Emering Banking by 2020

Managing Risk, Regulations and Funds

Cutting edge through Technology

Seamless distribution

Customer Centric business model

Simplified business processes

Innovation

Competitive reach is no longer determined by branch networks, rather by banking licences, technology
and advertising budgets. When every aspect of banking can be done online, a banks target market and
competitive arena is no longer defined by its physical footprint, but by its technology, regulatory
boundaries and marketing budget. New entrants will no longer have their pace of expansion constrained
by the availability of acquisition targets and/or prime retail locations

Every bank will be a direct bank; branch banking will be undergoing a significant transformation. As
technology enables every aspect of banking to go online, and as cash usage falls away, traditional
branches are no longer necessary. Given their high-fixed cost, branches will need to become dramatically
more productive, or significantly less costly.

Digital capabilities will improve, so that branch service officers and bank customers use the same
platforms, with the same look and feel. The human touch will always be available, just much more
through digital channels. Banks that are behind this trend will start to struggle, due to structurally
uncompetitive economics.

Emerging markets will continue to develop their physical footprints, using a growing range of points of
presence.

We are in the middle of a multiwave trend where digital is first focused on optimising current products
and services. The second wave, where enhanced data capture and analysis drives more targeted
customer offerings and improved services is underway. Mobile banking will increasingly disrupt
distribution models (e.g. instant videoconferences with product experts) and the payments industry (e.g.
P2P mobile payments). Advances in security and verification will enable all aspects of sales, service and
delivery to be conducted online. Technology is making it easier for customers to switch banks, making
relationships much less sticky. This will drive the third wave, where banks and their partners develop
sophisticated profiles on each of their customers. The pace of innovation will continue to increase, and
leading banks will need to enable or leverage this innovation. All of this will accelerate the evolution of
leading banks into customer-centric information and risk management businesses.

The smart device will grow in importance, and take its place alongside cards as the primary medium for
consumer payment. The customer will be able to select between account providers (e.g. credit providers,
deposit accounts) or locally stored value. Acceptance will be universal (with common cross-network
payment protocols) and value-transfer instant. Multi-currency capabilities will become normal.
Customers will be able to make contact payments or send funds to any other unique identifier (e.g. email
address, phone number, bank account, credit card number, etc.).

. Every traditional bank needs to become the lowest cost producer, and (nearly) every product needs to
have acceptable returns.

Biometrics (e.g. fingerprints, voice recognition) will become commonplace in transaction authorisation,
but will remain tied to a replaceable physical device (e.g. smartphone). Biometrics are unique and
unchanging, yet can be captured and replicated, so two-factor authentication (e.g. my fingerprint and my
phone) will always be required.

A number of large banks with processing scale and efficiency will commercialise all or part of their
operations and technology departments and offer services to other banks. Groups of banks might
partner to achieve scale and find best practices, combining their infrastructure into joint ventures.
Existing technology service providers will significantly expand the services they offer. Likely examples of
processes provided by utilities include customer authentication, fraud checking, payments processing,
basic account infrastructure and KYC processing.

Wealth management will move alongside deposit-taking as a baseline service for retail banking. Banks
without a strong wealth offering will lose share, as customers take increasing responsibility for their
lifelong financial well-being and planning in both the developed and emerging worlds, and look for their
bank to meet this need. Fee-based revenues will increase as a percentage of total in developed
markets and China, as consumers use longer working lives to save more and take out less (pay down
more) debt, and as banks favour growing business such as wealth management and retail brokerage. In
developing markets with economic and social stability, we will continue to see rapid credit growth.

Cities will continue to grow in attractiveness as urban migration creates 1,000m new banked
customers, as well as 800m new urban unbanked by 2040.
Banking the unbanked (urban and rural) will become a primary policy objective in both developed and
emerging markets, as governments seek to reap the economic benefits of broader access to financial
services for their populace. This push will drive new products and business models, and will become the
primary focus of governmental or state-sponsored institutions, particularly where the private sector is
unable to fulfill the need.

Banks will organise themselves around customers instead of products or channels. They will offer a
seamless customer experience, integrating sales and service across all channels. They will develop the
ability to view customers as a segment of one, recognising their uniqueness, and tailoring their offerings
so that customers view banks as meeting their needs not pushing products.

Banks (in most countries) will evolve their customer experience to be more female-friendly. In one US
survey, 73% of women said they were dissatisfied with the financial services industry. Complaints range
from a lack of respect, to being given contradictory advice and worse terms than men. Winners
tomorrow will address this through a combination of branding, product and service solutions. We expect
many more bankers to be women in 2020, and many more banks to publicly state this as an ambition.

Social media will be the media. Today, we view social media as coexisting alongside traditional media. By
2020, social media will be the primary medium to connect, engage, inform and understand your
customers (from the mass social mind to the minutiae of each and every individual), as well as the
place where customers research and compare banks offerings.

Mastery of social media will be a core competency.

Cyber security is paramount to rebuilding this trust winners will have invested significantly in this area.
Recent high-profile security breaches and media commentary surrounding cyber attacks have generated
fear and uncertainty, further eroding stakeholder trust. There are now higher expectations about
security of information and privacy among clients, employees, suppliers and regulators. Risks range from
internal misuse of social media to organised cyber-crime (e.g. mass information theft, or denial-of-
service attacks).

In short, banks need a clear strategic vision, and they need to do things differently.

Go digital. Customers want to interact whenever, wherever. Give them the convenience they seek
through digital tools. Sixty-one percent of customers want to research on their own, and 42% buy on
their own without help from representatives or experts. Balance automation with the human touch.
Sixty percent of great experiences are due to great staff. Twenty-five percent of customers rely on staff to
do research, 46% to select products and 63% to resolve their problems. Create a multichannel strategy
that balances cost and service. Encourage self-service for routine matters, and refocus branch and
contact centre staff on higher value-added activities like relationship building and sales.

Advisers and product specialists will be present in all types of branch in person, or by video from
centralised advisory offices expanding sales reach. Tellers will need to evolve into financial advisers,
fluent in all bank products a massive transformation of skills. Banks will likely need to simplify their
product sets for the benefit of both employees and customers. Transaction processing will be almost
entirely digital though many transactions will continue to be in store, just conducted through smart
ATMs, tellerless kiosks and touchscreens.

In developing markets, where branch networks are thinner, physical distribution will continue to evolve,
and banks are more likely to partner with new entrants to create alternative distribution channels (for
example, M-PESA in Kenya, handles deposits and payments using a network of agents and customers
cellphones and is used by twothirds of the adult population). These trends are inevitable, and banks
today need to choose what path they want to follow. What is your future distribution vision? At what
pace do you want to change? Do you push aggressively to precipitate this change and capture
advantage, through digital optimisation, alliances, partnerships, spin-offs, closures or manage
defensively to postpone the inevitable.

Choose an appropriate mix of branch models to support the desired customer experience. We see
lvarious models being experimented with today assisted selfservice, in-store branches, full-service
branches, community centres and flagship stores.

Develop cross-channel enablers to deliver a seamless and consistent customer experience regardless of
branch model mix.

Technology in Retail Lending-

Banks will enhance their credit, risk and pricing models (adding, for example, social media reputation
scoring). For example, a bank may be able to detect the beginnings of trouble at a small business, well
before receivables and turnover start to show signs of weakness, by identifying negative trends in social
media enabling a much higher quality of risk management and customer service.

And many of the fintechs such as ZestFinance have moved beyond traditional risk assessment to use
new sources of data in underwriting, such as whether an applicant keeps a consistent phone number or
has been late paying phone bills.

Banks need to accelerate investments in digital lending if they are to avoid a material decline in profits
and loss in market share. Leading banks have already started to invest in creating better customer
experiences, making it easier to apply for their offers, removing bad and avoidable interactions (generated
by complex internal processes, employee or customer errors, or better routed to lower-cost and more
convenient digital channels) from the branch and contact centers, and devising a more agile operating
model. These investments generally have paid off with faster, better and cheaper lending processes.

To help banks better understand the digital lending landscape and inform their next moves, Bain and SAP
Value Management Center recently surveyed two dozen banks in 10 countries. We assessed how well
 these banks reported they were performing along seven lending capabilities and four dozen operational
metrics that were segmented by loan classes and maturity levels. The capability areas include:

relevant, simple and easily bought offers;

better decisions that are informed by customer, risk and marketing data;

consistent cross-channel execution;

technology that enables a smart view of the customer;

efficient, digitalized processes;

migration of customers to anywhere, anytime self-service; and

rapid innovation and business reinvention.

Banks have made more progress in simple lending product classes, such as personal loans and credit
cards, than in complex product classes, such as mortgages and small business loans.

Executing consistently across channels. Customers expect each channel to dovetail seamlessly with
others so that they dont repeatedly have to fill in the same data. Yet the behavior endemic at many
traditional banks strong departments that narrowly focus on improvements within their domain
undermines a cross-channel approach. The walls between departments and functions must come down.

Gathering a full and consistent picture of the customer for marketing, sales and service. Most
banks report that they fall short in using the available internal and external data to make fast, high-quality
decisions when lending money, identifying financial distress or collecting payments. In an era of data
proliferation, greater computer power and digitally enabled customers, this represents a critical weakness
of bank lenders.
Configuring base products and processes quickly and easily. Most banks have scores or even
hundreds of product variations hard-coded into their information systems. Additional variations of features
and benefits can extend into the thousands. This makes it difficult to present products easily and quickly
to customers.
Digital marketing. Most banks have barely scratched the surface in learning how digital marketing and
communications can effectively engage customers. While some have invested in workflow and
automation tools, the promise of these technologies has yet to reach their potential in lending.
Straight-through processing. Most banks have no straight-through processing of loan applications for
other than the simplest cases.
Shaping and accelerating the next wave of investment
When the banks in our benchmark survey have invested to digitalize lending, they have been rewarded
by faster, better and less costly lending processes

Design around the customers priorities, not for internal operations. When it comes to digital
initiatives, banks often rely too much on an operational perspective based on internal metrics. While such
initiatives might initially improve process efficiency, they also tend to undercut the customer experience by
making it a secondary issue. For example, people dont want to buy a mortgage, they want to access
capital in order to buy a home. So they embrace an experience designed to help them buy a home more
readily than one designed to sell them a mortgage.
Commonwealth Bank of Australia (CBA) and Hana Bank have been pioneers in this area. The digital
components of their home-buying experience include using a smartphones location services to point and
shoot properties and view details, making an appointment with a lender from the phone, calculating limits
and receiving preapproval via an app, and using a mobile wallet to pay a deposit.

Similarly, Fidor Bank in Germany created a bank from scratch that focused entirely on the relationship
with the customer. The banks motto, banking with friends, relates to the community of like-minded users
who engage through social media platforms to offer advice and trade stories about all types of financial
matters. Without the legacy of branches, Fidor offers a broad range of Internet and mobile banking
services that includes peer-to-peer lending and emergency payday loans handled in a minute, thanks to
straight-through processing.

Human judgment and advice still matter, of course, and the point is to equip customer-facing employees
with digital tools that allow them to enhance the customer experience around their needs (buying a home,
financing a business, funding an education). While the contact center remains a principal mechanism to
support customers, it should also be easy for a customer to digitally schedule an appointment to see
someone in a branch if they want advice or when regulatory requirements demand a face-to-face
meeting.

Given the ascent of mobile banking, banks should increasingly take a mobile-first design approach, which
imposes a useful reductionary discipline to the design of the entire experience. Mobile-first design forces
banks to ask customers only for information the bank does not already have to make it easy to get advice,
to limit the number of wet signatures, to reduce the number of pages of documentation and ultimately to
eliminate paper. At mBank in Poland, users can access basic financial information on their phone without
needing to log in, and they can obtain one-click loans with 30-second approval and disbursement. The
mobile-first approach also can inform any redesign of the branch network and the contact center with
video, chat, messaging and call capabilities to provide easy access to advice during the lending process.

Simplify products and processes. At the heart of most bank lending organizations are powerful product
teams that typically aim to satisfy all possible customer demands with a huge array of product variations,
price points and promotions. Product and process complexity has crept in through historical decisions
taken in sequence. Similar products thus often have different processes that were implemented at
different times in different ways.
To complicate matters, the chain of process steps, from inquiry to collecting customer details to codifying
collateral to funding a loan, often functions through separate organizational departments. Some banks
even make customers use separate mobile apps for their primary banking accounts and credit cards.

Improving the experience and lowering costs require winnowing down the product suite and replacing the
complexity of 20 or 30 systems with just a couple of platforms that can handle variety, similar to how
automakers have moved to platform sharing (chassis and powertrains) for a variety of car models. CBA,
for instance, went from 610 product variants to 18 core products, which helped the bank reduce time to
market by 75% and processing errors by 30%.

Banks can realize huge gains in operational efficiency by automating more manual processes, using
workflow management tools and underwriting algorithms that spit out decision and approval. They can
also use digital tools to raise employee productivity. A mortgage specialist can talk to many more people
per day through video chat than in the branch or driving to customers locations. ABN AMRO in the
 Netherlands, for instance, has been able to use webcams to sell an increasingly large share of its
mortgages.

Reboot the technology infrastructure to support great experiences. IT systems at traditional banks
generally have hard-coded rules around every product feature, such as interest rate structure, term
length, up-front fees and so on. And different departments might install their own coding, which means
that a change-of-address request at a contact center would have different verification criteria than a
request at the branch. The rigidity of hard coding does not allow banks to quickly develop or modify
products digitally.
A more effective alternative thats increasingly being adopted by digitally savvy companies is an IT engine
that builds the basic features (interest rates, term, fees) into a core lending platform and then abstracts
above that platform to accommodate any product. Product abstraction allows teams to more easily
redesign and tinker with a product experience and have it sit on the underlying platform.

Companies in the digital vanguard have also moved away from individual IT systems that support product
and functional silos to common systems across products, departments and functions. Key components
that such systems deliver include the following:

modular products that can be assembled like LEGO bricks, enabling fast time to market, a high
degree of personalization for customers, and reuse through common processes and systems;

customer profiles that result from merging traditionally structured transactional data with
unstructured data from sources such as social media and customer e-mails; and

the ability to deliver offers in real time that respond to the customers location, profile, preferences
and past interactions.

Accelerate speed to market. While some banks can get to market in less than four months, many larger
banks tend to take much longer. What accounts for the difference? In many cases, the leaders have
replaced waterfall development of software and related systems (a sequential approach) with Agile
development (incremental and modular), which typically moves more quickly and accommodates changes
more readily.
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Retail Banks Wake Up to Digital Lending
December 15, 2015 Bain Brief
By Richard Fleming and Joe Fielding

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As retail banks gradually digitalize their activities, theyve focused largely on the most frequent customer
transactions, such as checking a balance or remote deposit. Much of the lending arena, with the
exception of credit cards, has taken a back seat. Recent analysis by Bain & Company and SAP Value
Management Center finds that most banks have digitalized fragments of the process for marketing, selling
and servicing loans. For instance, banks can handle only 7% of products digitally from end to end. That
sluggish pace of modernization leaves banks vulnerable as lending comprises more than one-third of
retail bank revenue.
 New digital entrants, ranging from financial technology start-ups to incumbent retailers and
telecommunication providers, have spotted the opportunity, and are attacking thin slices of the lending
profit pool. Many of these financial technology insurgents, or fintechs, provide a better experience by
focusing on the needs of specific customersoften an underserved segment. CommonBond, for
instance, started with loans to low-risk students, and OnDeck offers loans to small businesses without a
long track record. These insurgents often can offer a lower price through a combination of a lower cost
base to originate and service loans and better targeting and adjudication of specific risk profiles.

RELATED INSIGHTS

PlayJoe Fielding: Retail Banks Wake Up to Digital Lending

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DigitalResults Delivery

The fintechs also are creating new models to make lending decisions, source capital and service loans.
Often, they can offset at least some of the scale benefits of large banks with simpler digitalized
processes. In some instances, they enjoy a regulatory arbitrage; Prosper and LendingClub source funding
in a way that requires less capital to be held on their own balance sheets. Others, including WeChat,
PayPal and Square, offer digital messaging or payment platforms onto which they have added short-term
finance. And many of the fintechs such as ZestFinance have moved beyond traditional risk assessment to
use new sources of data in underwriting, such as whether an applicant keeps a consistent phone number
or has been late paying phone bills.

Banks need to accelerate investments in digital lending if they are to avoid a material decline in profits
and loss in market share. Leading banks have already started to invest in creating better customer
experiences, making it easier to apply for their offers, removing bad and avoidable interactions (generated
by complex internal processes, employee or customer errors, or better routed to lower-cost and more
convenient digital channels) from the branch and contact centers, and devising a more agile operating
model. These investments generally have paid off with faster, better and cheaper lending processes.

Banks report slow progress in digitalizing the lending process

To help banks better understand the digital lending landscape and inform their next moves, Bain and SAP
Value Management Center recently surveyed two dozen banks in 10 countries. We assessed how well
these banks reported they were performing along seven lending capabilities and four dozen operational
metrics that were segmented by loan classes and maturity levels. The capability areas include:

relevant, simple and easily bought offers;

better decisions that are informed by customer, risk and marketing data;
 consistent cross-channel execution;

technology that enables a smart view of the customer;

efficient, digitalized processes;

migration of customers to anywhere, anytime self-service; and

rapid innovation and business reinvention.

The benchmark survey shows that overall, banks report relatively low levels of digitalization in these
areas, as highlighted by several findings (see Figure 1):

On average, banks can handle only 7% of products digitally end-to-end.

Customers submit only 14% of loan applications through digital channels.

Most banks lack digital cross-selling expertise, with the average number of loans at just 1.1.

Banks spend only 18% of their marketing budget on digital initiatives.

14% of simple loans and 36% of complex loans require rework.

All of the above translates to mediocre combined annual growth in loans, at 3% for 2011 through
2014, and flows through to cost-efficiency metrics (see Figure 2).
Across all countries, most banks capabilities fall far short of their own aspirations (see Figure 3). A score
of 5 in digital maturity represents the emerging digital innovators, and even the current best-in-class
banks have significant gaps to close. Theyve made more progress in simple lending product classes,
such as personal loans and credit cards, than in complex product classes, such as mortgages and small
business loans. Within banks as well, the survey finds a high variance between lending classes.
The survey reveals where banks face the greatest capability gaps (see Figure 4):
Delivering simple, easy and convenient experiences. At most banks, the lending process remains
opaque to those who apply, making it difficult for customers to check the progress of an application or for
the bank to provide updates through online or mobile channels. Customers struggle to find and select the
product that incorporates the appropriate features for their needs without speaking with a bank agent.
Few banks report having good digital tools to support employees during this process. In some cases, its
even difficult to ensure critical milestones such as making mortgage funds available on the closing date.
Executing consistently across channels. Customers expect each channel to dovetail seamlessly with
others so that they dont repeatedly have to fill in the same data. Yet the behavior endemic at many
traditional banks strong departments that narrowly focus on improvements within their domain
undermines a cross-channel approach. The walls between departments and functions must come down.
Gathering a full and consistent picture of the customer for marketing, sales and service. Most
banks report that they fall short in using the available internal and external data to make fast, high-quality
decisions when lending money, identifying financial distress or collecting payments. In an era of data
proliferation, greater computer power and digitally enabled customers, this represents a critical weakness
of bank lenders.
Configuring base products and processes quickly and easily. Most banks have scores or even
hundreds of product variations hard-coded into their information systems. Additional variations of features
and benefits can extend into the thousands. This makes it difficult to present products easily and quickly
to customers.
Digital marketing. Most banks have barely scratched the surface in learning how digital marketing and
communications can effectively engage customers. While some have invested in workflow and
automation tools, the promise of these technologies has yet to reach their potential in lending.
Straight-through processing. Most banks have no straight-through processing of loan applications for
other than the simplest cases.
Shaping and accelerating the next wave of investment
When the banks in our benchmark survey have invested to digitalize lending, they have been rewarded
by faster, better and less costly lending processes (see Figure 5). To realize even greater benefits and
raise the returns on investments, the experiences of leading banks and companies in other industries
suggest several principles to guide investments.
Design around the customers priorities, not for internal operations. When it comes to digital
initiatives, banks often rely too much on an operational perspective based on internal metrics. While such
initiatives might initially improve process efficiency, they also tend to undercut the customer experience by
making it a secondary issue. For example, people dont want to buy a mortgage, they want to access
capital in order to buy a home. So they embrace an experience designed to help them buy a home more
readily than one designed to sell them a mortgage.
Commonwealth Bank of Australia (CBA) and Hana Bank have been pioneers in this area. The digital
components of their home-buying experience include using a smartphones location services to point and
shoot properties and view details, making an appointment with a lender from the phone, calculating limits
and receiving preapproval via an app, and using a mobile wallet to pay a deposit.

Similarly, Fidor Bank in Germany created a bank from scratch that focused entirely on the relationship
with the customer. The banks motto, banking with friends, relates to the community of like-minded users
who engage through social media platforms to offer advice and trade stories about all types of financial
matters. Without the legacy of branches, Fidor offers a broad range of Internet and mobile banking
services that includes peer-to-peer lending and emergency payday loans handled in a minute, thanks to
straight-through processing.

Human judgment and advice still matter, of course, and the point is to equip customer-facing employees
with digital tools that allow them to enhance the customer experience around their needs (buying a home,
financing a business, funding an education). While the contact center remains a principal mechanism to
support customers, it should also be easy for a customer to digitally schedule an appointment to see
someone in a branch if they want advice or when regulatory requirements demand a face-to-face
meeting.
 Given the ascent of mobile banking, banks should increasingly take a mobile-first design approach, which
imposes a useful reductionary discipline to the design of the entire experience. Mobile-first design forces
banks to ask customers only for information the bank does not already have to make it easy to get advice,
to limit the number of wet signatures, to reduce the number of pages of documentation and ultimately to
eliminate paper. At mBank in Poland, users can access basic financial information on their phone without
needing to log in, and they can obtain one-click loans with 30-second approval and disbursement. The
mobile-first approach also can inform any redesign of the branch network and the contact center with
video, chat, messaging and call capabilities to provide easy access to advice during the lending process.

Simplify products and processes. At the heart of most bank lending organizations are powerful product
teams that typically aim to satisfy all possible customer demands with a huge array of product variations,
price points and promotions. Product and process complexity has crept in through historical decisions
taken in sequence. Similar products thus often have different processes that were implemented at
different times in different ways.
To complicate matters, the chain of process steps, from inquiry to collecting customer details to codifying
collateral to funding a loan, often functions through separate organizational departments. Some banks
even make customers use separate mobile apps for their primary banking accounts and credit cards.

Improving the experience and lowering costs require winnowing down the product suite and replacing the
complexity of 20 or 30 systems with just a couple of platforms that can handle variety, similar to how
automakers have moved to platform sharing (chassis and powertrains) for a variety of car models. CBA,
for instance, went from 610 product variants to 18 core products, which helped the bank reduce time to
market by 75% and processing errors by 30%.

Banks can realize huge gains in operational efficiency by automating more manual processes, using
workflow management tools and underwriting algorithms that spit out decision and approval. They can
also use digital tools to raise employee productivity. A mortgage specialist can talk to many more people
per day through video chat than in the branch or driving to customers locations. ABN AMRO in the
Netherlands, for instance, has been able to use webcams to sell an increasingly large share of its
mortgages.

Reboot the technology infrastructure to support great experiences. IT systems at traditional banks
generally have hard-coded rules around every product feature, such as interest rate structure, term
length, up-front fees and so on. And different departments might install their own coding, which means
that a change-of-address request at a contact center would have different verification criteria than a
request at the branch. The rigidity of hard coding does not allow banks to quickly develop or modify
products digitally.
A more effective alternative thats increasingly being adopted by digitally savvy companies is an IT engine
that builds the basic features (interest rates, term, fees) into a core lending platform and then abstracts
above that platform to accommodate any product. Product abstraction allows teams to more easily
redesign and tinker with a product experience and have it sit on the underlying platform.

Companies in the digital vanguard have also moved away from individual IT systems that support product
and functional silos to common systems across products, departments and functions. Key components
that such systems deliver include the following:

modular products that can be assembled like LEGO bricks, enabling fast time to market, a high
degree of personalization for customers, and reuse through common processes and systems;
 customer profiles that result from merging traditionally structured transactional data with
unstructured data from sources such as social media and customer e-mails; and

the ability to deliver offers in real time that respond to the customers location, profile, preferences
and past interactions.

Accelerate speed to market. While some banks can get to market in less than four months, many larger
banks tend to take much longer. What accounts for the difference? In many cases, the leaders have
replaced waterfall development of software and related systems (a sequential approach) with Agile
development (incremental and modular), which typically moves more quickly and accommodates changes
more readily.
Besides adopting Agile, some banks have looked outside to spark a change in their legacy organizations
and pick up the pace of innovation. Theyre finding that a partnership or acquisition is the most promising
route to access the necessary talent and systems.

Regions, for instance, recently chose the partnership route with online lender Fundation to provide small
businesses with a coordinated delivery of lending solutions. The two companies believe that each will
benefit by combining Regions brand and retail distribution franchise with Fundations streamlined online
loan application process and concierge service.

SunTrust, by contrast, bought online consumer lender FirstAgain outright in 2012. It relaunched the
business as the LightStream online direct lending division making personal, unsecured loans. Loan
decisions are made by human underwriters, but the process is accelerated by LightStreams lending
platform.

Fidor, the German online bank, demonstrates another way to access external talent. It was one of the first
banks to provide application programming interfaces for third parties to integrate new applications. This
gives software developers and fintechs the opportunity to present their products on a bigger stage, and it
gives customers access to a growing set of banking services.

Investing to change the bank

Banks already spend a lot on ITabout 6% of 2014 revenue on average, Gartner estimates, far higher
than the 1% to 4% in most other industries, including tech-intensive telecommunications. Will digital
investments pile on that spending?

In the short run, yes, but the way that banks direct their investments will determine the payoff from digital.
Banks making greater digital progress in lending operations have higher IT spend than average. The
critical factor: They spend much more on changing the banks model than on running the existing model.
Laggards do just the opposite

The leaders accept a higher IT cost because theyre automating more, reducing labor costs and setting
the stage for higher revenue through digital conversions. Theyre working to pay for the investment by
removing errors and rework from the branch and call center and migrating more basic transactions to
digital self-service channels.

Banks have no choice but to move quickly to digitalize their lending operations. Customers rising
expectations for anytime, anywhere banking currently outrun banks capabilities. And fintechs have
momentum in building a base of customers, especially among young adults, as well as in attracting talent.
But even traditional banks can compete effectively in digital lending if theyre willing to put the customers
priorities at the center of their digital redesign.

Using Fintech in Retail Lending-

By fixing the broken processes as well as integrating straight-through, end-to-end loan processing using a
cloud-based commercial loan origination platform, the bank transformed its lead generation, credit
analysis, credit decision, exposure management, pricing configuration, document management, and
advanced reporting functions, and reduced turnaround time

(i) ineffective team structuring led to multiple hand-offs and high wait
times between teams; (ii) fragmented systems and non-
standardized processes led to repetitive checks and manual
handovers; and (iii) a reporting structure to track performance was
missing.

LOS-

Multi-Channel
Touch Points

Loan request submission from multiple channels leading to increased business value.

Credit Policy
Automation
Rule Management System to automate complete credit policy.

Efficient risk
management
Integration with External Credit Bureaus support for effectual decision making.
 Pre-screening: Check applicant eligibility along with credit checks

Credit Application Management: Seamless on-boarding with configurable

templates for data capture

Underwriting & Credit Analysis: Comprehensive credit assessment tools for

underwriting and engenders score as part of internal scoring engine

Decision & Approvals: Rules driven matrix ensures a robust validation and
approval process for loan disbursal
 Document Management: Maintenance and segregation of documents and
generation of loan packages with pre-defined bank specific templates

Collateral Management: Unified workflow around releasing, updating, valuing

and moving collaterals and other linked processes

Deviation & Delegation Management: Supports event and rules-based

management of exceptions as well as appropriate workflow routing

360 degree dashboard: Configurable functional, operational and investigative

reports & dashboards

Disbursement: Integration with core banking and card management systems for
customer and account creation and supporting amortization schedule generation with
full/partial disbursement schemes

Integration with Third Party Applications: Seamless integration with banks

third party and legacy applications such as Core Banking Solutions, Rating Applications,
Credit Bureau Systems etc

Unified Loans Processing

Shorter turnaround time, paperless workflow and First-Time-Right processing,

thereby reducing overall costs

Built on flexible BPM layer which offers configurable solution framework

Faster time to market with ready-made solution accelerators

Leverage existing investments through seamless integrations

Here are three predictions about the big innovations in lending based on our
interview.

Loans will almost always happen within a day, and online.

In both developed and emerging markets, banks are losing ground to

nonbank lending institutions, at least on the customer-facing lines. Many
loans are now processed without a person having to enter a bank branch.
In emerging markets countries, many companies are figuring out how to do
lending for people who are non-banked.

The upshot: the loans are given more quickly.

 People are comfortable applying online and going the loan the same day,
said Fulzele. It will probably be normal thing to do. Its amazing.

Consider the following path for a loan: a young person needs a loan for a
motorcycle, car or even a house. The non-bank lender comes up with a
credit score based on behavioral data drawn from Facebook and other
social media, and then deposits the money on a pre-paid credit card.

Presto: no bank required, and no banking history required, either.

Of course, banks may well invest in or start their own consumer-facing

cloud services. In finance, innovations are quickly swallowed by bigger
players. For instance, some of the money loaned by platforms come from
the same big institutions that keep a tight spigot on money for traditional
loans.

Interest rates on loans may become more opaque, and

consumers wont know enough to care

Right now, loan shopping is easy. For some kinds of loans, like the one on
your house, you can even hire a broker to help. Most consumers in
developed markets are reasonably well-versed in the idea that you need to
figure out how much your interest rate is. In fact, American consumers
understanding of their home mortgages is one success story of financial
education.

One hallmark of the new lending platforms is that they are opaque when it
comes to interest rates. If loans are given in a day, you dont have time to
comparison shop. In a unregulated or less regulated environment, there
are no rules for how much you tell people or how.

There are forces that act counter to this: On a peer-to-peer platform,

interest rates and terms can be very transparent. Consider Harmon-e-y, a
lending marketplace based in New Zealand. It directly connects borrowers
and lenders. Interest rates are transparent based on the relationship
between the two.

Whether the laudable transparency adopted by some startups translates to

understanding is another question and startups that want to avoid a
crackdown by regulators should probably make sure it does.
 Personal data will be used to make lending decisions
Lenddo is one example of a company at the forefront of this. It monitors
interactions, connections, and activity on social networks. Another
company, Inventure gave its customers a mobile phone and then
monitored their behavior, according to the web site Digital Trends.
According to the article:

Daniel Bjrkegren, an economist at Brown University in Providence, Rhode Island,

endeavored to predict how likely someone was to pay back a loan based on call metadata.
In results presented at the NetMob conference in Cambridge, Massachusetts earlier this
month, he analyzed the records of 3,000 borrowers from a bank in

Haiti who they called, for how long, and how much money they spent. After applying
an algorithm, Bjrkegren found the bank couldve reduced defaults by 43 percent if
itd taken his approach to selecting trustworthy applicants.

Vouch is another company with a take on this: it asks people to personally

guaranteed parts of your loan in exchange for a lower interest rate. This
model will become more widespread probably fastest in emerging
markets. In the United States, Fulzele pointed out, lending revolves around
the FICO score.

One example is Affirm, a company that currently offers installment loans to consumers at
the point of sale.

Ms. Pandey also appreciated the very seamless Affirm loan process. Affirm asks
borrowers for their cellphone number, their name, date of birth and the last four
digits of their Social Security number. Affirm then asks the applicant to reply to a
text message, to authenticate the persons identity.

Affirm makes the underwriting decision almost immediately. The entire process
is generally completed in two minutes or less.

consumer finance, mortgages, lending to small and medium-size enterprises, retail

payments, and wealth management

Challenges-

Vast majority have no credit scores

CUneXus has removed the biggest piece of friction in the consumer lending process: the application.
In 2014, they launched their lending platform, cplXpress (Comprehensive Pre-Screened Lending
Express) atFinovate Spring. This product is an always-on lending dashboard based on each partner
financial institutions existing lending criteria.

The latest
innovation from CUneXus is called AutoXpress. The platform gives banks and credit unions an end-
to-end auto purchasing experience. CUneXus debuted this technology at Finovate Spring 2016,
showcasing the integration with the DCU (Digital Credit Union) mobile app. DCU, with nearly $7
billion in assets, is the largest credit union based in New England. To build out this platform,
CUneXus partnered withEdmunds.com.
AutoXpress is built directly into the cplXpress platform. This new capability shows the consumer their
pre-approved car loan amount, term, and rate. The partnership with Edmunds adds the capability of
providing 100% guaranteed pre-negotiated vehicle pricing of the car dealers inventory. This all
happens within the partner bank or credit unions mobile banking app.
Edmunds has this capability with nearly 14,000 car dealers nationwide. Other partnerships will also
provide a GAP policy and an array of competitive auto insurance quotes. CUneXus also partnered
with the marketing technology provider, MobileRQ, a pioneer in contextual mobile marketing.
MobileRQs technology drives the targeting and personalization capability of the platform, including
location-awareness and the tailored notifications.
A customer can walk onto a car lot and MobileRQs geo-targeting technology enables a push
notification to reach that customers smart phone, reminding them they have a pre-approved auto
loan available. A link takes them to the mobile banking app, showing their loan options amount,
rate, term, etc. The financing is taken care of, theyre pre-approved and no application is necessary.
This end-to-end car shopping experience allows banks to provide value at or near a car buyers
ZMOT. Traditional digital marketing could never do this. According to Tyler McKinley, CEO of
MobileRQ, Personalization and mobile are now critical for successful retail banking institutions.
Data-driven, customer interactions within banks own mobile apps are the future of consumer
lending. Combining CUneXus on-demand lending solutions with MobileRQs data-driven, mobile
personalization platform enables banks to drive multi-product revenue growth and simply service
their customers better.

Using Loans to Acquire New to Bank Customers

CUneXus is not the only bank friendly digital loan solution company. Avoka, with their digital
engagement platform Avoka Transact for Financial Services, is a frictionless sales platform for
originating loans. They offer a great solution for acquiring new to bank loan customers.
How easy is their platform? Watch the Avoka Finovate Spring 2015 demo where they
demonstrate filling out a mobile web browser optimized loan application to a non-bank customer in
under five minutes.

The Marketplace Lending Opportunity

Many banks have begun to embrace working with marketplace lenders (MPLs). The most notable
are core banking provider Jack Henry & Associates and Chase Bank, who have deals in place
with OnDeck Capital. Other banks also work with one or more of the MPLs, and some banks have
built their own competing platform.
CUneXus has partnered with the Crowdnetic Gateway to allow the integration of multiple
marketplace lenders into the cplXpress platform. This optional capability will allow banks to be the
true relationship manager for their clients.
Luan Cox, CEO of Crowdnetic, opines on their integration with CUneXus, The demands of the
financial services industry are evolving at a rapid pace. CUneXus provides exactly what banks and
credit unions need to keep up with the changing demands of their customers. For most financial
institutions (large and small), building innovative technology with the speed that is required today is
simply not possible. We are incredibly excited to be partnered with CUneXus in combining our
Marketplace Lending Gateway platform to help deliver innovative loan products from over 20 lending
partners such as Lending Club, Marlette/Best Egg, Prosper, and OnDeck.

Power of Partnerships

The hype around new start-ups and venture capital investment is huge. According to The Pulse of
Fintech, 2015 in Review report by KPMG and CB Insights, VCs funded $13.8 billion in FinTech
globally in 2015 ($7.7 billion was invested in the US). Banks and credit unions have to remember
that there are a lot of startups that are building technology solutions with partnerships in mind. These
solutions allow for improved customer experiences, solve real problems, enhance marketing ROI,
and help improve the profitability of a banks consumer loan portfolio.
They also allow a bank to use the advantage of its existing customer base to leverage exciting new
technology to provide a superior experience that customers expect. Competing direct to consumer
companies will have a hard time gaining scale compared to legacy banks who upgrade their data
and digital capabilities and who partner with bank-friendly startups.

One-Third of Retail Banking Revenues at

Risk
January 13, 2016 | Subscribe to The Financial Brand for Free
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The lack of digitization of the lending process by traditional banks is

putting as much as one-third of retail banking revenues at risk, according
to Bain and SAP.
By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

Most of the banking industrys early efforts to digitize the consumer

experience has focused on transactional services such as deposit accounts and credit cards. Much
less effort has been spent on more complex services, such as lending, insurance, investments and
small business.
A study by Bain & Company and SAP entitled, Retail Banks Wake Up to Digital Lending, found that
the majority of banking organizations have only digitized a small portion of the overall lending
process. For instance, banks can handle only 7% of products digitally from end to end. By not
responding to fintech challenges in lending, more than one-third of retail bank revenues are at risk.
In a year-end analysis of the top 25 fintech start-ups in the US by Lets Talk Payments, six firms were
leaders in providing lending services, focusing on providing an enhanced consumer experience
through simplicity, specialized solutions and better pricing. The firms mentioned were:
Affirm: A next-generation financial services company that offers consumer loans at POS
with smaller monthly payments. Affirm is one of several Web startups experimenting with
flexible loans by calculating the risk of borrowers based on a variety of personal data points,
including information gleaned from social media profiles as well as the cost being purchased,
rather than relying on FICO credit scores.
Avant: A fast-growing marketplace lending platform that is lowering the costs and barriers of
borrowing for consumers. Through the use of big data and machine-learning algorithms, the
company offers a unique and highly customized approach to streamlined credit options. Avant
has secured more than $1.7 billion in funding and another $1.8 billion through its institutional
marketplace. More than 310,000 loans have been issued worldwide through the Avant
website.
 Lending Club: The second-most profitable company in alternative lending, Lending Club
continues to be one of the hottest startups from Silicon Valley. Lending Club is the worlds
largest online marketplace connecting borrowers and investors.
OnDeck: A lending platform for small businesses, OnDeck has loaned over $2 billion to
small businesses across 700 industries in all 50 states and Canada. The companys
proprietary small business credit scoring system, the OnDeck Score, evaluates thousands of
data points to deliver a fast and accurate credit decision.
Prosper: A P2P lending platform with more than 2 million members, the company has
surpassed $5 billion in loans funded through its platform since its inception and a record
$1.070 billion in loans in a quarter along with a record daily average.
SoFi: A market leader in student loan refinancing with over $4 billion in loans issued, SoFi is
focusing on student loans, mortgages and personal loans. SoFis proprietary approach takes
merit and employment history into account to offer customized credit products.
Beyond these six digital lenders, there are dozens of other digital providers, including familiar names
like WeChat, PayPal and Square. According to LetsTalkPayments, Companies are evolving with
the use of better technological tools and are providing cross-industry lending services. This helps
them to leverage the huge market potential of multiple industries under the single umbrella of
personal lending. This space is becoming increasingly sophisticated with the adoption of technology-
based, data-driven underwriting tools over traditional interview-based methods and credit score
requirements.
According to the Bain study, The fintechs are creating new models to make lending decisions,
source capital and service loans. Often, they can offset at least some of the scale benefits of large
banks with simpler digitalized processes.

To avoid losing market share and related revenues (and potentially entire relationships), banks and
credit unions need to invest in digital lending. Some banks have started the journey.

Leading banks have already started to invest in creating better customer experiences, making it
easier to apply for their offers, removing bad and avoidable interactions (generated by complex
internal processes, employee or customer errors, or better routed to lower-cost and more convenient
digital channels) from the branch and contact centers, and devising a more agile operating model,
the Bain report stated.

Significant Digital Capability Gaps Remain

The research study found several capabilities that fell far short of optimal across lending categories.
Most of these capabilities are competitive differentiators for fintech firms competing in the lending
marketplace.

Delivering simple, easy and convenient experiences. At most banks, it is difficult for
consumers to apply for or to check the progress of an application through online or mobile
channels. The digital shopping process is cumbersome and few banks have good digital tools
to support employees during the product evaluation process.
Executing consistently across channels. Silos remain at most banks between product
areas and channels, requiring customers to repeatedly have to fill in the same data.
Gathering a 360 degree view of the customer for marketing, sales and service. Most
banks reported difficulty in using the available internal and external data to make fast, high-
quality decisions when lending money, identifying financial distress or collecting payments.
Product simplicity and clarity. Most banks have extensive product variations hard-coded
into their information systems. This makes it difficult to present products easily and quickly to
customers.
 Digital marketing. Most banks have barely scratched the surface in learning how digital
marketing and communications can effectively engage customers. While some have invested
in workflow and automation tools, the promise of these technologies has yet to reach their
potential in lending, stated the report.
Straight-through processing. Most banks have no straight-through processing of loan
applications for other than the simplest cases

Slides on how technology can be used in export and import financing

Perhaps the most interesting model is one in which companies like
Lendio and Fundera are simply creating their own marketplaces where
small businesses can shop and compare loan products from online
lenders and conventional banks. In doing so, theyre mitigating one of
the biggest problems borrowers and lenders face search costs.

Its important to note that these lenders still only account for a small
portion of the market less than $10 billion in a more than $600
billion small business lending market. But they are driving
fundamental change, making the typical small business loan one of
less than $250,000 more profitable for lenders by leveraging
technology to drive efficiency.

We are also seeing small business owners willing to get capital through
these new platforms, even though its often more expensive, because
they value the convenience. Many of these new platforms are making
approvals online and via mobile applications in as fast as 24 hours for
some lower dollar loans, compared to a traditional process that takes
several weeks and requires stacks of paperwork.

To be sure, there are legitimate questions about this emerging market.

We dont want small business lending to run amuck, and regulators
and policy makers should be asking how to prevent fraud and
economic risk. But that doesnt mean this isnt a breakthrough.

CAPABILITIES
Retail Banking
Our team has proven expertise in retail banking products spanning multiple functional
areas, including:
 Branch banking: account opening and maintenance, retail investment services
and branch network strategy.
Core banking: back office operations and infrastructure.
Customer analytics: data marts (customer value management and retail
profitability).
Online banking: account management, EBPP and investments.
Commercial Lending
Credit risk management
Loan origination
Servicing
Trade Finance
Automated Clearing House (ACH) operations
Cash collection services
Electronic Bill Presentment and Payment (EBPP)
Image-based transactions
Lockbox services
Messaging and payment (cross-border) solutions
Trade finance
Treasury/cash management services

Cash Management
We specialize in streamlining cash management
functions using automated BPM workflows, as well as
a modular web-based platform for international
payments and global cash management
Additional Services
Treasury services
Structured finance