World Retail Banking Report 2022 1THECUSTOMER- ENGAGEMENTIMPERATIVEWHAT BANKS CAN LEARN FROM THE FINTECH PLAYBOOKWorld Retail Banking Report 2022In collaboration withCONTENTSForewordExecutive steering committeeExecutive summary Insights from our reportA disruptive competitive landscape Winning strategies: How banks can pivot to competeEmbracing ecosystem strategies: Learning to compete in a platform worldThe CMO as customer strategist and chief engagement officerIn conclusionMethodologyPartners with CapgeminiFootnotes345691317 21 23242531World Retail Banking Report 2022 World Retail Banking Report 2022 2FOREWORDAnirban Bose, Financial Services Strategic Business Unit CEO & Group Executive Board Member, CapgeminiJohn Berry, CEO, EfmaThe competitive playing field for banks is evolving quickly, introducing agile new competitors and challenging traditional formulas for success. Customers, not products or business lines, are the center point of strategies and business models today. The ability to leverage large volumes of data and new technologies to understand customers journeys and deliver personalized offers and experiences is now considered critical to driving loyalty, engagement and, ultimately, growth. Backed by insights from global surveys of customers and bank C-level executives, the 2022 World Retail Banking Report lays out these challenges and offers a path forward for industry strategists. Key takeaways include: Customers today expect banks to provide personalized experiences that are fun, engaging and consistent across all channels, physical and digital. Banks have the data to deliver, but often fall short compared to FinTech and Big Tech competitors. They need to invest more in systems, governance and AI/ML technologies to gain insights that can help them create stronger connections and maximize customer value. Embedding finance in customers ecosystem journeys has emerged as a key avenue for growth, but also poses unique challenges. Platform-based business models require that banks think about issues they have never before considered, such as how to maintain exclusivity and avoid brand dilution or how to bundle financial and nonfinancial offerings in ways that are good for both customers and the institution. Platforms offer the potential for new revenue, but also require new metrics to gauge success. Chief marketing officers (CMOs) are playing a pivotal role in this evolution. Once managers of mass-market campaigns, many are now chief customer strategists, tasked with orchestrating hyper-personalized, automated customer experiences. Its a data- and technology-driven ask, requiring CMOs to coordinate with other C-Suite executives to break down data silos and gain usable insights. Our report is filled with real-world examples and insights from industry leaders, as well as strategies for driving success in this rapidly changing environment. We hope you find it a helpful guide for building customer-led journeys and higher levels of engagement.World Retail Banking Report 2022 3EXECUTIVE STEERING COMMITTEEFrdric Chanfrau EVP & CIO Commercial Bank, Payments & Salesforce Services Citizens BankHelene Panzarino Associate Director Centre for Digital Banking and Finance The London Institute of Banking andFinanceMichael Anseeuw General Manager Retail Banking BNP ParibasDavid ReibsteinProfessor of MarketingWharton University of PennsylvaniaOlivier GuillaumondGobal Head of Innovation Labsand Fintechs INGRaghuram IyengarFaculty Director Professor of Marketing Wharton Customer AnalyticsSylwia LindenVice President - Marketing TinkZac MaufeManaging Director Global FInancial Services Solutions Google CloudChristopher YoungDirector Financial Services Industry Strategy - AdobeWilson DSouzaChief Technology Officer AkoyaAlexander WeberChief of Growth OfficerN26Travers Clarke-WalkerChief Commercial OfficerThought MachineBANKSSUBJECT MATTER EXPERTSFINTECHS ANDTECHNOLOGY PARTNERSWorld Retail Banking Report 2022 World Retail Banking Report 2022 4EXECUTIVE SUMMARYBanks that leverage data to drive omnichannel engagement and seamlessly embed themselves in customers digital journeys can enhance loyalty and drive growth Rapid digitalization and the rise of platform business models are changing customer needs, challenging banks to embrace new ways to win greater wallet share and grow. Customers today expect their phygital journeys those that bridge the digital and physical worlds to be relevant, engaging, and frictionless across channels. Or-chestrating those experiences with data-driven insights, user-friendly technologies, and cus-tomer-centric business models has emerged as a key to customer acquisition, retention, and loyalty.This is a competition that banks could lose but dont have to. Nimble FinTech firms and other digi-tal natives have responded to changing customer expectations by leveraging data to hyper-perso-nalize value propositions and grow customer mindshare and wallet share. They understand that as customers become entwined in the platform economy, embracing one-to-one personaliza-tion and experiential banking is the pathway to enhanced loyalty and ultimately growth.Incumbent banks have the customer trust, data, and delivery channels to compete in this hyper-personalized environment; the potential for growth should provide the incentive. For example, CIBC, the Canadian bank, has seen cus-tomer acquisition rates in three primary lines of business increase by 65% due largely to persona-lization efforts.1Even so, most banks are burdened by organi-zational and data silos and aging legacy systems. Many lack the commitment of FinTechs to build the analytics and digital capabilities needed to drive customer understanding and fuel perso-nalization at scale. At a time when customers can switch banks with a tap of their screens, this gap between what customers expect and what banks can deliver poses a significant threat to long-term relevance and growth.In our 2021 World Retail Banking Report, we highlighted the emergence of the Banking 4.X era, where banks embed themselves in cus-tomers digital journeys in ways that are inclusive, invisible, and sustainable.2 To deliver the perso-nalized omnichannel experiences and ecosystem journeys customers want, banks must pivot to platform business models that leverage data and new technologies. The formula for growth today sounds simple provide customers with the right products whenever and wherever theyre at in their digital journeys but it is challenging to execute.Todays chief marketing officers (CMOs) are on the frontlines of this transformation. In their evolving roles as chief customer strategists, they are leveraging technology to orchestrate indivi-dual customer experiences and coordinating with chief data, technology, and compliance officers to break down data silos and ensure they have the capabilities needed to deliver data-driven experiences in real-time. As described by Zac Maufe, managing director of global financial services solutions for Google Cloud US, “the most significant business change is moving from human-to-human to technology relationships. CMOs, or chief customer officers, are core to dri -ving that transformation.” The goal, as always, is enhanced loyalty and growth; its the means and tools that have changed.Sylwia Linden, VP Marketing, Tink, Sweden“New-age players are building a modern financial services industry accessible, smooth, friction-free, and designed with the customer journey in mind improving the way millions of people interact with their finances.”World Retail Banking Report 2022 5Insights from our reportThe World Retail Banking Report from Cap-gemini and Efma highlights how evolving consu-mer tastes, a hyper-competitive landscape, and increasing regulatory scrutiny around data usage are influencing bank strategies and challenging their abilities to grow. It also points a way forward for incumbent institutions to compete in this new environment. Our global Voice of the Customer survey, which queried 8,051 customers world-wide, highlights what customers expect from banks and how they view the industry. A separate poll of 142 banking senior executives from Asia, the Middle East, Europe, and the Americas shows an industry working overtime to leverage data, new business models, and technologies to grow in the face of rapid changes in customer behavior and expectations.Among our key findings: Customers want connected experiencesCustomer expectations from their commer-cial interactions are rising and banks are not keeping pace. Nearly half of respondents in our Voice of the Customer survey said their banking relationships were neither emotionally connec-ted nor well-integrated into their lifestyles; 52% said banking was not “fun.” Many respondents say their banks dont offer the seamless expe -riences, personalization, and innovation they want from their phygital relationships. Modernize infrastructure to optimize data-driven growth Structural challenges keep most banks from fully leveraging data-driven analytics to attract customers and grow relationships. In our execu-tive survey, 95% said legacy systems and outdated core banking modules inhibit efforts to optimize data- and customer-centric growth strategies, while 80% agreed that underdeveloped data capabilities hinder customer lifecycle process improvements. For example, 82% said they have Figure 1. What customers say they are not getting from their bank52%49%48%45% 45%44%43%41%30%27%Fun Rewarding Emotionally connectedIntegrates with lifestyleValue for moneyPersonalized Innovative Socially responsibleSeamless On-demandSources: Capgemini Research Institute for Financial Services Analysis, 2022; Capgemini Voice of Customer survey, N=8051.Question to customers: Do you agree or disagree with the following statements about your primary bank? (customers rating 3 and below, where 1: customer strong disagreement; 5: strong agreement) For example: 52% customers disagreed that “banking is fun.”52%of customers said banking was not fun95%of banking executives said legacy systems and outdated core banking modules inhibit efforts to optimize data- and customer-centric growth strategiesWorld Retail Banking Report 2022 6Figure 3. Banks face a range of data challenges Sources: Capgemini Research Institute for Financial Services Analysis, 2022; Capgemini marketing executives survey, N=142.Question to executives: What are top data-related concerns for marketing function? (selection of top ve in a list of seven factors)80%73%70%68%67%64%43%Data reliabilityCannot generate insightsLack of resources to process and analyze dataInadequate data management toolsCannot manage unstructured dataUnreliable and incomplete dataData in silosFigure 2. Incumbents face structural challenges along the customer lifecycleSources: Capgemini Research Institute for Financial Services Analysis, 2022; Capgemini Executive Survey, N=142.Question: Identify the pain areas within your organizations current customer lifecycle process (executives rating 5 or above, where 1: minimal pain and 7: highest pain point)IDENTIFY CONVERT ENGAGE82%38%Dicult to identify new customer segments Faced with higher customer acquisition cost61%55%51%49%Struggles to reduce customer churnFails to identify cross- and up-selling opportunitiesLags in driving organic customer growthStruggles to sustain customer loyalty55%49%44%44%Struggles to provide seamless onboarding experienceLags in delivering personalized content through right channel at right priceLags in providing diverse product portfolioFinds challenging to boost product use and frequencydifficulties identifying new customer segments; 55% struggle to provide seamless onboarding experiences. Invest in technologies to use data more like FinTechs Banks possess vast and varied amounts of customer data geospatial, financial, social me-dia, lifestyle, behavioral, health but 73% of the executives in our survey said they struggle to turn it into useful insights. Eighty percent of the executives in our survey cited data reliability as a concern, while 70% said they lacked resources to process and analyze data. Forty-three percent said siloed data was a concern.Finbar Hage,Head of Digital Customer Process, Rabobank, Netherlands“Technology is essential to boost digital capabilities. However, there are challenges involved in adopting and integrating analytical tools in the customer journey, organizing continuous improvement by aligning with clients, and integrating all required skills and capabilities under one roof.”World Retail Banking Report 2022 7.Figure 4. Customers and bank executives mostly see eye to eye about channel mixSources: Capgemini Research Institute for Financial Services Analysis, 2022; Capgemini Voice of Customer Survey, N=8,051; Capgemini marketing executives survey, N=142.Question to customers: Rate the importance of dierent channels while interacting with banks (score 5 or above where 1 = not important and 7 = extremely important)Question to executives: Which of the following channels are essential for customer engagement? (top three selection)CONVENTIONAL75%58%BRANCHES 77%91%MOBILE APP80%79%WEBSITESEMERGINGWEARABLES52%07%SOCIAL MEDIA52%54%VOICE ASSISTANTS 50%36%Customer ExecutiveFigure 5. To thrive in the platform economy, face hurdles with innovationSources: Capgemini Research Institute for Financial Services Analysis, 2022; Capgemini Executive Survey, N=142.Question: What are the major issues/threats or barriers to ecosystem banking (marketplace model operation)?(executives rating 5 and above where 1 = the slightest threat and 7 = the highest threat) 78%73%72%66%53%How to restrain the product cannibalization through ecosystem partners?How to avoid undercutting by the ecosystem partners?How to prevent brand dilution?How to promote nancial and non-nancial services eectively?How to maintain the exclusivity of the ecosystem for partners? Align channel mix to meet customer preferencesBank executives and customers want many of the same things from the distribution channel mix. In our surveys, about 80% of both groups continue to view the website as a critical point of interaction. Mobile apps were cited by 77% of consumers, compared to 91% of executives, while branches were actually valued more by cus-tomers (75%) than executives (58%). Accelerate platform learning and integration to competeEcosystem platforms are emerging as a pro-mising way to fill capability holes or expand re-venues, but banks are still learning the ins and outs of platform innovation. In our executive sur-vey, 78% worried about cannibalizing products through ecosystem partners, while 72% strug-gled with preventing brand dilution. Maintaining ecosystem exclusivity for partners was cited as a challenge by 53% of respondents.World Retail Banking Report 2022 8In each of those fields, incumbent firms have faced a choice: adapt their business models and practices to changes in the marketplace or perish. Many have failed to survive the disruption.