SCJ Presentation v5[3]

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 Ankit DhawanMatthew Hunt

Jakub KufelWilliam Eric Overbey

 Amy Wang

Keyi Zhang

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BofA Online Banking Assessment

• Advantages• Improved customer metrics

• Cost reduction• Increased customer interactions

• Customer behavior

• Challenges• Cost of development• Brand risk to traditional customers

• Security concerns

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Mobile Banking: Critical to BofA Success

• Growth• Smartphone users – est. 46% of U.S. mobile by 2012

• Transactions - $2 billion in U.S. by 2014• Deposits – revenue driver

• Innovation• Branding

• Functional differentiation• Competitive relevancy

• Cost savings

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Mobile Banking

• Benefits to customers•  Accessibility

• Convenience• Mobile features

• Challenges with adoption• Perceived value

• Security• Cost of data

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Strategy Evaluation

• #1: App development

• #2: SMS

• #3: Entering new categories

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Evaluation Criteria

• Improve users’ value perception

• Brand symmetry

• Increase awareness and adoption of BofA mobile

• Grow revenue and improve retention

• Address internal mobile requests

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 App development: Building on Rich Experience

• Advantages• Personalized customer experience

•Branding opportunities

• Limitless functionality

• Challenges• Complexity

• Smaller customer reach• Costly development

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SMS: Reaching broadest audience

• Advantages• Largest market opportunity

•Proactive engagement

• Customizable notifications

• Challenges• Shrinking market

• User cost associated•  Aging technology

• Competitive positioning

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Enter New Category: Direct Mobile eCommerce

• Advantages• Innovation alignment•

Lower data cost• Market opportunity• Strategic timing

• Challenges• Competitive market• High-risk entry• Cost of development• Low-hanging fruit

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Recommendations:

1. Customizable App

2. Promotional Strategies

3. Mobile Commerce

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Same App – Different Experience

Customer 1 Customer 2

14

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Customer Channel Mix

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014

Traditional Customer %

Mobile Customer %

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Bank of America Mobile Adoption Cost Savings

Mobile Adoption Rate

5.0% 15.0% 25.0% 35.0% 45.0%

Transaction

VolumeGrowth

2.00 $49 $147 $244 $342 $440

4.00 $48 $143 $239 $335 $430

6.00 $47 $140 $234 $327 $421

8.00 $46 $137 $228 $320 $411

10.00 $45 $134 $223 $312 $401

Savings in

$mm(est. 2014)

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Promotional Strategies

• In-store app training

• Instructional videos

• Marketing campaigns to increase customer adoption

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Promotional Gift Cards

• Incentivize users with $20 gift cards

• Target companies with strong online spending

• Example: Amazon

• Download BofA app – fill in billing information

• Billing information = retention driver

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Mobile Consumer Lifetime Value with $20 Gift Cards• Modeled higher retention rates for mobile

• CLV with mobile = $323 vs online = $297

• 30 million customers online

• Huge market of additional traditional clients

CLV 2009 2010 2011 2012 2013 2014 Total

Y0 Y1 Y2 Y3 Y4 Y5

Annual Margin per customer $100 $103 $105 $108 $ 110 $113 $ 639

Transaction costs per customer $39 $38 $37 $36 $34 $33 $216

Retention of mobile banking 100% 92% 85% 78% 72% 66%

Expected Contribution per customer $61 $59 $58 $56 $ 55 $53 $343

Minus

Acquisition cost $(20.00) $(20.00)

Mobile banking CLV per customer $323

Transaction cost $39 $39 $39 $39 $39 $39 $236

Retention of online banking 100% 82% 73% 67% 64% 61%

Online banking CLV per customer $61 $52 $48 $46 $46 $45 $297

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Long-term Vision

• Mobile commerce• Go direct – no middle man

•

Capture massive transaction market• Next step in digitalization of banking

• Credit card obsolescence

• Start-up acquisitions – eg. VenMo• Leverage technology partner

Check out with:

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Summary

• One-stop-shop customizable app

• Increase adoption through new functionality

• Promotional activities

• Increase revenue growth and customer retention

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Exhibits

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Exhibit 1: Bank of America Revenue Growth Analysis

Mobile eCommerce Market Share

$mm (2014) 5.0% 10.0% 15.0% 20.0% 25.0%

Loan Growth

2.00 $2,050 $2,470 $2,890 $3,310 $3,730

4.00 $3,943 $4,363 $4,783 $5,203 $5,623

6.00 $6,123 $6,543 $6,963 $7,383 $7,803

8.00 $8,615 $9,035 $9,455 $9,875 $10,295

10.00 $11,443 $11,863 $12,283 $12,703 $13,123