Retail Banking Distribution: Disruptions in the Digital World Anil Kumar Head of Retail Banking Group, Commercial Bank International (CBI) 11th Annual Middle East Retail Banking Forum & Expo April 18th, 2016

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai Loss of physicality: Branch, ATM, Call Center vs. Online, Mobile, Social Media “Banking is something you do, not somewhere you go” (Brett King 2012) Loss of physicality: Branch, ATM, Call Center vs. Online, Mobile, Social Media “Banking is something you do, not somewhere you go” (Brett King 2012) Threat to Bank’s traditional role in commerce: Cash, Checks, Plastics vs. Mobile Payments, eWallets, electronic store value “Banking is essential, banks are not” (Bill Gates 1994) Threat to Bank’s traditional role in commerce: Cash, Checks, Plastics vs. Mobile Payments, eWallets, electronic store value “Banking is essential, banks are not” (Bill Gates 1994) Unhinging of the Checking Account: Banks could lose day-to-day connect with their customers Unhinging of the Checking Account: Banks could lose day-to-day connect with their customers Retail Banking: Major Disruptive Trends Impacting Distribution FinTech companies, Mobile and Online operators are a threat to banks in payments and financial services 2  Branches: Walk-in transactions rapidly declining  Online: Increasing usage & preference for online transactions and applications  Mobile: Higher take-up in mobile than online. 6.2bn mobile users world wide. UAE has 2+ mobiles per inhabitant  Cash: Not going away anytime soon but usage declining  Checks: Soon to disappear

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai  Retail Banks continue to expand branch networks in the UAE and the region  Branches and Direct Sales are still primary channel for customer acquisition  Online or web not a full service channel yet – at best a support to branch or an alterative channel. Limited ability for online application and fulfillment of products  Call Centers not changed much in format and functionality from when they were setup in the 80s/90s – IVR, agent, inbound service & outbound sales  Retail Banks continue to expand branch networks in the UAE and the region  Branches and Direct Sales are still primary channel for customer acquisition  Online or web not a full service channel yet – at best a support to branch or an alterative channel. Limited ability for online application and fulfillment of products  Call Centers not changed much in format and functionality from when they were setup in the 80s/90s – IVR, agent, inbound service & outbound sales Retail Banking Distribution: Facts and Myths The region still relies on physical distribution while developed markets move to online 3 Bank facts Customer facts  In developed markets, only about 5% of transactions done at the branch, down from 60% 10 years ago  With rapid decline in use of cash (<20% in UK compared to 73% in 2000) and checks (< 2% of retail transactions), Branches and ATMs becoming less relevant  In the US, UK and other markets, 88% of consumers research financial products online and 90% prefer to apply online  Customers trying to solve problems are less inclined to call and would increasingly prefer to blog, use twitter, Facebook or Chat  In developed markets, only about 5% of transactions done at the branch, down from 60% 10 years ago  With rapid decline in use of cash (<20% in UK compared to 73% in 2000) and checks (< 2% of retail transactions), Branches and ATMs becoming less relevant  In the US, UK and other markets, 88% of consumers research financial products online and 90% prefer to apply online  Customers trying to solve problems are less inclined to call and would increasingly prefer to blog, use twitter, Facebook or Chat

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai Retail Banking Distribution: Adapting to the Change Move towards an integrated omni-channel experience 4 4 examples where banks in the region can quickly adapt to the digital transformation: Fewer branches but not branch less Fewer branches but not branch less Online : a full service channel Direct Sales: More wired, connected and engaged Direct Sales: More wired, connected and engaged From Call Center to Contact Center presence across multiple media 12 34

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai 1. Branch: The Role of the Branch is Changing Fast 5 With transactions and customer interaction moving away from branches, banks need to deleverage their branch network Consumers still need a “real” physical presence So this is not a case for branch-less banking but emergence of less branch experience Branch – the new Avatar: Flagship branch: Exhibit your brand, service, advisory focus to engage customers A warm, back to high-street community banking feeling instead of cold, impersonal, faceless bank Customers come to the branch not because it is re-modelled, digitalized or looks swank but because it adds value: advice, relationship, human interface, re-assurance A “hub and spoke” model. A large fag ship branch with small service centers distributed across strategic locations where customers live, work or go -is the future

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai 2. Online Distribution: Full Service, Primary Channel 6 Online is no longer an “alternative” channel, it is the primary channel 88% of consumers in developed markets research for financial products online Trends in other industries (e.g. books, music, newspapers, travel) show that consumers prefer online shopping. More than 90% of customers prefer to apply for banking products online Trends in other industries (e.g. books, music, newspapers, travel) show that consumers prefer online shopping. More than 90% of customers prefer to apply for banking products online If banks don’t enable online acquisition and fulfilment, someone else will Banks need to empower websites – simple, content rich, easy to search, offer online application and fulfillment Product design has to keep omni-channel onboarding experience in mind Compliance and credit policies to be revamped for instant approval / fulfillment Improving online customer experience: Usability across devices, targeted cross-sell offers (location based, post-login), search engine optimization (SEO)

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai 3. Direct Sales: Connected and engaged 7 Direct Sales teams have been around selling bank products for 20 years Very little change in selling techniques and customer experience – application and fulfilment With increasing online & mobile penetration and customer preference for online research of banking products, Direct Sales force numbers may diminish over time In the short-term, improve customer experience – ensure frictionless onboarding Enable Direct Sales with “Tablet Banking” – product presentation, sales kit, application Better quality product presentation, yet personalized sales Online applications connected to bank systems (loan underwriting / origination, operations) and credit bureau enable instant paperless approval and fulfilment generating superior customer experience Use gamification to recognize and reward Sales Agents generating higher productivity, engagement and better customer experience

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai 4. Call Center: From Call Center to Contact Center 8  Call Centers have not changed much in design and functionality from when they were launched years ago.  Main elements remain the same: IVR, agent, inbound service, outbound sales  Call Centers have not changed much in design and functionality from when they were launched years ago.  Main elements remain the same: IVR, agent, inbound service, outbound sales  Consumers spend more time surfing online, are more likely in the near future to get in touch with banks for information and problem solving using Blogs, Twitter, Facebook, Chat rather than the phone Banks need to move from operating a “Call Center” to managing a “Contact Center” Build capability to handle complaints and feedback on Social Media and other Online Channels “Contact Center” has to be omni-channel and provide pan multi-media access to Banks’ services, information and problem resolution capabilities either using self -service channels or assisted by an agent If done well and seamlessly, it presents an opportunity for Banks to cross-sell/upsell and enhance customer advocacy Add new one-to-one channels such as Chat, WhatsUp and upcoming Messengers

April 18 th, th Annual Middle East Retail Banking Forum & Expo Dubai Conclusion 9 Banks need to recognize changing consumers trends – Preference for Online and Mobile over physicality (Branch, Sales, Cash, ATMs) Banks need to recognize changing consumers trends – Preference for Online and Mobile over physicality (Branch, Sales, Cash, ATMs) Banks need to transform Distribution channels and Customer Interface using digital capabilities to align to changing consumers preferences Retail bankers need to understand the evolving role of Branches, Sales, Contact Center and the emergence of Online & Mobile as the primary channel Key is to develop Omni-Channel capabilities – Seamless, frictionless, paperless with the speed of response demanded by consumers in the digital age – instant, when you need it, where you need it