Client loyalty in the e finance world Lisbon1

Client loyalty in the cyberfinance-world: 

Client loyalty in the cyberfinance-world Forum Banca & seguros Lisbon, December 3 2002 Charles Goldfinger www.gefma.com

Presentation plan: 

Presentation plan Digital tornado and financial hurricane Cyberfinance: lessons of experience No disintermediation Triumph of click and mortar Cyberfinance challenges From multi-channel to cross-channel Smart customer Capturing value

Digital tornado: 

Digital tornado There is no Internet hype ! “ We tend to overestimate the speed of change in the short term and underestimate in the longer run” - Unprecedented rate of growth Years to reach 50 MM users Radio - 38 years TV - 15 years Internet - 5 years Unprecedented scope of change Telecommunications realm Information Technology Realm Business realm

Digital tornado: 

Digital tornado Three dimensions of Internet revolution Telecommunication protocol Infinite connectivity Information architecture Network – computer convergence Business model Abundance management

Digital tornado: 

Digital tornado Information architecture From centralised Master - slave ...to distributed Client - server ..to ubiquitous Peer - to- peer Network is the computer Computer is a network and

Digital tornado: 

Digital tornado Infrastructure - network dissociation From physical to virtual From dedicated to shared Before Network Infrastructure Now Network

Digital tornado: 

Digital tornado Business Model impact No disintermediation Growing demand for intermediation Markets Systems Middleware Upheaval …but no disruption

Financial hurricane: 

Financial hurricane From geofinance …to eurofinance …and cyberfinance

Financial hurricane: 

Financial hurricane Cyberfinance Financial services is the domain where Internet impact has been the strongest E-commerce market share (in % of total turnover)

Cyberfinance: 

Cyberfinance Ubiqutuous reach Retail Banking Financial markets Insurance Fund management Financial Data Wholesale banking

Cyberfinance: 

Cyberfinance New configuration E-Banking E-markets B2B banking Financial Portals Asset management Risk management

Cyberfinance: 

Cyberfinance Preliminary lessons of experience E-finance is only beginning Blurring boundaries Finance Technology Information Transaction Financial institutions Technology providers Key role of incumbents « Click and mortar » model dominant All finance is becoming cyberfinance

Cyberfinance: 

Cyberfinance Lessons of experience: Internet banking Initial prophecies Low costs Ease of entry Revolutionary impact BAH famous transaction cost diagram Killer application !

Cyberfinance: 

Cyberfinance Lessons of experience: Internet banking Iceberg costs Implementation complexity Client acquisition Difficult entry Obstacle course No revolutionary impact

Cyberfinance: 

Cyberfinance Lessons of experience: Internet banking No salvation outside “click and mortar” Success stories Nordea Wells Fargo Bradesco Critical success factors Integration Technology Marketing Business models

Cyberfinance : 

Cyberfinance Key challenges Technology Not just another channel Customers End of asymmetry Smart customer Business model Capturing value

Cyberfinance: 

Cyberfinance Technology challenge From multi-channel architecture….

Cyberfinance: 

Cyberfinance Technology challenge …to cross-channel architecture TCP/IP

Cyberfinance: 

Cyberfinance Technology challenges Integration imperative From e-finance to m-finance Anytime Anywhere Anyway

Cyberfinance: 

Cyberfinance End of information and knowledge asymmetry Goldfinger’s law Distributor Producer Consumer Customer challenge Three structural trends Lower transactions costs Market power shift

Cyberfinance: 

Cyberfinance Customer challenge Willingness to search Quality imperative Willingness to shop Willingness to pay Failure tolerance Loyalty

Cyberfinance: 

Cyberfinance Customer challenge Conflicting trends Time pressures Convenience “One-stop shop” Low search costs Better information “Best of breed”

Cyberfinance: 

Cyberfinance Customer challenge Mixed experience Financial supermarkets What synergies for customers ? Internal turf wars and co-ordination costs Cross-selling challenge Specialised providers Preserving talent Maintaining competitive advantage Avoiding mid-size trap Too small or too big

Cyberfinance: 

Cyberfinance Customer challenge Third way: Aggregation “Best of both approaches” Advantages Convenience Broad choice Capitalising on common standards Hurdles Permanent tension between aggregators and service providers Brand primacy Revenue sharing Privacy protection Customer trust

Cyberfinance: 

Cyberfinance Customer challenge Aggregation experience to date More developed in US than in Europe Tradition of vertical integration in Europe Challenge of cross-border integration Focus on Information consolidation Technology convergence Not so common standards No customer rush Yoodlee Less than 1 million clients

Cybefinance: 

Cybefinance Business model challenge Great difficulty of catching value Willingness to pay Growing importance of indirect revenues Manchester United model 80 000 paying ticketholders 50 000 000 non-paying fans Retail banking model Float vs. service services

Cyberfinance: 

Cyberfinance Business model challenge Proliferation of pricing systems and mechanisms Direct payments Third party payments Advertising Supplier rebates Services commissions Spread capture Catch value when and where you can

Cyberfinance: 

Cyberfinance Business model challenge From CRM to DTM Dynamic Transaction Management Control Multiple Revenue Streams Simulate & analyze dynamic pricing System Performance, Scalability and Real Time