FINANCING IN THE NEW DECADE – POSSIBILITIES, OPPORTUNITIES AND CHALLENGES Bangkok Fintech Fair 2021
Regional Banks
Diversified Banks
Consumer Finance
Investment Banking and Brokerage
Diversified Capital Markets
Asset Management and Custody Banks
Specialized Finance
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.20 0.30 0.40 0.50 0.60 0.70 0.80
CU
RR
EN
T L
EV
EL
OF
DIS
RU
PT
ION
SUSCEPTIBILITY TO FUTURE DISRUPTION
VOLATILITY
DURABILITY VULNERABILITY
WEIGHTED AVERAGE: 0.46
WE
IGH
TE
D
AV
ER
AG
E:
0.5
2
VIABILITY #1 Segments
Related segments
Banking
#2 Total EV of companiesin sample
Other segments
BANKING INDUSTRY DISRUPTION MATRIX LEGEND & NOTES
$6.7 trillion
$36 billion
THE BANKING SECTOR HAS BECOME HIGHLY DISRUPTED AND REMAINS SUSCEPTIBLE TO FUTURE DISRUPTION
Copyright © 2021 Accenture. All rights reserved. 4
EVIDENCED BY THE CHANGING STRUCTURE OF THE BANKING INDUSTRY
• 17% of global banking players entered the market since 2005
• Nearly 1 in every 5 players is new to market
• Regulation and technology facilitated a proliferation of new competitors, particularly in the payments market
17%3,200New players
Banks licensed
after 2005
Players in 2005
Players Today
Banking Leavers
83%
Subsidiaries of incumbent
banks
PaymentInstitutions
Fintechs
24.000
-8.300
7001.900 600 19.300
New Players (#)
17% of Global Banking players entered; 35% of Banks Have Disappeared Since 2005
Traditional banks
Payments players
FinTech BigTechNeobanks
Copyright © 2021 Accenture. All rights reserved. 5
% NEW PLAYERS IN BANKING INDUSTRY
NEO BANKS% OF INDUSTRY REV.
TAKEN BY NEW PLAYERSFINTECH
NEO PAYMENTS
19% 3.5%
7%
38%
7.1%
1.9%
11% 2.2%
23% 1.6%
19% 0.4%
1.2%
0.2%
0.1%
1.6%
1.0%
0%
1.7%
6.4%
1.3%
0.4%
0.5%
0.2%
0.5%
0.5%
0.5%
0.2%
0.1%
0.2%
63% 13.7% 0.6% 12.2% 0.9%
14% 4.1% 0.6% 3.4% 0.1%
COUNTRY
YET IN ASIA PACIFIC NEW PLAYERS ARE YET TO CAPTURE A MEANINGFUL SHARE OF INDUSTRY REVENUE
DID YOU KNOW, SINCE 2005…
Source: Accenture, #Berelevant (Accenture Research)
Copyright © 2021 Accenture. All rights reserved. 6
Copyright © 2021 Accenture. All rights reserved. 7
THE EARLY PANDEMIC HINTED AT FINTECH VULNERABILITIES
Operational
Performance(% change,
YoY H1 2020
External Risk
Indicators(% change,
YoY H1 2020
Financial
Implications(% respondents,
negative
Impact)
Operational
Costs(% change,
YoY H1 2020
• Onboarding Expenditure 8%
• Data Storage Expenditure 11%
• Platform downtime1%
• Agent/partner downtime 5%
• # Unsuccessful transactions 7%
• Liquidity risk17%
• Cybersecurity risk 17%
• Foreign currency exposure risk 12%
• Capital Reserve 51%
• Current Valuation41%
• Future fundraising outlook34%
Extracts from World Economic
Forum – “The Global Covid-19
Fintech Market Rapid
Assessment Study
“If the banks do not change, we will change the banks”Jack Ma, Co-founder and Executive Chairman of the Alibaba Group
AND IN SOME CASES THE OPTIMISM AND ROSE COLOURED GLASSES HAVE BEEN DISPENSED WITH
Copyright © 2021 Accenture. All rights reserved. 8
ACCENTURE’S 2020 GLOBAL FINANCIAL SERVICES CONSUMER STUDY
Copyright © 2018 Accenture. All rights reserved. 10
Last year we built on the success of our 2018 study and assessed what customer trends are now apparent in the market.
ConsumersSurveyed Banking and Insurance consumers.
PersonasDeveloped distinct personas based on a detailed cluster analysis of how they perceive and engage with banks and insurers.
CountriesIncludes respondents from countries across North America, Asia Pacific, Europe, Latin America, Middle East and Africa.
MEET THE PERSONAS
2. Pragmatists
Trusting and channel-
agnostic, Pragmatists see
technology as a means to
an end rather than a
lifelong passion. They are
satisfied with the service
levels they receive and
expect good value from
banking and insurance
providers.
4. Traditionalists
These customers value the
human touch and avoid
technology wherever
possible. They show low
levels of engagement and
satisfaction
with their financial services
providers, and trust is also
low.
1. Pioneers
This group comprises risk-
takers who are tech-savvy
and hungry
for innovation. They are
eager to engage with
financial services providers
through digital
channels and mobile
devices.
24% 21% 16%38%
3. Skeptics
Tech-wary and generally
dissatisfied with their
financial services
providers, these customers
are also the least trusting.
6%2%
4%8%
Percent of population (and change from 2018)
Copyright © 2021 Accenture. All rights reserved.
OUTSIDE OF HK AND JAPAN, ASIA PACIFIC HAS A MUCH LARGER SET OF CONSUMERS WHO ARE TECH-SAVVY AND KEEN TO ENGAGE DIGITALLY
TRADITIONALISTSVALUE HUMAN TOUCH AND AVOID TECHNOLOGY WHEREVER POSSIBLE
PRAGMATISTSSEE TECHNOLOGY AS A MEANS TO AN END
PIONEERSTECH-SAVVY AND HUNGRY FOR INNOVATION.
SKEPTICSTECH WARY AND GENERALLY DISSATISFIED WITH FS PROVIDERS
Copyright © 2021 Accenture. All rights reserved. 12
Source: Accenture 2020 Global Financial Services Consumer Survey. * 2018 Results
24% 21% 38% 16%
PIONEERS PRAGMATISTS TRADITIONALISTSSKEPTICS
19% 25% 27% 29%
61% 10% 28%
18% 12% 43% 24%
48% 24% 27%
34% 17% 45% 4%
55% 12% 31% 2%
51% 20% 26% 3%
39% 18% 42%
*
*
*
5% 60% 28%7%S
outh
east A
sia
COVID-19 ACCELERATED DIGITAL UPTAKE BY UP TO 5 YEARS
Source: Accenture 2020 Global Financial Services Consumer Survey.
VALUE AS OPPOSED TO EXPERIENCE IS NOW MOST IMPORTANT TO CONSUMERS
…
IS EXPERIENCE
BECOMING
UNDIFFERENTIATING?
Experience
Value
Copyright © 2021 Accenture. All rights reserved.
AND TRUST IN ALL INSTITUTIONS HAS FALLEN SIGNIFICANTLY – BUT MORESO FOR BANKS
Copyright © 2021 Accenture. All rights reserved.
Source: Accenture 2020 Global Financial Services Consumer Survey.
Neos
• NPS
• Brand affinity
• Customer growth
• Clean tech stack
• Low marginal
cost
• B/S scale
and NIM
• Product range
• Accessory not
primary
• Regulatory
maturity
+
-
Traditional
• Scale and B/S
NIM
• Product/
service breadth
• Stability and
resilience
• True multi-
channel
• Tech debt
• Cost to serve
• Customer
experience
• Change
metabolism
+
-
Post Digital end game
• Digital-first
distribution
• Tech-enabled
personalization
• Ecosystem model
that plays in all 3
layers
• Customer
acquisition
engines
• CIR in 30s with
strong profitability
• Transformed Tech
+ Ops
The Neo and Traditional business models are converging towards a ‘post-digital’ end game
Here Neo and Traditional ‘coopetition’ creates value through ‘re-bundled’ product propositions
Macro Products Unbundled Re-bundled (embedded banking models)
Payments Lending
Savings Investment
Data Aggregation
KYC / Onboarding
Debit Cards
Credit Cards
P2P –Money
Transfer
Processing
BrokerageRobo -Advise
Micro SavingsSavings
Robo -Advise
Brokerage
Earn as you Work
Scoring for no Credit History
Loyalty & Deal Match
Distribution Enablement
Cash Mngt
Account Merge / Sharing
Processing Retailer
Authorization
Currency Management
Exchange Exchange
Business ModelExperienceBranding
Regulated accountability of Products and Services
Micro level services facilitated with Open Banking and enabled with decoupled micro
service technology
Re-bundling across needs and getting closer to customers – Fintechs
coupling among each other and with non FS as well as FS assembled
around their granular core
Cloud APIData & AI
Cloud APIData
Int’l Money Transfer
Int’l Money Transfer
Debit Cards Exchange
P2P –Money
Transfer
Data Aggregatio
n
Lending
Accounting
Accounting
Debit & Credit Card
E-commerceProcessing
Customer and revenue is shifting due to product componentization
Players who are emerging with niche product propositions are focusing on scale at speed
Product ‘unbundling’ happening at speed
Source: CBInsights
Capital lite models are emerging
Vertically integrated models are difficult to replicate but also not needed to grow
Customer ownership and differentiation can also be achieved by sourcing and architecting value
Value architecting players are benefiting from ‘rebundling’ via ecosystems
Digital Lending Market MapSMALL & MEDIUM BUSINESS
ANCILLARY TOOLSSERVICINGORIGINATIONPROSPECT& DATA
SERVICING ORIGINATIONPROSPECT & DATA
Non-Exhaustive
Prospecting & Intelligent Data: Vendors using data driven insights to identify prospects and/or make recommendations for next best product
Servicing: Vendors providing the system of record of loan data
Origination: Vendors improving the end-to-end loan cycle from initial credit application through underwriting and fulfillment of the loan
Ancillary Tools: Vendors offering tools that support digital loan origination
ORCHESTRATING THESE “REBUNDLED” PROPOSITIONS THROUGH ECOSYSTEMS WILL BE KEY
ECOSYSTEMS ARE AT THE HEART OF FUTURE FIRM SUCCESS…
84% of leaders surveyed say ecosystems are importantto their strategy
…BUT LESS THAN HALF ARE ACTIVELY CULTIVATING THEM…
46% of executives are activelyseeking ecosystems andnew business models
…AND MOST ADMIT THEY DON’T HAVE REQUIRED CAPACITY AND
EXPERIENCE
40% have the capacity and experience to understand an ecosystem, build thestructure and value exchange, measuresuccess, manage relationships, etc.
“76% of business leaders surveyed agree current business models will be unrecognizable in the next 5 years—ecosystems will be the main change agent”
Source: Accenture Survey of 1252 US Business Leaders across multiple industries
Some banks are already exploiting the opportunities driven by ‘rebundling’ product innovation
Current Product
From MACROproducts...
..to unbundling / componentization
...then to options of re-bundling / packaging
Re-bundled internally
Re-bundled internallywith externalcomponents
Provided for being re-bundled externally
Vertically bundled & sellable aaS to others
Own channels
Through others
VALUE:• Drivers of value and customer’s perceived value provider will be
different in each model
• Rebalance of componentization/commoditization vs specialized/differentiated
• Monetization of trust and trust intermediation leveraging brand promise and purpose
MODEL:
• 1to1 → XtoX for hyperpersonlization and real time bundling
• Impact on operating model and tech choices based on the model
• At scale execution of choices
external components internal components
Inputs to the PDB Intensity Index
Customers• Trusted• Empathetic• Personalized advice
Employees• Values and Culture• Fair treatment
Product Offering• Transparency• Best advice• Compliant
Source: Accenture Digital Maturity and PDB Index 2021. Sample of 70 Global Banks
Meanwhile winning requires purpose as well as digital leadership
1. Winners will need to be able to manage / execute across multiple business models at the same time
2. Traditional banking will shrink over time with value being created by consolidation, efficiency, and purpose
3. CX is becoming undifferentiated, and battleground is moving back toward ‘rebundled’ products
4. A key tech and ops decision is common enablement platform versus business portfolio approach
5. Technology excellence is critical, but it needs to be an enabler of strategy not an end in itself
We are entering a post-digital world