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PREDICT THAT
How institutions compete and win with data analytics
Foreward 4
5.0 Conclusions 52
7.0 Acknowledgements 54
This report considers It’s clear that organisations that use We then present research on consumer
how institutions analytics extensively and systematically attitudes toward a range of interactions
compete and win are rapidly out-thinking and out- that can be enabled through data
with data analytics. executing their competitors. Traditional analytics, and analyse the impact these
players are swiftly coming to the would have on their relationship with
While our core needs their financial services providers.
realisation that they must prepare
for money – to save,
to adapt their settings for this new
spend, borrow, Lastly, we present a vision for a smart
competitive landscape – as is evidenced
invest – may not have connected financial services world. Here,
by the speed at which this topic is
changed much over we both explain the key technological
climbing higher on the corporate
the centuries, the way we interact with developments and discuss the role that
strategic agenda.
financial institutions has, and continues next generation digital communication
to drastically change. To date, this has We are now witnessing the first wave of and media technologies can play in
been largely due to disruption caused by start-ups and established information helping your organisation map out its
the ‘three-Ds’, being: services players challenging traditional journey.
models with propositions such as peer-
1. Demographic changes; This research was only made possible
to-peer lending, mobile payments, and
by the many generous contributions and
2. Digital technologies; and personal financial management service
insights from numerous leaders within
propositions. At the heart of all these
3. Design of the customer experience. the financial services industry, for which I
examples is the creative application
sincerely thank you.
These are topics that I have of data analytics – a catalyst that is
comprehensively researched over the providing innovative new ways to satisfy Rocky Scopelliti
past six years and presented in previous customers’ centuries-old core needs. Group General Manager -
reports. This report, the ninth in my Industry Centre of Excellence
This study concentrates on data
series, adds a ‘4th D’ into the mix – data. analytics. The report examines, firstly, the Telstra Global Enterprise Services
This report argues that data, as an major forces in play and how these are
accelerant of disruption, is setting the re-shaping the competitive environment.
financial services industry on a new Secondly, we report on how financial
competitive trajectory. services institutions are adjusting their
Just think of Google, Amazon, and PayPal strategies and capabilities for this
or – more specifically to the world of transformation.
finance – Capital One or Progressive
Insurance in the US.
4
1.0 EXECUTIVE
SUMMARY
In a Smart Connected World, data analytics are having a
profound impact on the competitive growth trajectory of the
financial services industry.
This is particularly relevant in the Asia 1. Major Forces Shaping Digital 2. Strategic Market Gaps Exist –
Pacific region, which is predicted to be Competition and Growth these can either be Closed by
home to two thirds of the world’s middle There are four key forces altering Incumbents or Exploited by
class by 2030 – a staggering 3.2 billion the competitive growth trajectory of New Entrants
people1. This region is also predicted to the financial services industry: There’s a major gap between the
overtake North America as the largest Personalisation, Network Effects, strategic priority of incumbents and their
wealth management market in the world Cloud Business Models and Open readiness to execute. New entrants are
by 20152. Source Artificial Intelligence based already exploiting that gap. Financial
Data analytics bring new risks to financial Technologies. institutions are now making a significant
institutions, particularly around the The intensity of competition has, and is investment in transforming themselves
appropriate use of data. Data analytics anticipated to increase exponentially, as into analytical competitors to close
will require a new consumer engagement the convergence of digital proliferation the gap.
model – one that ensures that analytics and inter-generational wealth transfer We studied 43 financial institutions
enhance value whilst also reinforcing makes traditional financial services across the Asia Pacific region. The results
the trust that consumers place in their markets increasingly attractive for new indicate a significant gap of 68% in the
financial institutions. players. We are now seeing these new organisational readiness of institutions
Business models, operational structures entrants venturing into the financial to compete on analytics, with only 32%
and markets are being disrupted and services market with increasing perceiving that they are on the verge of, or
contested by non-traditional and start- regularity. Global investment in FinTech ready to compete, using data analytical
up players unconstrained by proprietary ventures clearly illustrates this trend, capability. Further, there was a 17%
systems, processes and technologies, with investment tripling from US$928 strategic priority gap identified, with only
and able to compete ingeniously with million in 2008 to US$2.97 billion in 2013. 83% reporting a commitment to data
democratised data and open sourced Indeed, FinTech investment is outgrowing analytics from their CEO and leadership
models. These players understand that overall venture capital growth by a team. These gaps explain the significant
digital has irrevocably changed how factor of four, with nearly a third going investments – averaging 6% of an
customers expect to engage financial into ventures focused on data analytics organisation’s budget in FY14 – being
services. Institutions from the 20th and personal financial management. allocated for data analytics projects, with
century that choose not to adapt, but The epicentre market for disruptive expectations of a resulting performance
to rely on what worked in the past, can innovation includes Generations X and improvement averaging approximately
expect to be comprehensively out- Y, who today are responsible for more 6.3%. Clearly, growth is the major
competed. than half of all spending and borrowing incentive for such an investment, with
in Australia (a pattern likely to be similar 68% of Sales and Marketing departments
in most developed nations). We’ve now driving the data analytics strategy,
developed a Competitive Growth Model requirements and investment programs
that highlights where to enter, adapt or be (see Section 3 – Asia Pacific Financial
significantly out-competed (see Section Institution and Service Provider
2 – Major Competitive Growth Forces). Competitive Readiness Study).
5
1.0 EXECUTIVE
SUMMARY (CONT.)
3. Data Analytics – The Catalyst for online mode. Instead, it suggests that 4. Pervasive Connectivity and
Altering Consumer Perceptions with personalisation, it can remain Intelligence for the Analytics-Driven
Analytics-enabled financial services, a fundamental part of what makes a Business
and the experiences these capabilities financial services provider appealing The Smart Connected World where
provide, have the capacity to alter the to consumers in the Asia Pacific region. everyone and everything is connected,
perceptions of consumers across the • When it comes to retention, in intelligent and measured.
Asia Pacific region, as well as to support Australia, the digital advice concept
strategies to acquire, engage or retain (e.g. virtual/digital advice access to The emerging consumer environment
customers – whether executed through experts via video, chat, social media) is marked by high-speed connectivity
a branch, contact centre or digital has the greatest impact on customer and pervasive distributed intelligence,
consumer channel. retention, with a retention factor and features a better awareness of the
(satisfaction and advocacy) of 86%. consumer’s context than ever before. By
Our study involved over 3,100 consumers 2020, it is predicted that:
Within the Singaporean, Indonesian
across Australia, Singapore, Malaysia,
and Hong Kong markets, those who • 95% of people in the developed world
Indonesia and Hong Kong. The results
would use the personalised in-branch will be connected to the Internet – up
indicate that in all countries, each of the
experience gave it a retention value from 77% today;
five digital analytics-enabled service
of 92%, 97% and 90% respectively.
concepts researched achieved high • There will be 4-10 connected devices
Malaysian consumers who would
appeal levels, and the nine experience for every person on the planet; and
use the personalised digital banking
metrics tested demonstrated positive • 140 sensors per person.
service gave it a 95% retention score.
perceptual impacts for each concept.
Specifically: • When it comes to acquisition, Intelligence is being built into an
digital advice, again, is featured. For expanding range of devices, as well as
• The results clearly show the value Australians, the digital advice concept infrastructure and the environment.
of a personalised digital banking had the highest acquisition impact Analytics will remove friction from
experience (e.g. tools, insights, alerts, (consideration and switching) at 80%. businesses and consumers’ lifestyles
recommendations, notifications For Singapore, it was 88%, Hong Kong and deliver substantial operational
on saving, spending, borrowing or 86%, and Indonesia 93%. In Malaysia, economic and lifestyle benefits (see
investing) across the Asia Pacific this ranked third at 88%. Section 4 – Technology for Analytics-
region, with this concept ranked in the Driven Business in a Smart Connected
• Mobile banking is now heavily
top two most appealing in all Asian World).
penetrated across the region. Hong
markets. Demand for personalisation
Kong leads the way with 68% of the
extends to the branch, with the
population using smartphones to
personalised in-branch experience
access financial services, followed
(e.g. recent interactions, history,
by Indonesia 64%, Singapore 63%,
context) also ranked in the top three
Malaysia 53% and lastly Australia
concepts.
at 42%.
• Across all five concepts, consumers
indicated that ‘Knows me and my These results illustrate the significant
financial situation, irrespective of how potential impact of analytics on the
I use the bank or financial institution’ design and execution of personalisation
and ‘Access to banking experts when I strategies, digital tools, insights and
need them through my preferred way advice across channels to acquire,
to interact with them’ experiences engage and retain customers. However,
achieved strong positive results. as these digital services would be
enabled by large-scale analytics, it
• When it comes to maximising appeal,
is now becoming clear that modern
interestingly, in all countries, the
financial services providers need to have
personalised in-branch experience
well-developed analytical information
concept appears in the top three
gathering capabilities (see Section –
concepts. This finding may contradict
3.3 Analytics-Enabled Concepts and
the suggestion by some commentators
Experiences: Asia Pacific Consumer
that the in-branch experience is dying
Experience Study).
and will eventually be replaced by the
6
5. Valued Analytics-Enabled • Digital.Me: Shows how providers can
Customer Experiences combine analysis of saving, spending,
Cloud technologies connected by high- borrowing and investing behaviours
bandwidth, low-latency networks with social analytics and broader
make the infrastructure and expertise market analytics to create online and
required to harness advanced analytics mobile tools that help customers more
much more accessible. They create a effectively manage and use financial
step change in the ability of financial services.
service institutions (both traditional This vision of a truly analytics-driven
providers and disruptive new entrants) customer experience is underpinned
to deliver the highly personalised, highly by secure and highly scalable storage
contextual, analytics-driven experiences of customer data connected to a wide
customers now expect. range of specialised analytics services
The combination of the four key forces (often hosted on high-performance cloud
mentioned in Key Finding 1 Major Forces platforms) by high-speed, low-latency
Shaping Digital Competition and Growth networks (see Section 4 – Technology
and the democratisation of analytic for Analytics-Driven Business in a Smart
capability poses a threat to traditional Connected World).
financial service providers. But it also This report explores the financial
creates a limited window of opportunity services sector’s analytics capabilities,
for those incumbents who are prepared and how players may use analytics to
to move swiftly and embrace this new win in a competitive growth environment.
world. By doing so, they will also be able This has been based on the extensive
to exploit their existing advantages over Telstra research in the Asia Pacific
the newer entrants: namely, their unique region, and contributions from industry
position of trust, strong customer leaders in different fields and industries.
relationships with Gen X and Y and
multiple touch points.
We show three analytics-driven Digital technology has irrevocably
customer experiences to highlight how changed how customers expect
embracing an analytics-driven approach to engage financial services.
can help channels to evolve: Institutions from the 20th century
that choose not to adapt, but to rely
• Contact.Me: Combines and extends on what worked in the past, can
the vision of a personalised contact expect to be comprehensively out-
centre and intelligent personal competed.
assistant, blending an intelligent
personalised virtual financial
assistant with a physical (but remote)
relationship manager through an
engaging and consistent interface.
• Branch.Me: Turns the branch into an
environment for identifying visitors
and understanding their intent
and engagement preferences so
that branch staff (and even branch
infrastructure) can deliver personally
optimised content and interactions.
7
2.0 MAJOR COMPETITIVE
GROWTH FORCES
We begin the discussion by considering how analytics will
impact four major competitive growth forces, and how these
will redefine the environment in which tomorrow’s financial
service providers will compete and grow.
8
The results were surprising. While the 2.2 The Network Effect – Protection Financial services relationships range in
first group (with no returned value) or Opportunity nature from highly transactional through
had a poor response rate, the second to highly consultative and collaborative,
and third groups had little to separate involving many participants (e.g. the
them in terms of return rates. The ‘Peer-to-peer lenders consumer, merchants, traders, banks,
conclusion was that customers put a like SocietyOne are very schemes, their families, employers,
value on their relationship with the financial advisers, brokers, regulators
insurer, which provided a part-payment well placed to offer more and third parties). The buyers pay in a
for the information, with only a small creditworthy Australian variety of forms, including access to their
incremental payment required to realise money, future promises of interest and
that value. In light of that conclusion, borrowers a better deal and access to markets through their buying
institutions that have a wider, more
valuable relationship with the customer
give more investors direct activities. Financial services products
are, in fact, usually best described in
can leverage that relationship to access to attractive new terms of networks, with all of the actors
discount the cost of collecting valuable connected together through ecosystems
data in the future – providing them with a
fixed income asset classes. with complex business rules. Economists
significant competitive advantage. This is why peer-to-peer might describe this as a ‘two-sided
market’ (see Figure 1).
lending works.’
Matt Symons, CEO SocietyOne
PAYMENTS
PEER-TO-PEER
COMPARISON SITES
9
2.0 MAJOR COMPETITIVE
GROWTH FORCES (CONT.)
A two-sided market is a sophisticated Chart 1: Combined Peer-to-Peer Issued Loans January 2014 by Lending Club and
relationship between buyers and Prosper (Billions US Dollars)
sellers. The market’s nature is to have a
group of customers who have a many- 4.5
to-many relationship with a group of
providers (who may themselves also 4.0
be customers). In the middle is the
3.5
facilitating organisation, in this case
a financial institution, thus creating a 3.0
‘multi-sided platform’. Examples of two-
2.5
Billions
Jun 13
Dec 13
Dec 07
Jun 08
Dec 08
Jun 09
Dec 09
Jun 10
Dec 10
Jun 11
Dec 11
Jun 12
Dec 12
Prosper in the rapidly growing peer-to-
peer market, and PayPal in the payments
market (see Charts 1 and 2).
Prosper Lending Club
As scale is such a significant advantage
for multi-sided market platforms,
consolidation tends to occur very quickly. Source: Lending Memo
For example, Alibaba (China’s equivalent
to Amazon), became a US$16 billion
Chart 2: PayPal Annual Mobile Payments Volume 2008-13 (Millions US Dollars)
lender in less than three years and
China’s largest seller of money market
30000
funds in only seven months6. While
there are periods of innovation when 27000
lots of new entrants join the market, the
25000
winners quickly emerge and are either
acquired or begin to do the acquiring.
This is a turbulent period for incumbents,
20000
as they need to make the right bets to
ensure their scale advantage puts them
in a position to be doing the acquiring
15000 14000
rather than risk losing market share and
potentially being acquired or eliminated.
A recent example of this is Australia’s
10000
Westpac Banking Corporations new
venture capital fund taking an equity
stake in Sydney based peer-to-peer 4000
5000
lender SocietyOne.
Whilst new entrants in multi-sided 25 141 750
markets can move and scale quickly, 0
incumbents can also adapt by leveraging 2008 2009 2010 2011 2012 2013
the complexity of the market and their Source: Statista
understanding of its nuances. However,
a player that chooses not to adapt, Whilst new entrants in multi-sided markets can move and scale quickly,
relying on the complexity of the network incumbents can have the advantage of understanding both the complexity and
to protect them, can be rapidly out- nuances of the market.
competed.
10
2.3 Cloud – it’s not new technology, Smart institutions will use this data It is likely that we will see an increase
it’s new business models and analytics on it to help consumers in financial institutions partner with
simplify their lives by anticipating their third parties such as retailers to provide
needs and creating value-added services an integrated online experience. Why
‘Ultimately, the cloud is that support the increasingly dynamic would a customer want to go all the way
the latest example of lifestyles we choose. The smartest through to an online store if all they want
institutions will take a leaf from the to do is repeat a purchase they made
Schumpeterian creative leading technology companies and in a previous month? Their credit card
destruction: creating encourage their customers to curate their statement on the Internet banking portal
own data to improve its accuracy, and is the ideal place they could go to repeat
wealth for those who the accuracy of the associated insights the purchase. Done properly, this could be
exploit it; and leading to the derived from it. The customer wins by
receiving a more personalised service
a true cloud service with a seamless set
of rich shopping applications embedded.
demise of those that don’t.’ and the organisation wins by improving
Joe Weinman, Senior Vice President at Telx and
the quality of predictions applied to the
broader market as well as the individual. Everyone is looking for an edge. With
author of Cloudonomics: The Business Value of
cloud, a third party can participate
Cloud Computing
The competitive market for customers in the client experience and derive
means that everyone is looking for an value from it while leaving the
But what of the innovative ideas and edge, something to bundle or a new way original client relationship intact.
products sitting on top of these multi- to add value. With cloud, the third party
sided platforms? Many of these will becomes a service that can participate
be delivered in app-centric services in the client experience and derive While change is a challenge to
that help simplify consumers’ lives by value from it while leaving the client incumbents (who have scale), cloud
synchronising data, simplifying contact, relationship intact. An example of this is computing provides an exciting
integrating online purchases, accessing the Commonwealth Bank of Australia’s opportunity to create an agile
and aggregating content. To say Property Guide – this augmented organisation with an extended ecosystem
consumers have adopted this approach reality app is powered by realestate. into other industries, and to launch
is a wild understatement. Consumers will com.au and rpdata.com and bundles products in response to new entrants
typically quickly embrace a simple way property information into a value added almost as quickly as they appear. The
to manage their banking or investment application for consumers searching for ability to source data, analyse it and
(particularly superannuation) products in real estate. respond to the resulting insights will
a similar way. become a distinguishing characteristic
of banks competing digitally. Importantly,
The common attribute of these services cloud affords enterprises with the
is data. Almost every action taken by a necessary agility to reduce the latency
consumer using cloud services generates and associated risks associated with
masses of data that can be used to the lifecycle from the opportunity event
augment the existing customer data that through to taking action (see Figure 2).
financial institutions already hold – often
substantially increasing its value.
11
2.0 MAJOR COMPETITIVE
GROWTH FORCES (CONT.)
Analytics Latency
Business event
Response Latency
Data
latency
Data captured
Insight
latency
Insight delivered
Decision
latency
Decision made
Action
latency
Action taken
Source: TIBCO
2.4 Artificial Intelligence Cognitive Unsurprisingly, he built his computers As a consequence, our world is flooded
technologies that educate based on mathematical ideals, with this messy, imprecise, and yet
themselves, support expression and programmatic logic, and defined rules. amazingly useful information – in the
deliver expertise, continue to evolve For over 60 years, this is what we have form of words, pictures, video, and audio
come to know of computing. recordings. In fact, 80% of all the digital
information in the world is in the form of
‘Analyse the past, consider Unfortunately, what we have come this unstructured information. Everything
to know of life is far less structured,
the present and visualise organised, absolute, or even logical. Just
else is beyond the reach of traditional
computing, leaving the vast richness
the future.’ take a look at how we communicate. Our of unstructured data to the limitations
language is full of innuendos, subtleties, of what can be unlocked by the human
Thomas J. Watson, Senior –
idiosyncrasies, synonyms, metaphors mind. Given that 90% of the world’s data
IBM Chairman 1914-1956
and complex concepts for expressing was created in the past two years7, this is
When John Von Neumann started work abstract ideas. Why is it that noses run?
an exceptionally tall task.
in the 1940s on what has become the Can houses really burn up as they burn
blueprint of all modern computers down? Our communication with each However, with the advent of Cognitive
he imagined that computers could other is ambiguous, illogical and very Systems, that is changing. When IBM’s
solve any problem. Von Neumann was imprecise. And yet, it also turns out to Watson bested the two grand champions
a mathematician. He saw the world be very effective. The paradox of the (Ken Jennings and Brad Rutter) in the
through a mathematician’s eyes, human condition is that it is our ability U.S. game show Jeopardy!, it represented
believing anything could be modelled to reason, infer, and extrapolate from our a historic milestone and proof point
with mathematical precision using the interactions with others that makes us that computers could go beyond what
language of mathematical symbolism. so efficient at affecting results with each Von Neumann had envisioned. It was a
other. Our minds are especially adept at system that read, understood, learned
producing and consuming information in and, arguably, began to reason.
this imprecise form.
12
Consider a financial question that needs Many of the more important questions To understand this better it is worth
to be resolved and the complexity of we ask are really quite complex – delving deeper in to what defines a
that question. Consider this wealth involving contextual history, judgments, cognitive system. For example, IBM’s
management example: priorities, assumptions, observations, Watson is a system that is able to learn
assessment, pre-conditions, and so its behaviour through education; that
Steve, a financial planner, conducted a forth, as a preface to the actual question supports forms of expression that are
quarterly financial review with a client we want to ask. And that preface can more natural for human interaction;
today. He is 38-years old, married, be full of jargon, technical elements, whose primary value is its expertise;
father of two (12 and 14) and has a relative values, grammatical devices, and that continues to evolve as it
moderate-risk investment tolerance. and subtleties that are significant to experiences new information, new
His goals continue to be aligned with his the disciplines of the domain. But the scenarios, and new responses; and does
children’s education and retirement. He use of the language can convey far so at enormous scale. We refer to these
is currently heavily weighted towards more significant information that any as the ‘four-Es’ of cognitive systems.
small-cap growth funds, including a enumerated list of structured data could
24% stake in International Small-Cap ever offer – all of which is germane to
mutuals. He also has a 14% portfolio answering the question. Access to information often leads
stake in a property fund that specialises to new insights for the user that
in retirement properties that is in its 3rd And, of course, to find an answer to the enables them to discover risks and
year, and is showing signs of being sold question also requires the evaluation opportunities that might otherwise
out to a well-funded investment group. of complex ideas, knowledge, art and be elusive.
This client captured losses last year science captured in enormous reams
that significantly reduced his income of literature. The task of reading the
thousands of reports, articles, papers, Today, Watson is able to command the
tax burden, but is not likely to repeat
journals, studies, books, blogs, forums, language of the domain, from which it
that against the broad market gains
and web pages that are produced every can answer questions, becoming the
he’s enjoyed this year with his current
day (over 2.5 quintillion bytes or about perfect assistant, coach, or concierge.
allocation. He’s looking to explore
170 newspapers for every man, women, That has the power of enabling users to
shifting more of his holdings into tax-
and child on the planet8) – even when find important information for their job
sheltered municipal bonds. However,
– information that would otherwise be
he is suspicious of the stability of narrowed to just those sources that are
too hard to find in the river of literature
large municipalities, given the recently relevant to our discipline – is practically
flooding in to their work every day. More
reported bankruptcy of a large city in impossible.
so, access to this information often leads
that region.
This is the significance of a cognitive to new insights for the user that enables
Steve asks, what alternative bond funds system: to be able to understand the them to discover risks and opportunities
would address my clients concern and language as well as we do ourselves, be that might otherwise be elusive. Banks
align to his long-term goals? able to read mountains of literature to such as DBS Bank in Singapore, Citi in
find answers in seconds, and learn from the USA, ANZ in Australia and Nedbank
the experience getting smarter with in South Africa have been early pioneers
each action, outcome and new piece of with Watson in financial services.
information.
13
2.0 MAJOR COMPETITIVE
GROWTH FORCES (CONT.)
2.5 Competitive Growth Model We now bring these four competitive We are now seeing new entrants
– where to enter, adapt or be forces together into a model to explain venturing into the financial services
exponentially out-competed their inter-relationships while also taking market with increasing regularity. Indeed,
into account the impact of technology the competitive forces outlined almost
proliferation and inter-generational invite entrants from non-traditional
‘Frankly, I am more wealth transfer on the financial services industries, who can leverage their cloud-
concerned about those landscape. enabled data holdings and the analytics
capabilities they have developed (see
two guys in a garage than The intensity of competition has
Chart 3).
increased significantly – a trend that will
the competitors I already only accelerate as digital proliferation
know about.’ and inter-generational wealth transfer
make traditional markets attractive for
Jeff Bezos – Amazon.com founder new entrants.
Save
1.4% 10.7% 21.7% 66.2%
Spend
33.2%
1.7% 22.2%
43%
Age 14-20 (Z) 21-34 (Y) 35-49 (X) 50+ (boomer, pre-boomer)
Borrow
0.2%(z) 20.2%
47.8% 31.8%
Invest
0.4% 7.6% 27.1% 65%
Definitions
Save Total Deposits
Spend Amount spent (last four weeks) on credit and debit cards (i.e. does not include cash or direct payments)
Borrow Total amount outstanding on all loans and amount intending to carry forward on credit card
Invest Total direct investments, managed investments, property investments (excluding primary residence) and superannuation
Source: Roy Morgan and Telstra Research, February 2014
Today’s competitive forces almost invite entrants from non-traditional industries, who can leverage their cloud-enabled
data holdings and their analytics capabilities, to enter the market.
14
2.0 MAJOR COMPETITIVE
GROWTH FORCES (CONT.)
The twin mega-trends of technology These entrants share some common Governments, too, are noting the
proliferation and inter-generational strategies: importance of these new entrants and
wealth transfer places a new epicentre new models. In a move to encourage
1. Deliver Personalisation through
of disruptive innovation squarely focused greater access to credit, the UK’s
creating digital propositions that
on Generations X and Y. This opportunity Chancellor of the Exchequer invited
are based on meeting the lifestyle
has attracted new entrants in the form proposals to establish an independent
needs of customers (as opposed to
of technology-based start-ups and 21st referrals exchange process so that small
product orientations). Examples are
century information businesses pursuing businesses turned down for credit by a
Movenbank and Simple for digital
adjacent strategies. This point was bank would be automatically referred to
mobile services;
highlighted in a recent Finextra article other credit providers, such as crowd-
(2014) titled ‘Millennials look to tech 2. Design Network Platforms to reach funding and peer-to-peer platforms15.
firms to replace unloved banks’9 referring connected communities. These have In Australia, in its submission to the
to a report on a three-year study of demonstrated explosive growth, Financial System Inquiry, Federal
10,000 people10, some of the key findings moving swiftly from start-up to mass- Treasury has requested it consider
of which were: market relevance. Examples are PayPal the scope for promoting services
in payments and Lending Club in peer- by redesigning product disclosure
• 33% believe they won’t need a bank at
to-peer lending; requirements for the digital age; it
all in the future;
suggested innovation to enable the
• Nearly 50% are looking to tech start- 3. Operate Cloud Business Models by growth of ‘information intermediaries’
ups to overhaul banking; and, reducing barriers to scale with agile that can apply expertise in presenting
operations. Examples include Google information in a more effective way.
• 73% would be more excited about a
Wallet for consumer and merchant
new offering from Google, Amazon,
payment services and Estimize – a Data analytics are at the heart of how
Apple, PayPal or Square than their
service that facilitates aggregation these new entrants are establishing,
bank.
of data from analysts for trading and competing and disrupting. We now
In another development, it was reported investments; and consider how ready traditional players
by the European press that Facebook has are for this new competitive environment,
sought approval from the Central Bank of 4. Leverage Open Source Artificial and discuss the transformation
Ireland to start a service that would allow Intelligence Based Technologies in implications.
users to store money on Facebook and open collaboration that promotes
use it to pay and exchange with others11. universal access and redistribution.
These attitudes are coming from Some major financial services Nearly a third of FinTech funding in
generations that today include the incumbents are already responding, 2013 went into ventures focused
greatest number of buyers of financial including the Spanish bank BBVA, with on analytics and personal financial
services. In the near future, inter- their recent acquisition of Simple, and management.
generational wealth transfer will also the direct investment by Australia’s
ensure these generations will hold the Westpac, via its new venture capital fund,
greatest pool of wealth in most countries. into SocietyOne. Interestingly, Westpac’s
If their needs are unfulfilled, the research investment reflects a broader trend of
suggests they are quite willing to look global investment in FinTech ventures
beyond traditional providers. These as captured by CB Insights, which tracks
non-traditional entrants, referred to venture capital and emerging industries.
by futurist Alvin Toffler as ‘The Micro- Their data shows FinTech investment
Multinational’, are often staffed by tripling from US$928 million in 2008
teams you can count on both hands and to US$2.97 billion in 2013, outgrowing
are unencumbered by legacy systems, overall venture capital spending by a
legacy processes or legacy technologies. factor of four13 (see Chart 4). Key to note
These players don’t see themselves as is that nearly a third of this funding
banks, but rather data companies. One in 2013 went into ventures focused
such example is Zopa, a peer-to-peer on analytics and personal financial
lender founded in 2005 whose CEO, Giles management (see Chart 5).
Andrews, tellingly said: ‘The business is
not a bank and I’m not a banker, we’re
more of a data company’12.
16
Chart 4: FinTech Financing Activity (US$)
500 3500
450
3000
350
Investments (SM)
2500
Deal volume
300
250 2000
200 1500
150
1000
100
500
50
0 0
Banking & corporate finance Capital markets Data analytics Payments Personal finance management
17
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH
Having now considered some of the competitive and growth
forces at play – and the importance of personalisation, the
network effect, cloud business models and open source
technologies – we now turn our attention to evaluating
financial institutions, their customers and the opportunities
for transformation.
Firstly, we gain an understanding of This study consisted of 3,106 surveys The objective of this study was to
the strategic importance, competitive with a sample of consumers who have understand how institutions viewed
readiness and maturity of financial at least one of the following products current and future levels of readiness
insitutions in the Asia Pacific region for personal use: general transaction/ to compete analytically. Here we
and how any transformation may savings account, home loan, credit card, assessed their level of capability
affect them. Secondly, through new high interest account, term deposit, maturity, its strategic importance to their
consumer research, we look to gain an personal loan or investment (e.g. unit organisation, levels of investments, the
understanding of what analytics-enabled trusts or managed funds). The online benefit expectations, and importantly,
experiences consumers value, and their surveys were conducted from February which group within the organisation is
associated business impact. to March 2014. The dataset in now driving strategy, requirements and
each country was weighted to be investments in analytics. The framework
3.1 Methodology representative of the total population used in section 3.2.1 and 3.2.2 was
This section has two parts. In 3.2, we aged 20-69 years, according to region, developed and published by Davenport &
summarise the key findings from a age and gender. Harris (2007) and applied to the sample.
qualitative study conducted by Telstra
up to May 2014 from interviews and 3.2 Asia Pacific Financial Institution 3.2.1 Attributes of Analytical
surveys with 43 C-Level executives from and Service Provider Competitive Competitors
banks, credit unions, insurance providers, Readiness Study Davenport & Harris (2007) define an
payment schemes, trading exchanges analytical competitor as ‘an organisation
and consumer and commercial finance that uses analytics extensively and
providers across Australia, New Zealand ‘I wanted to build a systematically to out-think and out-
and Asia. The objective of this research company. I had no money, I execute the competition’. Based on
was to understand the competitive their study, they found that the most
readiness of institutions, the maturity had no business experience analytically sophisticated and successful
of their analytics capabilities, and and I had no business idea. organisations had four common
characteristics:
their expectations in terms of their
investments and the returns on this So I was perfectly qualified. 1. Analytics supported a strategic,
investment. I didn’t want to build a distinctive capability;
In Section 3.3, we present the key
findings from a quantitative study,
bank. I wanted to build 2. The approach to, and management of,
analytics was enterprise-wide;
commissioned by Telstra, of consumers a technology company.
in five countries: Australia, Singapore, 3. Senior management was committed to
Malaysia, Indonesia and Hong Kong.
Many days I went to work the use of analytics; and
The objective of this research was to wondering if it would be my 4. The company made a significant
understand attitudes towards current
financial services providers in local last day. There were many strategic bet on analytics-based
competition.
markets and determine the current near-death experiences
digital behaviour of consumers.
Additionally, we wanted to gauge local over the first five years.
perceptions of five analytics-enabled Our idea involved doing the
experiences and assess the potential
impact of these on current behavioural business differently and
patterns.
that was hard to sell.’
Rich Fairbank, CapitalOne CEO
18
Importantly, they describe each of Figure 3: Four Pillars of Analytical Competition
these characteristics as being broadly
equivalent in terms of importance for
defining an analytical competitor. The
characteristics were not independent
of each other, but should rather be
viewed as four pillars supporting an
organisation’s analytical capability.
Source: Reproduced with permission from Harvard Business School Publishing Corporation and
Telstra Research, 2014
19
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
Source: Reproduced with permission from Harvard Business School Publishing Corporation and Telstra Research 2014
20
The results of our study indicate that, Approximately 17% of respondents 3.2.4 Expectation on Improving Results
to this point in time, 5% of financial perceive their capabilities as being more Respondents were asked to what
institutions across Asia Pacific consider localised (Stage 2). They are more likely percentage performance improvements
themselves to be analytical competitors to be using analytics to support tactical they were expecting from the
(Stage 5). This result was consistent with activity, such as reporting, but do not introduction of analytics capabilities. The
the study by Davenport & Harris, who use the capability to compete. Only a result of 6.3% was an average across the
identified that analytical competitors in small proportion (5%) perceives their sample, and reflects how the majority of
their US study were from information- organisations as analytically impaired institutions reported being Stages 3, 4,
intensive services firms – four of (Stage 1) (see Figure 4). and 5 in their degree of competitiveness,
whom were financial services firms. with a clear understanding of benefits
The overall results indicate a significant
Of interest in our study was that one (see Figure 6).
gap of 68% in the data and analytics and
of these organisations was an online-
competitive organisational readiness, Figure 6: Results Performance
only institution born in the 21st century;
with only 32% perceiving that they are Improvement Expectations (%)
another was a 20th century institution
on the verge of (Stage 4), or ready (Stage
that had transformed.
5) to compete using data and analytical
The results indicate that approximately capability.
one in three (27%) are on the verge of
competing analytically (Stage 4). We
can expect that these organisations are Nearly half the organisations
likely to have already made the large surveyed have analytical
investments in the requisite technology, aspirations, but still require major
people and processes and are now
progressing to embedding the capability
investments in capability. They are
most likely to still be developing
strategy rather than capability.
6.3%
into strategy, products and systems. A
survey by Gartner16 found that the Big
Data hype was translating into increased
investments in, and adoption of, Big 3.2.3 Level of Strategic Importance
Data technology. The industries furthest Respondents were asked where data
along the adoption curve came from analytics ranked in their organisation’s
the banking sector, with 13% already strategic priorities for FY14. The result of
deployed. ‘4th’ was an average across the sample,
but it was reported that it has made Source: Telstra Research, 2014
Nearly one in two (46%) respondents a very rapid entry onto the corporate
perceive themselves as having analytical strategic agenda (see Figure 5). In a
aspirations, but still require major global retail banking study by PwC, 90% Companies that invest in Big Data
investments in capability (Stage 3). They of executives agreed that ensuring they analytics outperformed their peers
are most likely to still be developing can harness the power of Big Data is one by 5% in productivity and 6% in
strategy rather than capability. They are of the six key priorities for leading banks profitability.
also likely to be developing business today. Of interest in that same study was
cases to support capability investments that only 20% feel well prepared or are
across the organisation. This result is investing to address those priorities18.
consistent with the broader findings
of a study by SAP and Bloomberg of Figure 5: Ranking in Top 10
100 banking executives in 2013. That Strategic Priorities
study found that only 46% of banks can
analyse external data about customers,
only 32% could analyse social media
activity, and only 29% could analyse
share of wallet17.
4th
21
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
3.2.5 Level of Investment 3.2.6 Departmental Stakeholders service-related activity with marketing
Respondents were asked what Respondents were asked to select (at 39% of respondents) now emerging
percentage of their organisation’s which departments were stakeholders as the clear leader in driving strategy,
budgets was allocated toward analytics in analytics capabilities. What we found requirements and investments in this
projects. The result of 6% again reflects was that 66%-85% of respondents are area (see Charts 4 and 5).
the level of strategic importance and using analytics for sales, marketing and
benefit realisation that this area now
occupies in the organisational program
(see Figure 7). This result is consistent Chart 6: Departments Using Data Analytics (%)
with Ovum’s findings that investment by
retail banks is expected to accelerate 85% 83%
between 2014-2018, with the growth 78% 78%
rate ranging between 5.3% and 6.4%19. 66%
Gartner further reported that 34%
of bankers and 26% of insurers have
already invested in Big Data, with 24% of
bankers and 40% of insurers planning to 32%
27%
invest within the next two years. Gartner
also noted that 44.7% of organisations
across many industries in the Asia
Pacific region have ambitious plans
to invest over the coming two years20.
Human Resources
Logistics
Operations
Marketing
Sales
Customer Service
Executive Management
In another study by McKinsey and
Massachusetts Institute of Technology, it
was reported that companies that invest
in Big Data analytics outperformed their
peers by 5% in productivity and 6% in
profitability21.
Figure 7: Data Analytics FY14 Budget
Proportion (%)
Source: Telstra Research, 2014
6%
22
Chart 7: Department Leading Data Analytics Strategy, Requirements, Investment (%)
The overall results indicate a
significant gap of 68% in the
readiness of institutions to
compete on data analytics, with
8% only 32% perceiving that they are
10%
on the verge of competing, or ready
to compete, using data analytical
capability. Further, there was a 17%
strategic priority gap identified with
only 83% reporting to have senior
management commitment to data
analytics. These gaps explain the
24% significant investments (averaging
6% of organisational budget in
FY14) being allocated for data
analytics projects. Corresponding
YES expectations for performance
improvements averaged
39% approximately 6.3%. Clearly, growth
is the major driver of investment,
with 68% of Sales and Marketing
departments now driving the data
analytics strategy, requirements
and investment programs.
19%
23
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
3.3 Analytics-Enabled Consumer Those who indicated they found the During the evaluation of each concept,
Experience Study concept appealing and were likely respondents who had indicated they
Respondents across Australia, to use it, were also asked to indicate were likely to use that concept were
Singapore, Malaysia, Indonesia and Hong how the concept would impact on then asked to rate how well or poorly
Kong were asked to evaluate a series of their satisfaction levels, likelihood to each concept would deliver on these
analytics-enabled service concepts. The recommend their provider to friends and same experience measures if provided
concepts were shown to respondents family, the impact on consideration when by a financial institution (i.e. a ‘post’
in a random sequential order in order to switching financial services provider measure). Not all metrics were rated for
ensure a reliable analysis of all concepts. and the impact on consideration when each concept, only those experiences
Descriptions of each concept are opening new accounts with their current that were appropriate for that concept.
provided in 3.3.1. financial services provider.
For the analysis of this data, the
For each concept, respondents were As well as these metrics, respondents difference between the pre measure
asked to indicate the level of appeal of were also asked about the likely impact and the post measure was calculated
that concept, as well as the likelihood of each concept on their perceived to create an impact score. The impact
of using this service if it were offered by banking experience. Nine items were scores were then averaged out across
their main financial service provider. tested as baseline (i.e. ‘pre’) measures the five countries to provide a single
prior to the concept evaluation; for experience impact score for each of
example, one of the tested items was: the nine attributes. In this report, we
‘Knows me and my financial situation, highlight which two experiences are
irrespective of how I use the bank or most impacted (across all countries) for
financial institution (e.g. in person, in each concept.
a branch, contact centre or online)’.
The full list of items is shown in Table
1. Respondents were asked to indicate
how well their main financial institution
performed on each item.
24
C Personalised Digital Banking Experience
D Digital Advice
25
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
2. Access to banking experts when I need them, through my preferred way of interacting with them
3. Proactively recommends products and services that are relevant to me with enough information on the product
for me to make decisions
6. Provides information that helps me achieve my goals, such as saving, spending, borrowing or investing
7. Knows me and my financial situation, irrespective of how I use the bank or financial institution
(e.g. in person in a branch, via a contact centre or online)
8. Provides me with tools and insights to help me manage and control my finances, specifically saving, spending,
borrowing and investing
9. Alerts me when something relating to my finance occurs that I need to know about
The following section outlines the 1. Cultural factors can encourage As such, specific results should always
research findings of the concept some respondents to indicate more be viewed in the context of all concepts
evaluation. Please note that throughout positively when evaluating potential within each country (i.e. what is the
the analysis, the scores in Asian market concepts; and highest ranked concept as opposed to
countries are consistently higher than the lowest ranked concept in Australia?)
2. The Internet may be less integrated
those in the Australian market. While this rather than across countries.
into the general population in some
is the case, it does not necessarily mean
Asian markets. As a result, the online
that all of these concepts will perform
population in these countries may
better in these Asian online markets than
represent a more ‘early adopter’
in the Australian market, as there could
orientation than in more mature
be several reasons for this, two of which
markets such as Australia, where the
include:
online population is now considered to
be broadly representative of the total
population. This will result in Asian
consumers being more open to trying
new market concepts.
26
3.3.2 Appeal and Impact of Concepts
Each of the five digital service concepts achieved high appeal levels in all countries.
Chart 8 shows the appeal ratings for each concept by the individual countries, as well as the experiences most affected for each
concept, across all countries.
Australia 41 43 38 28 50
Singapore 57 56 62 45 61
Hong Kong 57 60 58 51 50
Malaysia 64 60 70 57 61
Indonesia 82 78 86 78 78
Indicates top two experiences per concept Indicates two highest concepts per country
Source: Telstra Research, 2014
27
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
Australians found the customised These results show quite clearly the This indicates that each concept has
insurance (50%) and personalised value of a personalised digital banking the potential to improve consumer
contact centre (43%) concepts most experience for the various markets perceptions of financial institutions.
appealing. Singaporeans found the across the Asia-Pacific region, with this
With that in mind, the ‘Knows me and my
personalised digital banking experience concept ranked in the top two most
financial situation, irrespective of how
and customised insurance concepts appealing in all Asian markets.
I use the bank or financial institution’
most appealing, with around six in
Alternatively, those who did find the digital experience achieved strong positive
ten indicating that they found each
advice concept appealing in any country results across all five concepts (in the
appealing (62% and 61% respectively).
showed strong support for the concept top two for all concepts). The ability to
Amongst Hong Kong consumers, the in terms of satisfaction and advocacy access banking experts when needed
personalised contact centre (60%) and scores. This would suggest that it could was also a common benefit across
personalised digital banking (58%) develop a strong niche position with the personalised in-branch experience,
concepts were considered the most Asia Pacific region and provide a useful personalised contact centres and digital
appealing. customer acquisition tool. advice. Finally, the provision of tools and
insights that inspire and help consumers
In the Malaysian market, the highest
The personalised digital banking to manage their finances was a strong
level of appeal was achieved by the
experience was highly valued theme across the personalised in-branch
personalised digital banking experience
across all markets in the Asia- experience and personalised contact
(70%) and the personalised in-branch
Pacific region. The digital advice centre experiences.
experience (64%). Indonesians were
experience could also help with
generally positive, with 86% indicating 3.3.3 Incremental Appeal
customer acquisition and retention.
that the personalised digital experience Analysis was conducted to identify the
Interestingly, in all countries the
was appealing, and 82% finding the optimal number (and combination) of
personalised in-branch experience
personalised in-branch experience concepts. This analysis looks to identify
concept appears in the top three
appealing. the combination of concepts that obtain
concepts.
the greatest number of people who find
at least one of the concepts appealing.
All nine experience metrics achieved Chart 9 shows the incremental appeal
positive results (for every concept for levels for each market as concepts are
which they were measured – note, some added to the concept portfolio.
experience metrics were not relevant
to the concept and therefore were not
measured).
28
Chart 9: Incremental Appeal of Concepts (based on five concepts)
100
90
80
70
60 IMPORTANT NOTE:
These levels of appeal
are based on specific
concept combinations
50 as shown in Table 2.
40
1 Concept 2 Concepts 3 Concepts 4 Concepts 5 Concepts
Appeal generally begins to plateau at three concepts in Australia, Singapore, Hong Kong, Malaysia and Indonesia. In Indonesia,
marginal appeal is relatively limited as new concepts are added to the portfolio. This is a result of the overwhelming appeal levels
of all concepts (NB. this may be a result of the low penetration of digital financial solutions in the market as whole, which would
mean that these concepts are relatively foreign to the Indonesian online market and therefore potentially represent a new and
somewhat exciting prospect for financial services in the country).
29
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
To achieve the maximum appeal in each country, a specific combination of concept should be utilised. Table 2 shows the ideal
combination of services in each market.
Table 2: Concept Combinations (based on five concepts)
1 Concept E 50 C 62 B 60 C 70 C 86
2 Concepts EB 64 EA 77 CB 75 EC 82 CB 90
Personalised digital banking and customised insurance appear in the top two concepts for each country (with the exception
of Indonesia). Interestingly, in all countries the personalised in-branch experience concept appears in the top three concepts.
This finding may contradict the suggestion by some commentators that the in-branch experience is dying and will eventually
be replaced by the online mode. Instead, it suggests that the in-branch experience is still a fundamental part of what makes a
financial services provider appealing to consumers in the Asia-Pacific region.
3.3.4 Impact of Concepts on Retention
Chart 10 shows the impact of each concept on retention amongst those who indicated they would use the concept.
Chart 10: Impact of Concepts on Retention by Country
Australia 82 80 82 86 78
Singapore 92 88 62 90 89
Hong Kong 90 88 85 87 87
Malaysia 94 91 95 91 93
Indonesia 97 97 97 96 96
Indicates two highest concepts per country
Source: Telstra Research, 2014
30
In Australia, the digital advice concept service gave it a 95% retention score, strong retention scores achieved by
has the greatest impact on customer while the digital advice and personalised the personalised in-branch concept
retention amongst those who would contact centre offerings were both indicates that there is no surrogate for
use the concept (86%). Within the scored at 91%. Finally, Indonesia was split high quality in-branch service.
Singaporean market, those who with the personalised in-branch, contact
3.3.5 Impact of Concepts on Acquisition
would use the personalised in-branch centre and digital banking concepts all
As well as measuring the impact on
experience give it a retention value of achieving the strongest retention scores
customer retention, the research also
92%. In Hong Kong, the personalised (97%) amongst those who would use
measured the impact on customer
in-branch experience drives customer them.
acquisition for each concept. Once again,
retention with a factor score of 90%
These results show the ongoing the questions were asked of those that
amongst those who would use the
importance of a good in-branch indicated they would use a concept.
service. Malaysian consumers who would
experience. While digital services have Chart 11 shows the results for each
use the personalised digital banking
proven to be an appealing and useful concept by country.
supplement for financial services, the
Australia 72 67 78 80 75
Singapore 83 79 81 88 87
Hong Kong 83 78 80 86 85
Malaysia 92 86 88 88 93
Indonesia 94 93 94 96 93
Indicates two highest concepts per country
31
3.0 THE DATA ANALYTICS INDUSTRY
AND CONSUMER RESEARCH (CONT.)
32
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD
The research now leads us to consider the technology
environment from both a consumer and financial institution
perspective.
Here, we present our vision for a Smart Figure 8. Growth in connected devices
Connected Financial Services World. We 30-75 Billion devices
then provide guidance on how analytics
and communications technologies can
be used to respond to the changing
competitive environment, and how the
design of experiences that are valued by
consumers can deliver growth.
4.1 The Consumer Environment - A
Smart Connected World
10-12 Billion devices
‘Smart networks,
smartphones and smart
software are putting
technology right at the
heart of the Australian 2013 2020
economy and connection has been the ability for people to in 2010, HFT accounts for 40% of
at the heart of the connect with each other more readily, equity order volumes in Europe, over
with almost two billion active social half of volumes in the US and for
Australian way of life. platform users globally and more than Asia about 5-10% with potential for
Technology is connecting 6.5 billion mobile phones in a world of rapid growth27. Others report that
about 7.2 billion people24. algorithmic trading accounts for half of
everyone and everything all trading on the New York and London
• Everything is connected
- and creating new The next phase of the age of
exchanges28. Demand for ‘trading at
the speed of light’ and the need for
opportunities for all of us’. connectivity focuses on connecting
shaving nanoseconds of latency has
devices and exposing data from those
David Thodey, CEO Telstra Corporation Limited22 seen organisations like Telstra make
devices, primarily for consumption
significant investments in cable
The Smart Connected World has many by other devices (i.e. not humans).
systems linking global markets and
pseudonyms: the Internet of Things, the Underpinning this machine-to-
exchanges.
Internet of Everything, and the Industrial machine connectivity is a range of
Internet. However, in each version this high-bandwidth, low-latency, short- • Everything is intelligent
vision is essentially underpinned by five range communications technologies, Intelligence is being built into an
basic premises: such as Fibre, Bluetooth 4.1, IEEE ever-increasing range of devices,
802.15.4 and WiGig. Various sources infrastructures and environments.
• Everyone is connected predict the global ecosystem of Looking at the consumer space,
We are near the end of one phase of connected devices will increase to every day we see announcements for
the connectivity revolution where the 30-75 billion devices by 202025 - that’s intelligent appliances29, intelligent
focus has largely been on connecting between 4-10 connected devices for vehicles30, home automation products
people to the Internet, typically via every person on the planet. In fact, and even intelligent toothbrushes31.
‘traditional’ devices such as PCs, Cisco estimate almost 3% of all ‘things’ For signs of the rise in embedded
smartphones and tablets. In developed on earth will be network-connected intelligence, we only need to look at
economies, we are rapidly reaching a by 2020 – up from 0.6% in 201226. Of shipments of the processors used
point where, for most purposes, we can course, the trend to pervasive high- to control consumer devices, where
assume all those wishing access to the speed connectivity isn’t restricted 32-bit microcontrollers and System-
Internet can have it. The ITU estimates to people and individual devices – it on-Chips are rapidly supplanting the
77% of people in the developed world applies equally to more complex relatively dumb 8-bit microcontrollers
use the Internet today23. At current abstract entities such as markets. traditionally used to power appliances,
growth rates, this will reach 95% in The high-frequency trading (HFT) etc. It’s clear that this is being driven
2020. Of course, one of the headline market has now become globalised. by the need to provide the network
stories of personal connectivity The Bank of England estimated that connectivity described above32.
33
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
• Everything that can be measured • Analytics will remove friction from dividend of the Smart Connected
will be measured business and lifestyle processes World for industrial applications
As we interact with the world, The final and key premise of the Smart alone to be over US$32 trillion
whether physically or digitally, we Connected World is that analytics annually35. And when IT consulting
leave footprints. In the digital world, will be used to improve decision- group Tata conducted a broad survey
for example, our trail includes making and to remove friction from on Big Data activity, they found that
clickstreams on websites we visit, our existing processes of all kinds. In financial services organisations had
search queries, the content we view Section 3, we saw consumers’ thirst the second highest expected return
and much more. Technologies such as for personalisation. We saw that on investments in Big Data, with an
Micro Electro-Mechanical Systems customers believe financial services expected mean ROI of 69%36.
make it possible to deploy arrays of providers have more than enough
highly advanced sensors both widely information to be able to tailor
and very cheaply. Janusz Bryzek from products and customer service to suit
Fairchild Semiconductor talks of a them. The first four premises above
trillion sensors deployed by 202033 – ensure that financial service providers
that’s about 140 sensors per person. have more data available than ever
In fact, of all the connected devices before to understand their customers’
mentioned above, IDC predict that needs and their context. There are
14% will be fully autonomous devices also substantial operational economic
largely devoted to collecting data34. benefits to be had. GE estimates the
34
Infographic: Vision for the Smart Connected Financial Services World
• Amount of data in
• 1.5B smartphones the world doubles
globally every seven months
• Smartphone • Over four Zettabytes
penetration: Hong in storage currently
Kong/Singapore 87%,
Malaysia 80%,
Australia 75%, China Sensor
71%, Indonesia 23% Cloud Interconnected
Cloud Storage
• 177M wearables
by 2018
• 515M health/ fitness/
wellness sensors
shipped annually by
2017 Sensor
Cloud
Everything is connected
• 60-100 sensors
in new cars now - Interconnected 3rd Party
200 by 2020 Cloud Analytics Aggregators
• 50% of new cars
network connected
by 2015, 100% Sensor
by 2025 Cloud
• 5.7 connected
devices & sensors
per home in 2013
growing to 30
by 2018 Sensor
Cloud Marketing 3rd Party
Aggregators
“snaps” daily
• 4.75B items shared Fraud & Product Design
on Facebook daily Risk & Selection
• 2.5B Internet
users globally
• 131k person years
spent online daily
Electronic
Trading
• In Australia: 14.5M
card transactions,
7.4M direct entry &
2.2M ATM Analytics
transactions daily
removes friction
• Globally 9M PayPal
transactions daily
35
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
4.2 The Financial Service Provider The ability to manage and effectively Maintaining such focus in the face of
Environment – Data, Infrastructure integrate not just internal data, but also the challenges described in Figure 9 is
Analytics and Actioning externally sourced data and insights, no easy task, even for the most capable
is a key capability for analytics-driven financial service organisation. Similarly,
organisations and is only likely to many organisations are challenged to
‘Data helps us form a become more important into the future. strike an optimal balance between the
picture of the customer’s Analytics-driven business in a Smart
agile and innovative analysis and uses
of data with the security and governance
life journey, the next step Connected World requires access to
of data, required to maintain consumer
unique and often-rare skill sets that
they will take and how we are increasingly in short supply38. This
trust and meet regulatory requirements.
36
Figure 9: The V 7 Model
The first three Vs talk about the The next three Vs refer to properties Finally, one major data challenge
flow of data. Obviously the Smart of the data we use and the insights posed by the Smart Connected
Connected World generates vast we infer from it. Data and the World is not technological. Obviously
volumes of data about customers insights we infer from it are not data and the insights derived from
and prospects. Soaring volumes absolute and immutable things. it have intrinsic value. However,
are accompanied by increased They exist in a spectrum of validity organisations typically have not
velocity – a growing demand for real- (how correct, accurate and precise yet developed the tools to treat
time and near-real-time analytics it is) and veracity (how complete, them alongside other classes of
driven by ever increasing service how relevant and how up-to-date assets whose value is actively
expectations from customers. This it is), which must be continuously measured and managed. In fact,
has been one of the key drivers managed if we are to understand value is often not ascribed to data
of demand for high-speed, low the applicability of those insights. and insights at all, but rather to
latency networks, particularly What is more, both the data and the the infrastructure hosting them or
for trading environments. Finally, insights age – they are volatile – and to the processes they impact. This
the sheer variety of data types, the levels of volatility are highly is one possible factor driving the
sources, structures and formats variable. fragmented organisational approach
is also increasing rapidly. Deciding we saw in Section 3 of this report.
how to best handle a particular This issue has seen the rise of a
single customer call may involve new discipline, often referred to
analysing structured data (e.g. as infonomics, which is the study
traditional CRM and transaction of the economic value of data and
records), unstructured data (e.g. information. The Electronic Trading
speech analytics of the in-flight call) part of the financial services market
and semi-structured data, such is one exception. Real world mining
as customer comments on social companies understand the value of
media. geological data; for institutions, the
equivalent is their customer data.
37
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
4.2.1 Key Infrastructure Technologies Advanced SQL – No SQL No SQL is an early adopters’ market
Advanced SQL is a technology where the brunt of technology is open
and market that is ready for source, tooling is crude (where it exists),
How best can we manage and
prime time, with major IT and the vendor ecosystem is only
interact with the vast amount of
platform players having in the beginning to establish itself. For early
data available, so we can find new
past year planted their flag in this space adopters of No SQL that can get access
and useful relationships and ways
through acquisition. The key question to previous skill sets (Hadoop skills
of using that data?
here is one that applies to any market are rare), it’s time to look at pilots and
that is in a consolidation phase: which prototypes. No SQL platforms such as
Now let us examine just some of the players will get successfully integrated Hadoop, DataStax, MongoDB are based
key technologies that are being used by into their new parent companies on open source software and are not
organisations to enable analytics-driven and leverage the larger go-to market known to be enterprise grade. There is
business in the face of the challenges presence that big players provide? an acknowledged worldwide shortage
posed by a Smart Connected World. Advanced SQL platforms, such as those of data scientists conversant with
provided by IBM Streams, tend to be these platforms (see the Data Analytics
considered more enterprise grade and to Framework below).
have an appropriate resource pool.
P
BYTES
KEY VALUE STORES GRAPH DATABASES NO SQL
SQL-LIKE NO SQL
(HIVE, PIG, H BASE
DOCUMENT DATABASES
T ENTERPRISE DW
ADVANCED SQL
(MPP/COLUMNAR)
DATA VOLUME
G
LEGACY DATABASES FILE SYSTEMS TRANSFORMED IN MEMORY DATABASES
NO SQL DATA OLTP, DW
PREDICTIVE ANALYTICS
BYTES
LONG RUNNING EVENT PROCESSING REAL-TIME EVENT PROCESSING
M
BYTES
STANDARD BATCH REPORTING
INTERACTIVE REPORTING
DATA MART QUASI REAL-TIME ANALYTICS
38
Hadoop & Co. Complex Event Processing Human language is also a very high
Hadoop and a number of Complex Event Processing bandwidth channel for our brains to
competing platforms are (CEP) involves combining interact with the outside world. Classical
actually frameworks that streams of data from multiple speech interfaces are typically simple
consist of a number of items: (typically high volume) sources stream command-response. Natural language
to look, in real-time, for priori patterns interfaces fronting cognitive systems
a) A way to distribute data and enable much richer and more flexible
that indicate a particular event has just
objects across massive networks of aspects of language such as abstraction,
occurred or is likely to occur. For example,
computers yet still retain the ability which can be helpful when interacting
a particular pattern of withdrawals
to access that data quickly; with large and complex sets of data.
across the ATM network may indicate
b) A way to efficiently manage and a fraud ‘blitz attack’ is underway; or a What is more, cognitive systems can
distribute computing tasks across pattern of interactions across channels shoulder some of the discovery load
the network; and coupled with a pattern of transactions themselves – learning the types of
may indicate a particular customer relationships and features that are
c) Libraries and APIs, simplifying the has reached a critical decision point useful and interesting, and proactively
task of writing programs to run about whether to churn; or instructions identifying them.
across the network. based on a set of variables such as
Speech and Text Analytics
These frameworks have gained price, quantity or timing to execute
The conversations that
popularity for complex analytical tasks an algorithmic trade without human
customers have with staff
across large, and often distributed, intervention. By utilising large in-memory
and that customers have
farms of computing resources. Many of databases and statistical decision trees,
with each other are an enormously
the major cloud platform providers offer CEP systems allow organisations to
rich source of information about the
Hadoop or alternative frameworks on define patterns of interest and to trigger
customer’s needs, interests and their
their infrastructure. particular actions when those patterns
attitude to the organisation. Text (and
are observed.
In-memory Databases speech transcribed into text) can be
Data stored in primary 4.2.2 Key Analytics Technologies simply mined for keyword ‘triggers’
storage (typically called or, using the types of technologies
Discovery Technologies mentioned in this section, can be
RAM) can be accessed One of the key problems
much more quickly than data stored on analysed holistically in the context of a
with vast streams of complete conversation. More advanced
secondary storage (e.g. spinning disks or heterogeneous data is how best humans
Solid State Drives [SSDs]). So, logically, speech analytics also look at features
can interact with them to understand like pacing, tone and vocal stresses to
a database residing entirely in RAM will their structure and explore them to
be substantially faster. Improvements estimate the customer’s emotional state.
find new and useful relationships and Are they confused? Angry? Eager? Is
in memory density and reductions in ways of looking at that data. Probably
the cost-per-gigabyte of dynamic RAM their sentiment becoming more or less
the highest bandwidth channel human positive as the conversation progresses?
(the most common type of RAM) make brains have to the outside world is our
it economically feasible to keep much This is potentially critical information to
visual cortex. Many people find it easiest help inform how the customer should be
larger data bases entirely in primary to think and communicate visually.
memory. This is the concept of the in- treated.
Over the last decade, there has been
memory database. Rapid developments significant research focus on tools and
in SSD technology and forthcoming environments to help explore large data
memory technologies such as sets using the power of the visual cortex.
memristors40, magneto-resistive RAM41
and Restive RAM42 promise interesting Some of that focus has been on new
changes in the way data is stored and display paradigms from simple word
analysed. clouds to graphical representations.
Others have focused on the environment
itself, creating large case immersive
facilities.
39
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
40
Scheduling and targeting of outbound 4.3 Analytics-Enabled Experiences Other organisations are exploring
contact beyond marketing is a complex We now bring the research in previous augmented intelligence (AI) technology
discipline. On the one hand, outbound sections, together with the technology – one of the early pioneers being the
contacts can be extremely effective at aspects discussed thus far, to provide Australian-born company MyCyber Twin,
limiting the impact of a poor customer guidance on how financial institutions who use avatar-based web interfaces
experience and at influencing the can create valued experiences for their to create Intelligent Personal Agents
customer during critical decision points customers. (IPAs). Customers ask questions and give
such as decisions to churn or during instructions using natural language and
major life events. On the other hand, 4.3.1 Experience 1: ‘Contact.Me’ the virtual agent infrastructure exploits
outbound contacts that are mis-targeted the customer profile and context data to
– which occur at the wrong time or on the ‘It would save time interpret and action the requests. IPAs
wrong channel – are wasteful and can are software, usually accessed through a
easily damage a customer relationship. explaining all my smartphone, which tie together:
Analytics-driven selection of targets, circumstances.’ • Awareness of personal context;
times, and channels can assist in
Verbatim – Personalised Contact Centre/ • Deep insights into customer
improving the performance of
Telephone Experience – Telstra Research, 2014
outbound contacts. behaviours and intentions, enabled by
predictive analytics;
The relationship manager is one of the
most powerful tools available to financial • The ability of natural language
Case Study 2:
service providers who wish to deepen interfaces to interpret the user’s goals;
Westpac’s ‘Know Me’ Program
a customer relationship. The term and
relationship manager is interpreted very • A highly engaging smartphone
differently by different organisations. interface, often including a speech
We refer to an individual who acts interface.
Westpac’s ‘Know Me’ program uses
as the major touch point for a given The paradigm is that an IPA is always
customer analytics to execute
customer into the organisation and its with you, always familiar with your
effective customer interactions on a
services. Telstra’s research in Section 3 activities, behaviours and needs, and
one-to-one basis through every one
demonstrates that there is very strong always working to meet and anticipate
of the banking group’s online and
customer demand for the personalisation those needs. Our research indicates that
offline touch points. The Westpac
and convenience that relationship in the relatively brief time Intelligent
Group has more than nine million
mangers typically provide. Unfortunately, Assistants have existed, they have been
customers and a multi-brand
direct relationship management is widely and rapidly adopted. Results show
strategy. Since launching in 2013,
relatively expensive and is typically Singaporeans leading with 70% of the
Westpac has completed 812,000
restricted to very high value customers. population using IPAs on smartphones,
next best offer conversations with
customers in branches, resulting Some financial services organisations followed by Indonesia (66%), Malaysia
in a 37% take up rate. Through the such as BBVA (see Case Study 3) seek (64%), Hong Kong (63%) and Australia
call centre, 490,000 customers have to extend the relationship management (59%). The best-known IPAs today are
been targeted through the program, functions using a personalised contact general-purpose tools (such as Apple’s
with 60% taking up an additional centre approach (as tested in Section Siri and Google Now). IPAs targeting
product, a significant uplift in 3 of this report). Typically, these use specific applications such as banking and
Westpac’s cross-selling efforts. existing customer preference data finance are emerging, including Lola from
Targeted online communications and interaction history data to drive BBVA (as described in Case Study 4).
that appeared in 80% of online intelligent contact management
banking profiles also generated solutions, allowing the customer to deal
incremental revenue’44. consistently with one particular agent
who is familiar with their needs and
holdings or a current matter. Additionally,
this data can be used to prime the agent
for an interaction – providing customer
summaries, identifying in-flight
episodes or providing next best action
recommendations (for example cross-
sell and up-sell opportunities relevant
to this customer).
41
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
42
Diagram 1: Thematically Analysed – Personalised Contact Centre/Telephone Experience Concept (Australia)
Unlike some other blended channel concepts, Contact.Me does not seek to blur the line between support from virtual assistants
and human agents. There is ample evidence (including the evidence reported in Section 3) that customers are not just accepting of
self-service, but often actually prefer it. However, some tasks are more amenable to self-service and some are more amenable to
mediated support – the boundary between the two varies from person to person and context to context.
My Relationship
Manager
Interface Accounts Portfolio Location Predictive Customer Automated
Management Analytics Profile Workflows
Intelligent
Identity Presence CRM Core Virtual
Mobile App Loans Reports &
Services Banking Assistant
Statements
Content Delivery
& Discovery Intelligent Service Orchestration
43
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
44
Figure 11. Anatomy of Branch.Me
Content
Light Sonic QR NFC Tags
Insights Targeting
Beacons Beacons Codes Self-Directed Devices
CRM Customer
Profile Messaging Kiosks Digital Interactive
Signage Video Wall
Rules Behavioural
Models
45
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
4.3.3 Experience 3: Digital.Me Digital.Me, shown in Figure 12, • Control over whom I share my data
conceptualises how the financial service with and how they use it.
‘Makes me more provider can bring together the disparate
elements of the digital self in a way
There are five key capability areas
enabling Digital.Me. The first of these
knowledgeable about my that benefits the consumer, and how a are the aggregation services that gather
highly trusted financial service provider
situation.’ can help customers to manage access
together the various streams of data
that make up the digital self from a
Verbatim – Personalised Digital Banking to their digital selves. As a consumer, financial services perspective (such
Experience – Telstra Research, 2014 Digital.Me provides: as transaction and account records,
All of the trends reported in the first • One place where I can get a payments and bills). Forrester49 talks
half of this section point to the growing consolidated personalised view of my about four categories of data that make
importance of the distributed body of financial services, and the state of my up the digital self, all of which Digital.Me
data and insights that organisations use personal finances, including my saving must support:
to form a picture of who we are, how we spending patterns – and some of the • Created. Content explicitly uploaded
behave, what is important to us, what we factors driving them; by you, e.g. a house title, a will or a copy
like and what we don’t like. This corpus • A place to keep important documents of a birth certificate, or statement of
– sometimes called the digital self – is of all types, ranging from the title advice;
used every day as the basis for decisions document for my house to a receipt for • Mutual. Information mutually held
about what products and services we the stationery I just bought at the local by you and your service providers,
will be offered, how they will be priced, office supplies store; e.g. passwords, explicit customer
how organisations and other people will
• Education, tailored to me, about the preferences, PINs, Biometrics;
engage with us, how we will be provided
behaviours that suit what I want • Received. Transaction and activity
with customer services, and whether we
from my financial services, and records, e.g. invoices and bills; and
are trusted – it becomes our digital self.
encouragement to implement them;
Nowhere is the state of our digital self • Recorded. Data generated as part
more critical than in financial services. • Strong protection from fraudulent use of your day-to-day activities, e.g.
of my financial services or my data; payment transaction records.
and
46
Secondly, Digital.Me makes extensive Central to Digital.Me is easy-to-use, fine-
use of analytical services. Behavioural grained, access control. This enables Case Study 6. Moven
models and predictive analytics are the customer and their financial service
used to understand individual spending, provider to tightly and explicitly control
saving, borrowing and investing patterns, which services and what data regarding
as well as to understand what drives the customer is exposed to third party
Moven, a US start-up, provides
those activities. Social analytics help service providers (for example, retailers
a mobile personal finance
to identify peer groups the user can be or other financial service providers)
management tool that helps
compared with, as well as to identify and to other individuals (such as family
customers understand the impact
events that may change behaviours members or financial advisers).
of their social life on their spending.
with regard to financial services. Market
Finally, at the core of Digital.Me is a Moven has no physical branches, but
analytics deliver insights into the broader
range of personal financial management relies on a banking partner (currently
economic environment, whether at a
tools to help the customer understand CBW Bank) to provide core banking
macro or micro level.
and optimise their finances and their services such as the underlying
Digital.Me uses and exposes a wide financial services in an intelligent and accounts.
range of services to establish the identity highly personalised way: tools to assist
Using a well-designed, modern and
of the users and to be able to gather and with effective financial planning; tools
engaging user interface, Moven
provide evidence regarding that identity, to help the customer understand their
provides an array of features aimed
whether to internal systems, or third position in an increasingly complex
at helping users understand their
party-provided services. Globally, the financial environment; tools to help the
spending behaviour and encouraging
financial services industry continues to customer identify and take advantage
good spending and saving
struggle with identity paradigms that of opportunities; and, importantly, tools
behaviours:
balance the need for stronger evidence to help protect finances and sensitive
of identity with ease of use and minimal information about themselves and their • Users can set saving targets, track
intrusion on transactions such as loved ones (see Case Study 6). Chart 12 their progress against them and
purchases. Even as adoption of two- features how these smartphone-enabled even receive rewards for progress
factor authentication continues to grow activities have become pervasive across against those goals;
in the industry, many organisations and the Asia Pacific region, particularly in
some domains are seeing a need to push Indonesia and Hong Kong. • Customers can track and
to three and four factor authentication – categorise their spending, either
and beyond that to adaptive multifactor by funneling payments through
solutions. As the connected device most a debit MasterCard provided by
strongly related to the individual and Moven’s banking partner or from
most frequently on the person of the third party accounts;
individual, the smartphone and all its • Moven provides analysis of how
extensive capabilities is a key component the customer’s spending patterns
of Digital.Me identity services. are changing over time; and
• To encourage users, Moven
provides gamification features
relating to spending behaviour,
aimed at encouraging good
spending and saving behaviours.
47
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
Those who use a To Access To Access Use Use Video Use tools to Share Learning how To Access
smartphone to do Financial Updates on Intelligent Calling monitor Trading to manage Financial
Services Financial Assistants financial finances on News &
each activity across Markets performance savings, Information
on savings, borrowings,
total population (%) borrowings, investment
investment and spending
and spending
Australia 42 9 59 40 14 5 8 10
Singapore 63 31 70 55 26 14 21 34
Hong Kong 68 43 63 50 28 30 24 46
Malaysia 53 24 64 64 27 26 20 28
Indonesia 64 36 66 73 36 39 28 37
Average of impact on consideration when opening a new account and impact on consideration
when switching amongst those who find concept appealing and are likely to use
Digital.Me isn’t just about using Scenario 3: Digital.Me in action loan for her dream system. Digital.
analytics to help the customer Me generates a simple online loan
Lianne gets a notification from her agreement form for the balance, and
manage their finances more easily
bank’s Digital.Me application that Lianne applies her digital signature to
and effectively, it’s also about
she’s reached the savings target she agree to the loan on the spot.
creating a platform that will allow
set for the deposit on a new home
providers to offer as yet unthought-
entertainment package. The message The salesperson rings up the sale
of new services that customers
also tells her that a retailer Lianne has and asks for Lianne’s mobile number.
will value.
used before is offering triple rewards Digital.Me draws on several factors
points at the moment. – including her smartphone location
Scenario 3 gives one picture of how and the authentication steps she has
a customer might interact with the Later that day, Lianne visits the already taken – to satisfy her bank
Digital.Me concept. It also shows how retailer, decides on an entertainment that Lianne is the person in-store
financial service providers can leverage package and negotiates a great deal and using the phone. A message
the Digital.Me concept to create new with the salesperson. Lianne opens pops up on the smartphone: ‘To
and monetisable services – acting as a the Digital.Me app on her smartphone, authorise payment of $14,750 to
trusted party to facilitate transactions enters her PIN and selects “Finance a Home Entertainment Palace, reply “OK
and manage the flow of data between purchase.” Digital.Me asks Lianne to 77665.”’ Lianne replies and payment is
the customer and third parties, such say the answer to a secret question. immediately transferred via the real-
as retailers. Once her answer and her voiceprint time payment network.
have been verified, Lianne enters a few
details. Digital.Me analyses her saving A few seconds later the receipt,
and spending pattern, including when warranty, loan agreement and loan
the family’s major bills are expected, product disclosure statement appear
and immediately approves a personal in Lianne’s Digital.Me document safe.
48
4.0 TECHNOLOGY FOR THE ANALYTICS-
DRIVEN BUSINESS IN A SMART
CONNECTED WORLD (CONT.)
Today, we are already seeing some Additionally, comprehensive identity Federated identity solutions from global
aspects of the Digital.Me concept solutions are emerging from bank Internet companies such as Facebook
coming to life, with Personal Finance consortia and mobile operators, and Google offer huge customer reach,
Management (PFM) tools such as those including BankID in Scandinavia50 and but, to some extent, risk displacing the
provided by Moven (see Case Study 6) KDDI’s Au brand in Japan51. trust relationship between the customer
and the recently acquired Simple Bank, and their financial service provider.
American Express’ Bluebird and Serve
platforms, and Mint from Intuit, perhaps
the longest established non-bank PFM.
50
Figure 12: Anatomy of Digital.Me
In Section 3, we saw that consumers expect their financial service providers to use the data at their disposal to deliver
better, more personalised and streamlined customer experiences. We also saw that customers are willing to recognise
those providers who do successfully deliver such experiences. Earlier in this section, we also examined how the evolving
Smart Connected World makes a much broader array of data available to help us understand the customer, their needs and
their current context – each of which is a prerequisite for delivering highly personalised, low friction services. Of course,
the practicalities of collecting the required data, analysing it and actioning the resulting insights will challenge many
organisations – as will the paradigm shift required to embrace an analytics-driven mode of operation. However, the three
customer experiences we portrayed show that this paradigm shift could be game changing.
51
5.0 CONCLUSIONS
Access to data and the ability to • Analytics-enabled financial services • We show three analytics-driven
effectively manage analytics will decide and experiences have the capacity to customer experiences highlighting
which financial institutions will prosper radically alter consumer perceptions how channels can evolve through
and which will be supplanted during this across the Asia Pacific region and embracing an analytics-driven
next wave of transformation. to support customer acquisition, approach:
engagement and retention strategies 1. Contact.Me: Combines a
What we have observed is: – whether executed through a branch,
• The intensity of competition has personalised contact centre and
contact centre or digital channel. intelligent personal assistant,
increased exponentially. This is only
likely to accelerate as the twin mega • The results indicate that in all blending an intelligent personalised
trends of digital proliferation and countries, each of the five analytics- virtual financial assistant with a
inter-generational wealth transfer enabled concepts we researched physical (but remote) relationship
make traditional financial services achieved high appeal levels, and manager through a single engaging
markets increasingly attractive for new the nine experience metrics tested consistent interface.
entrants. achieved positive perceptual impacts 2. Branch.Me: Turns the branch into an
for each concept. This means that environment for identifying visitors,
• The epicentre of disruptive innovation either incumbents or new entrants
is Generations X and Y. Today, these understanding their intent and how
have the ability to compete and win on they engage with the branch in order
generations are responsible for more the basis of analytics-driven services.
than half of all spending and borrowing to provide personally optimised
in Australia (and probably other What do we need to do? content and interactions with branch
developed nations too). • As these digital services would be staff and branch infrastructure.
• Personalisation, Network Effects, enabled by large-scale analytics, it 3. Digital.Me: Shows how providers
Cloud Business Models and Open is now becoming clear that modern can combine analysis of saving,
Source Artificial Intelligence based financial services providers need spending, borrowing and investing
Technologies are the forces that are to have well-developed analytical behaviours with social analytics and
defining where and whether new information gathering capabilities. broader market analytics to create
companies enter the market, and • For new entrants, Generations X online and mobile tools that help
whether traditional players adapt or and Y are seeking offerings beyond customers more effectively manage
are out-competed. traditional financial services products and use financial services.
• There is a major gap between strategic and are prepared to look outside • This vision of truly analytics-driven
priority and incumbent readiness to traditional providers to fulfill these customer service is underpinned
compete analytically. New entrants needs. by secure and highly scalable
are already exploiting this gap, so • For incumbents, a limited window of interconnected storage of customer
incumbents are seeking to close the opportunity exists to adapt, close the data connected to a wide range of
gap through major investments in gap quickly and exploit their existing specialised analytics services (often
capability. advantages, namely their unique hosted on high-performance cloud
position of trust, strong customer platforms) by high-speed, low latency
relationships with Generations X and Y networks.
and multiple touch points. • For all players in the market, entering
into analytics needs to be done so
safely and in a way that respects
customer privacy, enhances trust, and
delivers greater value to consumers.
52
6.0 ABOUT THE AUTHOR
Rocky has more than 20 years’ senior • Cross Industry Innovation – the secret
management experience in the may well be in another industry (co-
information technology and financial produced)
services sectors, encompassing Product • Towards a Clever Australia – Banking,
Development, Strategy and Planning, Financial Services & Insurance
Business Development, Research and Industry Insights Whitepaper
Strategic Marketing.
• The Digital Investor
Over the past six years, Rocky has • Analyse This, Predict That – How
authored a number of thought Institutions Compete and Win with
leadership research reports that provide Data Analytics
recommendations on technologies
that financial services institutions Educated in Australia and trained in the
can leverage in order to better serve United States, at Sydney University and
customers, improve productivity and Stanford University respectively, Rocky
drive growth. These include: has a Graduate Diploma in Corporate
Management and a Masters in Business
• ICT as a Driver to Improve Service to
Administration. He is also a Graduate
Generation Y for Financial Services
and Member of the Australian Institute of
• Servicing Micro Businesses – What Company Directors.
Financial Services Need To Know
• Mobile Innovation – The next frontier
for growth and productivity for insurers
• 2012 for the Financial Services CIO
– Why agile IT strategies are key to
meeting the requirements of a new
financial age
• The Digital Media Bank – how video
can better engage your customers and
workers
53
7.0 ACKNOWLEDGEMENTS
Deloitte refers to one or more of Deloitte Nearly three years after its triumph on Rob High
Touche Tohmatsu Limited, a UK private the television quiz show Jeopardy!, IBM Rob High is an IBM Fellow, Vice President
company limited by guarantee, and its has advanced Watson from a game- and Chief Technology Officer of the
network of member firms, each of which playing innovation into a commercial IBM Watson Group. He has overall
is a legally separate and independent technology. Using natural language responsibility to drive Watson technical
entity. Please see www.deloitte.com/ processing and analytics, Watson strategy and thought leadership. As
au/about for a detailed description of processes information akin to how a key member of the IBM Watson
the legal structure of Deloitte Touche people think, representing a major shift Group Leadership team, Rob works
Tohmatsu Limited and its member firms. in an organisation’s ability to quickly collaboratively with the Watson
analyse, understand and respond to engineering, research, and development
Deloitte provides audit, tax, consulting, teams across IBM.
Big Data. Now delivered from the cloud
and financial advisory services to public
and able to power new consumer and
and private clients spanning multiple Roy Morgan Research
enterprise services and apps, Watson
industries. With a globally connected Roy Morgan Research is the largest
is 24 times faster, smarter with a 2,400
network of member firms in more than independent Australian research
percent improvement in performance,
150 countries, Deloitte brings world- company, with offices in each state of
and 90 percent smaller – IBM has
class capabilities and high-quality Australia, as well as in New Zealand,
shrunk Watson from the size of a master
service to clients, delivering the insights the United States and United Kingdom.
bedroom to three stacked pizza boxes.
they need to address their most complex A full service research organisation
business challenges. Deloitte has in Named after IBM founder Thomas specialising in omnibus and syndicated
the region of 200,000 professionals, all J. Watson, Watson was developed in data, Roy Morgan Research has more
committed to becoming the standard of IBM’s Research labs and is now being than 70 years’ experience in collecting
excellence. accelerated into market by the new objective, independent information on
Watson Group. As part of the group, IBM consumers.
About Deloitte Australia is investing $1 billion to introduce a new
In Australia, the member firm is the In Australia, Roy Morgan Research is
class of cognitive computing services,
Australian partnership of Deloitte considered to be the authoritative source
software and apps, and investing $100
Touche Tohmatsu. As one of Australia’s of information on financial behaviour,
million to spur innovation for software
leading professional services firms, readership, voting intention, consumer
application providers to develop a new
Deloitte Touche Tohmatsu and its and business confidence. Roy Morgan
generation of Watson-powered solutions.
affiliates provide audit, tax, consulting, Research is a specialist in recontact
Watson’s ability to answer complex
and financial advisory services through customised surveys that provide
questions posed in natural language
approximately 6,000 people across the invaluable and effective qualitative
with speed, accuracy and confidence is
country. and quantitative information regarding
transforming decision-making across
customers and target markets.
a variety of industries, including health
care, financial services and retail.
54
8.0 NOTES AND REFERENCES
1 Telstra (2014): Make for Asia 18 PwC (2014) Retail Banking 2020: Evolution 26 “Connections Counter: The Internet of
or Revolution Everything in Motion”, Cisco Systems
2 Capgemini & Royal Bank of Canada (2013) (http://newsroom.cisco.com/feature-
Asia-Pacific Wealth Report 19 Ovum (2014) Examining Use Cases for Big content?articleId=1208342) accessed
Data in Banking March 6th 2014
3 Telstra Corporation Limited and Roy
Morgan Research (2014). Analyse This, 20 Gartner (2013) Survey Analysis: Big Data 27 Bank of England (2010) Patience and
Predict That. Australia Adoption in 2013 Shows Substance Behind Finance
the Hype.
4 Thomas H. Davenport, Jeanne G. Harris 28 The Guardian (2014) High-frequency
(2007) Competing on Analytics – The New 21 McKinsey & Company (2013): Applying trading is a blight on markets that the Tobin
Science of Winning. Harvard Business advanced analytics on consumer tax can cure
School Publishing Corporation USA companies.
29 For example:
5 Eric Siegel (2013) Predictive Analytics – The 22 http://www.theaustralian.com.au/
Power to Predict Who Will Click, Buy, Lie, or business/in-depth/john-duries-ceo- – I n January 2014 Belkin announced
Die. John Wiley & Sons, Inc Hoboken, New survey-2013-david-thodey-telstra/story- a smart, network controlled slow
Jersey fngmlzq7-1226777161214%23 cooker (http://www.belkin.com/us/
pressreleases/8800549504060/)
6 Wayne Busch & Juan Pedro Moreno (2014) 23 “Key 2006-2013 ICT data for the
HBR Blog – Banks’ New Competitors: world, by geographic regions and by – I nternet-connected refrigerators have
Starbucks, Google and Alibaba level of development”, International been commercially available (with very
Telecommunication Union, (http://www. limited success) for more than ten years.
7 http://www-01.ibm.com/software/data/ itu.int/en/ITU-D/Statistics/Documents/
bigdata/ statistics/2013/ITU_Key_2005-2013_ICT_ –M
edia-centric appliances such as
data.xls) televisions and game consoles have been
8 http://www-01.ibm.com/software/data/ commonplace for some time. Digital
bigdata/ 24 “Social, Digital & Mobile Worldwide in TV Research predict almost 27% of the
9 Finextra (2014) Millennials look to tech 2014”, We Are Social, 9th January 2014 world’s TVs will be Internet connected by
firms to replace unloved banks (http://wearesocial.net/blog/2014/01/ 2018.
social-digital-mobile-worldwide-2014/)
10 Scratch (2014) The Millennial Disruption 30 While most of the world’s major automotive
Index. USA 25 Compiled using data from: groups such as Volkswagen, BMW,
Mercedes Benz, Nissan and GM are
11 http://www.australianbankingfinance.com/ – Natasha Lomas,“10BN+ Wirelessly researching autonomous vehicles (http://
technology/facebook-to-enter-payments- Connected Devices Today, 30BN+ In en.wikipedia.org/wiki/Autonomous_car),
arena/ 2020’s ‘Internet Of Everything’, Says ABI telematics technology to track vehicles
Research”, TechCrunch May 9th 2013 and remotely monitor performance of both
12 BBC News (2014) Start-ups challenge big (http://techcrunch.com/2013/05/09/ vehicles and drivers are quite mature.
banks’ technology internet-of-everything/)
31 At CES 2014 Kolibree announced a
13 Finextra (2014) London enjoys fintech – “Connections Counter: The Internet of Bluetooth connected toothbrush which
investment boom. CB Insights & Accenture: Everything in Motion”, Cisco Systems measures brushing behaviour and allow
Global Boom in Fintech Investment 2013 (http://newsroom.cisco.com/feature- monitoring via a mobile app (http://www.
content?articleId=1208342) accessed kolibree.com/shop/product/)
14 FinTech Venture Capital and Private Equity
March 6th 2014
Report – CB Insights www.cbinsights.com/
32 See, for example “MCU market turns to
blog/fintech-venture-capital-report – “Gartner Says Personal Worlds and 32-bits and ARM”, EE Times, 30th April
the Internet of Everything Are Colliding 2013, (http://www.eetimes.com/document.
15 Finextra (2014) UK to explore legislation
to Create New Markets”, Gartner Inc. asp?doc_id=1280803)
to make banks refer small businesses to
November 11th 2013
alternative platforms
33 Janusz Byzek, “The Emergence of Trillion
Tony Danova, http://www.businessinsider. Sensor Opportunity”, Semicon 2013, (http://
16 Gartner (2013) Survey Analysis: Big Data
com.au/75-billion-devices-will-be- www.semiconwest.org/sites/semiconwest.
Adoption in 2013 Shows Substance Behind
connected-to-the-internet-by-2020, org/files/docs/SW2013_Janusz%20
the Hype.
Business Insider, 3rd October 2013 (http:// Bryzek_Fairchild%20Semiconductor.pdf)
17 Bank Systems & Technology (2014) – Banks www.businessinsider.com.au/75-billion-
set stage for customer acquisition with devices-will-be-connected-to-the-
data analytics internet-by-2020-2013-10)
56
34 “The Internet of Things is Poised to 43 “Bloomberg adds social sentiment
Change Everything”, IDC 3rd October analytics to trading terminal”, Finextra, 3rd
2013 (http://www.idc.com/getdoc. March 2014. (http://www.finextra.com/
jsp?containerId=prUS24366813) news/fullstory.aspx?newsitemid=25794)
35 “Industrial Internet: Pushing the 44 CMO (2014) Customer-led big data
Boundaries of Minds and Machines”, G.E., programs deliver millions to Westpac’s
26th November 2012. bottom line
36 “The Emerging Returns on Big Data”, Tata 45 See https://www.bbva.es/eng/particulares/
Consultancy Services, 2013 subhome/gestor-bbva-contigo/index.jsp
37 “The Emerging Returns on Big Data”, Tata 46 See http://www.sri.com/blog/meet-lola-
Consultancy Services, 2013 virtual-personal-assistant-banking and
38 For example: 47 “Rebooting the branch: Reinventing
branch banking in a multi-channel, global
– The McKinsey Global Institute estimates environment”, Price Waterhouse Coopers,
the U.S. faces a shortage of 140,000- December 2012 (https://www.pwc.com/
190,000 people with deep analytical en_US/us/financial-services/publications/
talent. “Big data: The next frontier for viewpoints/assets/pwc-reinventing-
innovation, competition and productivity”, banking-branch-network.pdf).
The McKinsey Global Institute, June 2011
48 “Tablets and Kinects used in DBS’ new
– Gartner estimate 4.4 million jobs will be flagship branch”, CNET 6th December
required globally to directly support Big 2012 (http://asia.cnet.com/tablets-and-
Data activities by 2015. “Gartner Says kinects-used-in-dbs-new-flagship-
Big Data Creates Big Jobs: 4.4 Million branch-62219680.htm)
IT Jobs Globally to Support Big Data By
2015”, Gartner Inc., 22nd October 2013 49 “Services For The Digital Self”, Forrester,
(http://www.gartner.com/newsroom/ September 3 2013.
id/2207915)
50 See https://www.bankid.com/en/
39 “The hype and the hope: The road to
big data adoption in Asia-Pacific”, The 51 See http://www.au.kddi.com/english/
Economist Intelligence Unit, November
2013.
40 For an explanation of memristor technology
please see http://en.wikipedia.org/wiki/
Memristor
41 For an explanation of Magneto-resistive
RAM technology see http://en.wikipedia.
org/wiki/Magnetoresistive_random-
access_memory
42 For an explanation of Resistive RAM
technology see http://en.wikipedia.org/
wiki/Resistive_random-access_memory
57
58