The Inevitable Future of Banking

The Inevitable
Future of Banking
Dr. Markus Hamprecht
Webinar der Bankenakademie, dem zentralen Aus- und
Weiterbildungsorgan des Bundesverbands deutscher Banken

Agenda
01 02 03
The market is
changing drastically
Utopias vs.
Dystopias
How to Navigate into
Utopia

01 The market is changing drastically
The market is changing drastically…
New players
are actively
seducing
these
customers
Disinter-
mediation is
finally here:
BigTechs are
unbundling
the bank
Platforms +
Ecosystems:
Customers
love their
prison of
convenience
You have lazy,
unfaithful and
demanding
customers
Regulation is
destroying
your
customers’
experience

… and the global COVID
crisis even accelerates
these developments
and puts a twist on it

COVID-19 Impact:
4 notable new trends
Escalating geopolitical
tension;
Continuing rise of
nationalism
Massive government
intervention into
economy & new
regulation
1
Macro
Shifting customer
expectations &
behaviors
Traditional sales
models are
disrupted
particularly in B2B
4
Customers
Supply chain
disrupted; digital
manufacturing gaining
momentum
Increasing cost
pressure
2
Operations
Pervasive remote
working – with need
for new tools,
processes and ways
of engaging
Every industry is a
health industry
3
People

Banking customers are becoming more and more willing to change and we are
making it easier
You have lazy, unfaithful and
demanding customers (1/2)
Basis: respondents who have already changed their current account (2019: n=409 | 2018: n=344 | 2017: 300 | 2016: 236) |
Missing values to 100% = "Don't know / not specified"
Source: BITKOM, Kontovergleich24.net, N26, DKB
2.2 2.3
2.5
2.9
2016 2017 2018 2019
Ø # Account changes
Have you ever changed your main current account?
The number of account changes increases The average time to open an
account: Eight minutes

Clients are looking for the perfect solution
for specific scenarios
You have lazy, unfaithful and
demanding customers (2/2)
Source: DKB, Transferwise
Money Transfer
Studying abroad Renting a student flat
Kostenlose Girokarte und
Kreditkarte
In Deutschland, Europa und
weltweit kostenlos bezahlen
In Deutschland, Europa und
weltweit Geld abheben

They steal your clients… … even when only getting a few
things right
New players are actively seducing
these customers
* Reported data as of 31/12/2019
Source: Company reports
10
5 5
4
11
4
Revolut N26 Marcus Monzo Commerzbank DKB
Customers(inm)*GrowthRate(YoY18-19)*
118% 117% 123% 125% 7%4%
monzo
Banking made easy
Revolut
A Radically Better Account
Marcusby Goldman Sachs
Save with Marcus by Goldman Sachs

Disintermediation has finally arrived:
BigTechs are unbundling the bank (1/2)
Source: CBInsights
Amazon Pay
Amazon Cash
Amazon
Vor Ort Aufladen
Amazon Protect
Amazon Lending
Amazon Credit
Amazon Go
Amazon Store Card Amazon Credit Card Amazon Allowance Amazon Recargable

Disintermediation has finally arrived:
BigTechs are unbundling the bank (2/2)
The winner takes it all – BigTechs and Big Banks
Source: Ant Financial
• In 2018 Amazon’s third-party sellers
accounted for 58% of sold volume on the
platform – equivalent to third party sales of US
$160bn
• There are currently over 5 million marketplace
sellers across all Amazon marketplaces
• Apple Card was “the most
successful credit card launch
ever.” (CEO of Goldman Sachs,
David Salomon)
• GS so far has extended
US $10bn in credit lines in total
and has US $736m in loan
balances given to Apple Card
customers*
*as of 30/09/2019
Source: Apple, Business Insider, cnbc.com, feedbackexporess.com, Bloomberg
Apple
Credit Card
Amazon
Loans to
merchants
Goldman Sachs

Platforms + Ecosystems:
Customers love their prison of convenience
All of your Financial Services in one place
DIGITAL-ONLY
BANK
Ant Fortune
Zhima Credit
MYbank
Alipay
ONLINE PAYMENTS
& MOBILE WALLET
ONLINE FINANCIAL
PRODUCTS
CREDIT
SCORING
PROGRAMME
EXAMPLE: ANT FINANCIAL
Connecting Large customer network to
inclusive Financial Services
• Alipay is the world’s leading payment and
lifestyle platform
• Ant Fortune is a comprehensive wealth
management app that allows users to
manage their finances
• MYbank is a private online bank serving
small and micro enterprises
• Zhima Credit is a private credit scoring and
loyalty program: Customers receive a score
based on social media interactions and
purchases carried out on Alibaba
Source: Ant Financial

Source: ING – ING Investor Day
Presentation 2019
( Think forward staying a step ahead):
https://www.ing.com/Investor-
relations/Presentations/Investor-Day-
presentations.htm

1. C24 Bank
Control of Customer Interface by providing
basic Banking products (Checking account +
Debit Card)
2. Check24
Other Banking products with Best-price
guarantee are offered via Check24-
ecosystem of established banks
Source: C24, finanz-szene.de

MiFiD II: Less individualized information + lower consulting quality*
Regulation is destroying your
customers’ experience
32.7% 25.1% 20.7% 20.3%My consultant used to be more flexible and
individual in his response to my needs.
The increased standardization of information
helps me to filter out relevant information
more quickly.
Totally Agree Agree Disagree Totally Disagree
5.4% 22.8% 41.4% 29.3%
Totally
Agree
Agree Disagree Totally Disagree
* Survey refers to implementation of MIFID 2/MIFIR
Source: Deutsche Kreditwirtschaft

Source: Handelsjournal, https://www.handelsjournal.de/handel/payment/die-deadline-rueckt-naeher.html
…but is perceived as negative by online retailers
Regulation is destroying your
customers’ experience
2FA offers security for
online banking and online
payments…
What effects do you expect after the implementation of 2FA?
Survey among 39 Online Retailers (multiple answers)
Increased termination rate
High conversion costs/expenses 39%
Drop in Sales 37%
Fewer orders 34%
Decline in customer satisfaction 34%
32% Short familiarization of the customers, then everything as before
8% No effects
5% Other
82%
68% Increased service volume
61% Complex payment process for customers
Source: ING, Mastercard

Banks are not best suited
anymore to provide meaningful
Financial Services

Living
Ecosystem
Oligo-
polistic
banking
structure
Integrated
Banking
Services
Loss of
customer
contact
Stability
and trust
Unbearable
cost and
uncertainty
03.02.01.
Three crossroads between
Utopia and Dystopia on the horizon…
02 Utopias vs. Dystopias
vs vs vs

Living Ecosystem
• Banks are managing a broad
ecosystem of fully integrated
FinTechs, BigTechs and
RegTechs
• Banks extend their business
model to capture more of their
customers’ wallets and embed
themselves in more
transactions
• Customers benefit from broad
services
Utopias vs Dystopias
Oligopolistic banking
structure
• Many banks have lost the battle
with BigTechs and FinTechs
• This significantly narrows the
banks focus and value-chain
participation
• Banking is dominated by an
oligopolistic structure, with many
traditional players having
vanished  exposing customers to
less choices + higher prices
VS

Integrated Banking
Services
• Banks have successfully integrated
FS into the everyday life of their
customers
• Customer preferences are
continuously tracked,
customer needs are predicted
and banks deliver new and
integrated customer services
• Customers are able to consume FS
boundaryless and best-in-breed
Loss of customer
contact
• Banks have lost the direct customer contact
to BigTechs and FinTechs and are only left with
the role of a utility + infrastructure provider
• Value-added services have moved to
FinTechs + BigTechs (Payments, Wealth
Management)
• A major share of the
customer´s wallet and
the customer contact
has moved to new
players
VS

Stability and trust
• New regulation has made banks
more stable, resilient and safe for
customers
• Banks are seen as trustworthy
banking providers and play
a critical role in supporting customers
and society
coping with effects from
COVID-19
• Banks have taken regulatory
requirements and new regulation to
develop mutually beneficial
services for their clients
Unbearable cost and
uncertainty
• Overregulation has reduced
customer service and client
advisory to “0”
• Customers are forced to move to
non-regulated market
participants
• Cost of regulation
implementation is constantly rising
and pushing banks out of business
VS

What do established banks have to do?
03 How to Navigate into Utopia
Think desires, not products:
Create integrated/ invisible/fully digitized E2E
services
Examples:
• Santander Car Loans
please check the sources page

services
Examples:
Think platforms, not apps:
Be first to market a holistic solution
Examples:
• We.trade
• LBBW - Blockchain-basierte Plattform für
Schuldscheinemissionen

Think Ecosystems, not stand-
alones:
Integrate your financial services into networks
Examples:
• DBS (Singapur)
• BBVA
services
Examples:
Examples:
• We.trade

alones:
Examples:
• DBS (Singapur)
• BBVA
services
Examples:
Examples:
• We.trade
Think impactful technology
usage, not technology for
technology :
Technology should only support the
implementation of the client use case, not the
other way round
Examples:
• JPMorgan – COIN (AI)
• RBC Bank (Analytics & AI)

Think new cooperation models,
not in-house solutions:
Integrate third parties if it provides better service
for your clients
Examples:
• ING Gruppe
• ING Deutschland
• Deutsche Bank: BluePort
alones:
Examples:
• DBS (Singapur)
• BBVA
services
Examples:
Examples:
• We.trade
technology :
other way round
Examples:

Think new cooperation models,
not in-house solutions:
Integrate third parties if it provides better service
for your clients
Examples:
• ING Gruppe
• ING Deutschland
• Deutsche Bank: BluePort
alones:
Examples:
• DBS (Singapur)
• BBVA
services
Examples:
Examples:
• We.trade
technology :
other way round
Examples:
And as to COVID:
Your head start in customer trust
is worth gold. Use it to your
advantage and in order to make
these five points work

The challenging situation should be used to
build stronger, enduring, trust-based
relationships with customers and to significantly
differentiate from the new competitors
The time is now:

What news would you like to read?
… It is up
to you!

Thank you for your time
Dr. Markus Hamprecht
https://accntu.re/37YCax9

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The Inevitable Future of Banking

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