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