock in very much a digitally-led bank, which Bro- relatively high levels of trust that brand has
January 2012 and rebranded the business as die said it still was, but with the capture of obtained. Even before the post-financial
Virgin Money. Northern Rock, the bank suddenly had a lot crisis world, trust has been an invaluable
of physical outlets. resource for banks.
As of the lender’s recent half-year results,
The lounge idea was already in its early On this, Brodie commented: “We’re lucky
it had earned £81.8m in profit before tax, a
stages, but now the space was there to be enough that we’ve got that trust. Having
37% rise from the £59.7m collected in H1
able to realise the notion, despite some of the said that, trust is easily lost and hard to win.
2014.
outlets not being in the best location. It works for us, I believe, because of the
4 y September 2015 www.retailbankerinternational.com
RBI 718 September.indd 4 02/10/2015 10:33:48
Retail Banker International DISTRIBUTION: VIRGIN MONEY
nature of the brand which has a degree of will tell us. We think because of the physical interac-
uniqueness to it and a slight cockiness and “At the moment, the challenge for new tion between humans, the process becomes
funkiness. It allows space for the brand to banks is to get the right mix of customers more assisted. It’s a different experience to
do something like this. I think it would be to allow them to grow rather than just a if you just went online by yourself.”
difficult for our competitors to try and land group of consumers that may not have the Brodie concluded: “We’re definitely plan-
something like this.” dynamic to allow growth.” ning to open more [Virgin Money Lounges].
The main reasoning for the Virgin Money We’ve got another planned for the begin-
Branchless challengers Lounges is to find that perfect combination ning of next year in Sheffield and we’ll be
Upcoming entrants to the market have between ‘the human touch and the digital continuing to look at other sites. I think the
decided to skip the branch channel alto- experience’. way we describe this strategy is that it isn’t
gether and make everything completely dig- He said: “We’ve got 80 physical units, a Carphone Warehouse kind of approach
ital. While he sees the value in digital, Bro- therefore the physical part of our business with a store in every corner. That’s what
die felt that the physical channels should isn’t huge. About 70-75% of our business is most people are pulling back from.
not be underestimated as ‘consumers still digitally led. What we tend to do is advance “Concept-wise, this is as much about
want it’. the digital side of our business and drop being able to give something back to cus-
He added: “We definitely believe that that into the physical. As we develop things tomers than anything else because we
the world will be going mobile and we’ve online, we can deploy that in the stores. know that customers want to interact with
invested quite heavily in that. Almost 50% “It’s simply just trying to help the custom- us physically. The whole idea of what that
of our digital traffic comes through mobile. er through that process. When a customer physical experience is going to be in the
Whether people want to bank entirely on wants a product, we give them an iPad and future is definitely changing and this is part
mobile, if nothing else, I think the consumer that links into the digital experience online. of our approach to that.” <
www.retailbankerinternational.com September 2015 y 5
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FEATURE: STANDARD CHARTERED Retail Banker International
Standard Chartered gets a facelift –
What can we expect?
It has been a year of changes for Standard Chartered. In anticipation of its management meeting
happening in Singapore later this year, Retail Banker International’s Sruti Rao spoke to Karen Fawcett to
find out what developments are under way in their retail banking division. Report by Xiou Ann Lim
S
tandard Chartered is having an event- focusing on affluent and emerging affluent “It’s about concentration rather than
ful 2015 so far. With falling profit- individuals. “We recognise that we cannot spreading yourself too thin,” she added.
ability, the bank has had to undergo be all things to all people,” says group head
a massive restructuring exercise. As of retail clients Karen Fawcett. What does this mean in terms of cost?
part of former CEO Peter Sands’s aggressive “We want to build deep long-term relation- “Our costs are a little too high,” says Fawcett.
cost-cutting plans, the bank axed around ships, so we’re steering away from clients Currently at a cost-to-income ratio of nearly
4,000 jobs worldwide from its retail bank- who just want a single personal loan to those 70 per cent, the bank is targeting to bring
ing division earlier this year. It also exited who will have a multi-product relationship that down to about 55 per cent.
its non-core and underperforming global with us,” she says. “What we’d like to do is to keep the
cash equities business and announced that In fact, the Asia-focused British bank is momentum going, but at a lower cost,” she
it would close 80-100 of its retail branches. looking to grow together with its clients. In adds.
More interestingly, Sands himself exited a market like Singapore, for example, the The focus on cities also has far-reaching
the bank and was replaced by former J.P. bank is tapping the emerging affluent clients implications on the bank’s distribution.
Morgan investment banker Bill Winters. in the personal segment and migrating them “From a channel point of view, there is a
Winters, who assumed leadership in June, through to priority banking. lot of efficiency in being focused. We’re 2.5
sent out a letter to staff on his first day to “We spot them young, partner them at dif- times more efficient in strategic cities than
outline direction and announce changes. ferent life stages and serve their financial outside of them – so we’re very focused on
About a month later, he revealed a more needs as they build their wealth. So, we have staying in the right cities, where the emerg-
straightforward management structure as a continuum,” she explains. ing affluent and affluent clients are,” says
well as his intention to simplify operations. This heightened focus on banking afflu- Fawcett.
With a résumé vastly different from his pre- ent clients is interesting because while this She adds that they are also looking at
decessor’s, many wondered if Winters would segment currently makes up only one-tenth branches in outlying areas with less traf-
be steering the bank into a completely differ- of the bank’s 9 million retail clients, they fic and relocating them into urban centres,
ent direction. account for a third of the division’s income. where they can foster much better interac-
Thus far, the bank’s plan to streamline its Done right, and with suitable market con- tion with the bank’s clients.
retail division is very much on course. Rep- ditions, the bank could increase its profits
resenting about 33 per cent of group income, significantly. What is the digital strategy to complement
the retail business is seen as an important In line with this strategy, the bank is also this move?
driver of the bank’s growth. Earlier this focusing on high-growth cities – where there According to Fawcett, emerging markets are
year, the bank articulated a clear strategy of are high concentrations of affluent individu- moving a lot faster in terms of digital and
als seeking interna- smartphone adoption as compared to more
n STANDARD CHARTERED INCOME STATEMENT, DECEMBER 2014 (S$1000) tional banking solu- mature markets. She cautioned against the
tions and comprehen- assumption that emerging markets would
2013 2014 sive wealth solutions have to go through the same evolution as
Net interested income 121,235 520,925 and advice. “Our seen in Western Europe and the US.
Profit before income tax 56,628 184,119 footprint is now on “The markets are leapfrogging. Africa will
nearly half of the 100 go from handwritten application forms to
Income before operating expenses 194,520 815,149
fastest-growing cities fully mobile in one big step – there will be
Profit for the year/period 44,332 148,047 in the world,” says no gentle evolution as what we’ve previously
Source: Standard Chartered Bank Fawcett. seen.”
That is why the bank is revamping its
digital platform – so that clients can do, on
n STANDARD CHARTERED BANK (SINGAPORE) LIMITED CAR DISCLOSURE their mobile phones and online, everything
30-Jun-14 31-Dec-14 30-Jun-15 that they previously would have done in a
branch.
Common Equity Tier 1 Capital 1,418 1,534 1,539
Emphasising that the full capabilities of
Eleigible Tier 1 Capital 1,418 1,534 1,539 the bank need to be present in all channels,
Total Eligible Capital 2,236 2,372 2,373 she cites that the strategy follows what cli-
Total Risk Weighed Asset 17,076 17,068 16,645
ents want – convenience, ease of use and the
ability to get banking done whenever and
Source: Standard Chartered Bank
wherever they want.
6 y September 2015 www.retailbankerinternational.com
RBI 718 September.indd 6 02/10/2015 10:33:57
Retail Banker International FEATURE: STANDARD CHARTERED
One project that will be rolled out later
this year is the Retail Workbench, a tablet- A recap of Standard Chartered’s 2015 so far
based sales tool that enables staff to ‘bring’
the bank to clients – wherever they are. Cli- 8 January - The bank announces plans to axe corporation Daimler AG.
ents will no longer have to fill in and sign 4,000 retail banking jobs and shut down its 10 June - Winters sends out a letter to staff
multiple forms, as their data will be digi- institutional cash equities business, equity on his first day as CEO, pledging to focus on
research and equity capital market operations. capital and returns. The bank’s shares surge.
“Branches can become unused 26 February - Former J.P. Morgan banker Bill 19 June - In another letter to staff, Winters
space if you’re not careful” Winters is named incoming chief executive, announces a management shake-up – with 13
replacing Peter Sands. members of the senior management team to
tally captured once and processed. As for 4 March - The bank releases 2014 full-year report directly to him.
relationship managers, it means they have
results – “profits are down but there is a plan 5 August - Results for 1H 2015 are released,
the full profile of clients at their fingertips
– facilitating the process of offering tailored of action”. with a 44% fall in profits to $1.8 billion. Win-
solutions to meet specific client needs. 25 March - Michael Gorriz joins as group chief ters halves dividends but maintains investor
As Fawcett says: “It’s not about being information officer from German automotive confidence as shares surge 6.5 per cent.
multichannel or omnichannel. It’s about
being unichannel – it’s the channel clients
want. We are client-led, not digital-led.”
Does this mean retail branches will become
irrelevant?
Fawcett believes that branches are still
important as clients require face-to-face
interaction. But the bank has quickly real-
ised that people don’t want to go to branches
and stand in teller queues.
“Branches can become unused space if
you’re not careful,” she says.
She adds that branch transactions start
to fall as soon as there is a critical mass of
smartphone and smartphone apps in the
market. Speaking about retail branches, she
says: “We certainly don’t need as many and
their use will be different.”
She notes that clients now call and visit
the bank for more high-end problem-solving
or sales occasions. “So, this whole idea that
we’re building branches for presence is no
longer compelling.”
Fawcett stresses that the bank is finding
opportunities to do things in a more seam-
less, global and consistent fashion. With an
affluent population that is becoming more
international in working across borders,
multi-market capabilities are becoming
increasingly important.
“Think about the businessman who needs
cash management solutions across the coun-
tries to which he is exporting or the expatri-
ate who is working overseas and investing in
his home country or the parent who is fund-
ing his child’s overseas education,” she says.
“People want access to global products and
they want global recognition for their bank- Karen Fawcett, Group head of retail clients
ing relationship across countries.”
The restructuring of the retail business
is showing early signs of success according retail business operating profit rose by 14 while costs have come down by 5 per cent.
to the bank’s recently announced first half per cent to $680 million. Higher returning As Fawcett says: “Our strength is in our
2015 results. Priority and business clients now make up network. We have what it takes to be the
Although Standard Chartered saw a 44 46 per cent of the division’s income – com- world’s leader in affluent retail banking in
per cent dip in its 1H 2015 profits, the pared to 40 per cent in the first half of 2014, Asia, Africa and the Middle East.”<
www.retailbankerinternational.com September 2015 y 7
RBI 718 September.indd 7 02/10/2015 10:33:57
DIGITAL: FNB Retail Banker International
FNB leads South African digital banking market
Mobile app banking is the fastest growing digital channel at First National Bank (FNB), South Africa’s
oldest bank. The bank has won top ratings for its online and mobile banking platforms, but how is it taking
advantage of its new digital focus? Robin Arnfield reports on the bank’s technological progress
S
ahil Mungar, Head of Marketing for Blackberry platforms. ers along with prepaid, contract, and top-up
FNB Digital Banking, says:“FNB’s “Our tablet app is available on iOS, airtime deals. FNB said it is the first bank in
mobile banking app and cellphone Android and Windows, and includes Busi- South Africa to sell SIM cards.
banking service were ranked as the ness Banking features enabling enterprise According to South African press reports,
best in South Africa in the South African banking features such as dual-authorisation, FNB is using South African mobile operator
Consumer Site Satisfaction Index 2015.” collections, and payments,” Mungar says. Cell C as its partner for FNB Connect.
“Also, FNB Online Banking (FNB.co.za) According to an FNB press release, the FNB said that integrating its FNB Con-
was ranked number one by South Africa’s most popular transactions on the FNB Bank- nect service with its digital platforms such as
Columinate Internet Banking SITEisfaction ing App are payments, account transfers and Online Banking gives customers the benefit
Survey 2015. prepaid products. of a single login to simultaneously manage
“FNB’s banking app was ranked fourth Other transaction types that are popu- their financial and mobile accounts.
best globally in the MyPrivateBanking lar with FNB Banking App users are Send
Report, Mobile Apps for Wealth Manage- Money, iTunes gift codes, and card services Enhancements
ment 2015, and sixth best globally by the such as cancellations, upgrades and ordering “Last year, we decided to enhance the Bank-
UX (user experience) Alliance in March new cards. ing App across all device types with a new
2015,” Mungar adds. look and feel, and improved usa-
Launched in July 2011, the FNB “We’re getting a lot of repeat users of the cardless bility,” Mungar says.
Banking App is now used on over ATM withdrawal app. People are using the service “Our goal is to improve the
1.5 million active mobile devices. as they don’t want to carry cards” banking experience across all our
“FNB Banking App is our fast- digital platforms, for example by
est growing digital channel,” says
Sahil Mungar, Head of Marketing for FNB Digital Banking reducing the number of clicks and
Mungar. developing innovative solutions.
“It’s also the most downloaded app in the FNB Connect “We’re seeing that digital banking is
financial vertical across South Africa’s app Since 2011, FNB has sold 285,000 discount- becoming a preferred banking channel for
stores. We don’t break down user numbers ed smartphones and tablets to the bank’s many customers, and that they are finding
into smartphones and tablets, but, reflect- customers, and also offers broadband ADSL fewer reasons to use traditional banking
ing the fact that tablet ownership in South and 3G Internet packages. Around two mil- channels.”
Africa is lower than smartphone ownership, lion customers use FNB's digital channels to FNB’s Online Banking service has over
we have fewer tablet users than smartphone top-up airtime or electricity each month. 1.5 million active users. “Customers can
users.” In June 2015, FNB launched the FNB now download and link the FNB Banking
FNB’s smartphone app is natively avail- Connect mobile voice and data service, App to their devices without having to have
able for iOS, Android, Windows Mobile and offering FNB-branded SIM cards to custom- an existing Online Banking profile,” says
8 y September 2015 www.retailbankerinternational.com
RBI 718 September.indd 8 02/10/2015 10:33:59Retail Banker International DIGITAL: FNB
Mungar. fer services from South Africa to Zimbabwe transaction volumes between July 2014 and
“This improves customers’ ability to get and to Mozambique via Western Union for April 2015.
started with app banking immediately.” users of its Banking App, online banking and First introduced in 2013, there are now
FNB allows customers to open new cellphone banking services. 1,305 Slimline terminals in South Africa,
accounts and switch their banking to FNB Money can be collected at selected OK Ltd which includes terminals at remote locations
using its Banking App and Online Banking stores in Zimbabwe or at one of the 15 FNB across the country.
service. branches in Mozambique.
“The digital account-opening process takes Last year, FNB launched the Global Pay- dotFNB
under 10 minutes, at the end of which you’re ments services which allows mobile app and FNB opened its first dotFNB cashless and
given an account number,” says Mungar. online banking users to send and receive paperless branch in 2012, and has opened a
“You then wait a few days for your card to SWIFT payments to and from anywhere in further eight dotFNB branches around the
be delivered by a courier, who will carry out the world. country.
KYC verification on your doorstep.” The branches provides an environment in
Mungar says that all FNB’s channels, Cardless cash withdrawals which staff can help FNB customers migrate
including cellphones, online banking and In June 2015, FNB launched a cardless cash to the bank’s digital channels - App Banking,
the banking app, provide account manage- withdrawal service enabling Banking App cellphone banking and online banking – and
ment services, as well as personalised cross- users to withdraw cash from any FNB ATM show them how to use these channels.
sell capabilities offering existing customers using their smartphone. They offer deposit-taking ATMs, interac-
account upgrades, limit increases, invest- Users pre-stage the withdrawal on their tive financial planning Microsoft Surface
ments and credit products. smartphone, select cardless services on the tablets, and videoconferencing cubicles for
Because these offers are pre-approved, ATM, and enter their mobile number. interviews with remote subject specialists.
customers have the ability to sign up imme- They then receive a one-time PIN which is Customers can open FNB accounts at
diately for them via the channel they are valid for 30 minutes. the dotFNB branches and purchase smart-
using, he says. phones and tablets
“We’re seeing that digital banking is becoming a preferred banking which are bundled
Cellphone banking channel for many customers, and that they are finding fewer reasons to with the accounts.
The South African use traditional banking channels” “The dotFNB
banking market is store creates a bal-
Sahil Mungar, Head of Marketing for FNB Digital Banking
divided between ance between what
affluent customers we believe to be the
who are very tech-savvy and primarily use FNB launched its cellphone-based cardless future of banking and the need for human
digital channels, and low-income customers cash withdrawal service, which uses USSD, interaction,” Kim Gibson-van der Walt,
who have limited access to technology. in 2011. Head of dotFNB, FNB Banking Channels,
“These low-income consumers tend to use “So far, over R2 billion ($160 million) has said in a news release.
traditional channels and rely on cash in their been withdrawn from our ATMs via cell- He added: “Sales and service pods are
day-to-day activities,” says Mungar. phone,” Mungar says. designed in such a way that customers sit
FNB provides a Cellphone Banking ser- “Our initial prediction is that the cardless alongside the bankers, sharing the experi-
vice, which uses USSD (Unstructured Sup- cash withdrawal app will be even more pop- ence of discussing their banking portfolio,
plementary Service Data), a GSM protocol ular than the cellphone-based service due to choosing a device and setting it up with the
enabling cellphones to communicate with its intuitive user interface, much quicker pro- FNB digital channels.”
a service provider’s computers, for lower- cess, and the ubiquity of smartphones.
income consumers. “We’re getting a lot of repeat users of the Sensor technology
The service offers basic transactional cardless ATM withdrawal app. People are In February 2014, FNB introduced interac-
capabilities such as balance checks, prepaid using the service as they don’t want to carry tive gesture technology at its flagship Canal
airtime, data and electricity, and eWallets cards.” Walk dotFNB store.
which enable users to send money to any The motion sensor technology recognises
other cellphone. ATMs the movement of shoppers who pass by the
“Our cellphone banking service is popular FNB has over 2,000 ATMs in South Africa. store front, prompts advertising messaging,
with low-income customers, with over 2.5 Its ATMs range from ATM Advance ter- and allows people who choose to interact
million active users,” says Mungar. minals which offer a full range of services, with the screen to view FNB banking prod-
“Our eWallet mobile money service gets a including cash deposits, to mid-tier ATMs ucts and services.
lot of usage, due to the many migrant work- that dispense cash and offer account man- Customers can select a cheque account
ers in South Africa who need to send money agement services, and touchscreen-based and a bundled tablet or smartphone on the
home to relatives.” Slimline self-service terminals. spot by gesture browsing through a cata-
According to FNB, its eWallet service, “Slimline terminals offer bank account logue of the products available.
which is also available on the FNB Banking management facilities, but don’t dispense Once the customer has selected the bundle
App, saw a 95 percent growth in transaction cash,” says Mungar. of choice, a one-time code is displayed on
volume between May 2013 and April 2014. “They can dispense vouchers which cus- the screen that the customer sends via SMS
In addition to P2P transfers, eWallet- tomers use to withdraw cash from a point- to FNB.
holders can buy prepaid airtime, data and of-sale terminal, and are usually placed in The customer will then be called by a
electricity, pay bills and make purchases at convenience stores.” consultant within 24 hours to finalise the
selected retailers. According to a news release, FNB’s Slim- application process and ensure that the new
Since 2014, FNB has offered money trans- line terminals saw a 30 percent increase in account and smart device deal is active. <
www.retailbankerinternational.com September 2015 y 9
RBI 718 September.indd 9 02/10/2015 10:33:59COMMENT: JOHN LUNN, MOORHOUSE Retail Banker International
How much does a free bank account cost?
The UK is one of the only countries in the world that persists with the free banking model. But with paid
current accounts, such as Santander 123, gaining attention, how long will this model continue to exist? Is
there even such a thing as free banking on the high street for consumers? John Lunn argues
B
anks are still suffering the fall out the charges. one provider to another simpler.
from the financial crisis and the lat- Consumer research from PwC has found However, this service does not provide
est scandal never seems far from the that there would be stiff resistance from con- ANP as the customer is issued with a new
headlines. sumers to banks introducing charges to retail account and sort code upon switching.
Whether it’s PPI mis-selling or Libor rate- banking. If account numbers were fully portable, it
rigging, banks’ reputations continue to take Sixty-six per cent of consumers are aware would be similar to how we can now switch
a battering in the court of public opinion. of current account hidden charges and 50 mobile phone providers but still keep our
So it seems unlikely that any bank that per cent of customers would be likely to original phone number.
decided to introduce charges for all its change bank if an upfront fee was intro- If ANP was introduced, it would likely
accounts would see a stampede of customers duced. have biggest impact on challenger banks,
signing up, quite the opposite in fact. Sixty-two per cent of customers would not as their newer technology would probably
It seems counter-intuitive, but were banks be prepared to pay anything for their cur- mean they’d be able to offer cheaper services
to charge for their accounts it would actually rent accounts and 27 per cent would not pay than the legacy banks.
make their services more transparent. more than £10 a month. However, introducing APN would require
Currently they have to recoup losses from Submissions that have been made to huge investment from banks as their systems
providing free accounts from other areas the Competition and Markets Authority are not currently set up to offer this.
and services, such as charging for overdrafts. show differences in opinion between banks
If we all paid a fee for our accounts, we towards charging for accounts. Steps already in motion
would be able to choose the level of service Barclays seems indifferent, but recognises Charges for banking are not a new concept
we were willing to pay for and have total that it could promote competition; of course.
clarity about what we get for our money. Lloyds on the other hand believes it is a With credit cards for example, we have
It would also allow customers to earn a step too far as packaged accounts already long been able to see what they’d cost us a
fair level of interest; consumer advice organi- exist. year as well as any extras we’d get, such as
sation Which? estimates that customers miss Tesco sees the free account system as cash back or points towards air travel.
out on £9bn ($13.6bn) a year in fees and a barrier to entry as larger banks are able And HSBC already has a fee-paying model
lost interest. to subsidise their free accounts from other with a range of accounts with different
Fees for accounts would promote compe- sources. charges and levels of service.
tition by making it easier for people to com- On the other hand, Virgin believes a The trend is moving towards charging for
pare accounts to find the deal that best suits charge is necessary to promote competition. current accounts but it would be a brave
them and would also potentially mitigate the Any wholesale change in charging for institution indeed that implemented fees on
risk of mis-selling. bank accounts is likely to need to be driven all accounts.
by regulatory change. The mantle needs to be on banks to drive
Resistance from consumers Andrew Bailey, deputy Governor of the innovation in the products and services they
But abolishing the free banking model comes Bank of England and Andrew Tyrie MP are offer their clients, and if that means charging
with some big drawbacks, not least the risk both vocal critics of the free banking system. for them then there is nothing wrong with
of consumers seeing it as yet another attempt that.
for banks to get more of their hard earned How much is this going to cost? Banks need to put their customers at the
cash. The Financial Conduct Authority had previ- heart of everything they do and if they are
There is also some cynicism around ously commissioned a report (which Moor- successful in this they will design products
whether it would stop banks using unfair house supported) into the costs and benefits that their customers want and are willing to
charges or mis-selling as they could intro- of account number portability (ANP) as a pay for.
duce new fees or commission structures for way of increasing competition in banking. While it’s unlikely that free banking will
employees. ANP would make it easier for customers completely disappear in the United Kingdom,
Perhaps most importantly, it is a legal to switch provider, as they would retain the the direction of travel is very much towards
requirement for employers to pay salaries same unique account identifier. different tiers of accounts that offer different
into a bank account so charging for accounts The unique account identifier typically services for different fees. <
could be viewed as a new tax. comprises a six-digit sort code and an eight-
It is estimated that nine million people digit bank account number.
have basic accounts who would then need The Current Account Switch Service was
to pay, risking a two-tier banking system launched in September 2013 and is designed John Lunn, Partner at transformation con-
and the poorest people bearing the brunt of to make switching current accounts from sultancy Moorhouse
10 y September 2015 www.retailbankerinternational.com
RBI 718 September.indd 10 02/10/2015 10:33:59Retail Banker International DIGITAL: BANK LEUMI
Bank Leumi leaping into the digital field
Israel’s digital and online market is booming and the financial sector is taking note. Despite a slow start
for banks, (consumers could only open an account online from July 2014) Bank Leumi is tackling this
challenge head on to become a fully digital brand. Patrick Brusnahan investigates
I
nternet penetration within Israel is upgrade the current environment and move everything we do must improve the employ-
increasing. The number of internet forward in a more straightforward direction. ee and customer experience.
users in the country grew from 4.6 In the bank in Israel, we agreed that after we “We have also set three priorities. Timeline
million in 2009 to 6 million in 2013, will be far into the CRM programme and and speed are our number one priorities,
a huge percentage of the 8 million person the digital wallet, we will reconsider the deci- then cost and then scope. We will be push-
strong population. This is set to increase ris- sion.” ing the envelope and budget, but we will not
ing to 8.4 million in 2018. Banks are set to compromise on timeline and we must deliver.
take advantage of this rise in usage. Necessary change We are implementing the strategy in the pro-
In addition, m-payments increased Change is needed in the Israeli market as gramme and in a year’s timeframe; we will
sharply from ILS16.9m ($4.3m) in 2009 to it develops. This month, the Bank of Israel launch these digital capabilities and channels.
ILS293.2m in 2013 at a CAGR of 104.2%. asked Bank Hapoalim and Bank Leumi to There is a new landscape which is agile in
This is expected to increase even further to sell off their credit card operations in an new technology.”
ILS2bn. attempt to increase competition in the mar- One of the key components of this shift is
Bank Leumi is getting ready for the tech- ketplace. These two banks hold over 20% of Bank Leumi’s new digital channel, which the
nological wave. It has selected Swiss vendor the retail credit business and with that going, lender hopes to launch within a year. But is
Temenos to overhaul and replace its legacy some other road to turnover needs to found. that enough time to launch anything, never
core banking system as part of a multi-year To combat this, as well as updating the mind a whole new channel?
renovation programme. This is expected to core, Bank Leumi saw an opportunity to cre- He said: “We’re not going to ask for a
save the Israeli lender millions of dollars in ate something else: a digital sub-brand under license for a new bank, we’re using our
savings on IT maintenance costs each year. the bank. own banking license; this is just a digital
Yerushalmi explained: “We put together channel. We strongly believe that one of the
Transitions a plan; however, we said that this by itself roadblocks in our timeline is the inability to
When asked about the change by RBI, Dan would be risky and the benefits may not be crystallise what we want to offer in a digital
Yerushalmi, COO of Bank Leumi, said: as expected. Then we felt we should build a bank. If you want to define very clearly and
“There is never a good time to do a trans- digital channel i.e. a digital sub-brand under specifically a unique offering, the process
formation of core systems. I joined the bank the banks. It has made a lot of sense to con- should be simplified and we don’t see an
almost three years ago and at that time. nect the two programmes together. issue in building this within a year.”
“At that time, because of the changes “So basically, the first phase of the pro- How this ‘digital channel’ will form is still
we’ve seen in the market, we thought we gramme is to build a digital ecosystem. This up in the air. Yerushalmi conveyed that it
should start dealing with two other strate- is what we have embarked on and we’re ‘might be mobile-only’. The important thing
gic areas: mobile and digital, and CRM and planning to launch it next year. Then, build is that it has to be intuitive, something that
cloud. As a result, we started a consolidated our core capabilities gradually and replace the lender has struggled with in the past.
Cloud CRM initiative and we’ve built a new the old capabilities with the new ones with This is particularly with regards to security
upgraded digital wallet that includes a lot some overlaps in the programme. As you can and identification, a part of the online and
of capabilities that you can do today on the understand, today, it is very hard to forecast mobile experience that many banks struggle
mobile if you are a retail, or even SME, cus- and plan for a few years ahead. Things are with. However, the COO believed that the
tomer.” changing so fast.” new digital overhaul would change all of this.
Yerushalmi believed that this is a necessary He said: “One of the real customer frus-
step for the bank to be able to move forward. Priorities and strategies trations is requests to add identification and
He said: “You can understand that at This development is with three strategies information. Here we will try to do that for
some point, the core capabilities are serving and three priorities in mind. This is to make the customer. We will not ask them ten times
as a glass ceiling for every new initiative in sure that the overhaul is worth doing and it to identify themselves.”
the bank and impacting time-to-market sig- is done right. Most importantly, that these Yerushalmi concluded: “Right now, our
nificantly. We’ve implemented this in several changes actually make a difference to how bank is definitely leading the whole digital
of our entities in Europe in the past and there the bank services its customers. space in the local market. The main differ-
were two considerations. Yerushalmi added: “Firstly, everything we entiator today is technology. It’s not pricing.
“One, we were about to embark on a trans- do should bring significant business value. We see a lot of the boundaries between busi-
formation in North America, but due to the The second objective is efficiency. We would ness and technology blurring and therefore
lack of experience in the regulatory envi- like to build a place where everything that the collaboration between the two is critical,
ronment in North America, we decided to we do tomorrow will take half of the time otherwise you will not be able to make sig-
continue with our existing partner there and and half of the money. The third thing is that nificant strides ahead.” <
www.retailbankerinternational.com September 2015 y 11
RBI 718 September.indd 11 02/10/2015 10:33:59You can also read
