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Digital cracks in banking--Sid Nandi

Presenter Sid Nandi's presentation from IDEAS - Int'l Data Engineering and Science Association Conference at UTD.

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Digital cracks in banking--Sid Nandi

  1. 1. Sid Nandi FOUNDER & CEO, DIGITAL TAAS Digital Cracks in Banking RISING POWER OF FINTECHS
  2. 2. Drive business transformation by extending core capabilitie s to create a sustainable digital enterprise. Enterprises which are insightful enough to detect market trends, agile enough to quickly respond and competent enough to deliver differentiated valuepropositions. Develop key strategies, define targeted plans and deliver execution certainty designed to quickly actuate critical outcomes. Capabilities which are critical to their competitive success in the marketplace and adaptable to future disruptiveforces. Sid Nandi Purpose Enable the future. Founder & CEO, CTO, Tax & Head of Client Managing Director, Senior Architect, BE& MS Computer Digital TaaS Accounting – Govt, Facing Technology, International S&P, Cap Gemini Science & Engg Thomson Reuters Custody & Fund Settlement Ops, Ernst & Young University of Texas Services, Bear Stearns (JPM) @ Arlington JP Morgan Investment Bank Career Progression
  3. 3. 1 Ubiquitous distribution through branches 2 Unique expertise around credit underwriting 3 Special status of beinga regulated institution • supply credit • foster economic growth • insurance on liabilities (deposits) Banking Status Historically banking has been one of the business sectors most resistant to disruption: Consumer stickiness & inertia moving to another financial services provider. Gravity towards established and branded banks for protection during turbulent times Development of inherent flaws in their business model . Focus all about generating more revenue.
  4. 4. Institution Fee Income Rank by Asset Size $5.6B 3 5.3B 2 4.5B 1 $1.3B 5 1.2B 6 1.0B 9 707M 19 $660M 12 634M 4 Wells Fargo Bank of America Chase U.S. Bank PNC Bank TD Bank Regions Bank SunTrust Bank Citibank BB&T $632M 11 What is wrong withthis? 1 Retail banking industry made $11B revenues from overdraft & ATM fees in 2016 (61% of profits). 2 $4B maintenance charges on checking accounts just to keep the accountsopen! 3 $34.6B fee income generated by banks on deposit accounts in2016
  5. 5. What has changed? Financial crisis had a negative impact on trust in the banking system. Customer experience has taken centerstage across industry verticals with personalization as a key driver. Mobility has undercut the advantages of physical distribution channels. Massive increase in the availability of customer data with cheap computing power leading to proliferation of startup businesses.
  6. 6. What is a Fintech? fin·tech [ˈfinˌtek] | noun 1. Computer programs and other technology used to support or enable banking and financial services. “A technology firm that focuses on financial products and services.” While there are banks which want to consider themselves as FinTechs, the key is to understand if they have technology at the core driving their business decisions and outcomes? The sector is shaped by shifting market conditions, new regulations and changes in consumer demands and behaviors. Over the past decade the fintech companies have matured significantly forcing incumbents to rethink their business models and embrace digital innovations. Digital attackers disintermediate profitable customer-facing businesses and avoid capital- intensive areas.
  7. 7. Disproportionate Returns ¹ Revenues generated by carrying loans and other assets already sold and sitting on the books. ² Asset management includes investment and pension products. Only insurance sold by banks is included. Source: Analysis and data provided by Panorama (a McKinsey Solution)
  8. 8. Fintech Trends Key fintechtrends • Blockchain • Application program- ming interfaceecosystem • Paymentinfrastructure • Big databaserisk assessment • Anti-money laundering and know your customer machinelearning • Cybersecurity • Next-generation personal • Peer-to-peer lending and investment • New digital lending • Aggregator comparison engine • Next-generation • Trading • Next-generation collateral management • Trade analytics • Robo-advisory • Social investing • Crowdfunding • Investmentacross regions engine • Telematics • Social integration • IoT andconnected devices • PreventionCapitalmarkets andinvestment banking Operations and infrastructure Retail Beyond banking InsurancePayments Wealth management Small andmidsize enterprises Next-generation digitalmarketing Digital model reinventors Virtual market- place Retail value chain and coupons Digital for unbanked • Mobile payments • Internationalremittances • Mobile point-of-sale devices • Otherpayment processing • One-stop shopfor businesses • Peer-to-peer corporate lending and investment • Next-generation lending to smalland midsize enterprises • Digital cash management Source: Panorama by McKinsey
  9. 9. Rising Investments The level of venture-capital investment in financial technology has recently accelerated. Globalinvestmentinfinancial technology, $ billion Asia– United StatesEuropeOther +42% peryear 4.0 2.4 1.81.72 4 6 8 10 12 14 1.2 +54% peryear +6% peryear +33% peryear 12.2 2.6 +205% per year +8% peryear 0 2008 2009 2010 2011 2012 2013 2014 Source: CB Insights; analysis of data provided by McKinsey Panorama (a McKinsey Solution)
  10. 10. 1. Nerdwallet and aggregate offerings from banks in loans, credit cards, deposits, insurance - They also get paid by banks for generating newbusiness 2. Wealthfront provides automated wealth management solutions which attract fee averse millennials. 3. Lending home provides cost-effective mortgages with accelerated time horizons. 4. Alipay (from Alibaba), chinese payments service makes online finance simpler and intuitive with gaming strategies 5. Holvi payments (acquired by BBVA) offering banking services to SMB’s expanded to online sales platform, book keeping, expense claims & cash flowtracker. 6. Social Finance (SoFi) offers financial products and services to students & young professionals which has expanded to career and networking services. 7. Stripe ($5B), an online payment system enables merchants to launch their website and accept payments within mins vs 5-7 days for legacy payment companies 8 China’s Tencent (gaming and social networking) launched WeChat, a messaging platform, which offers instant loans without collateral (unto $30K) with credit bureau data Fintech 1,042 Companies | $15.1B Funding Fintech stories
  11. 11. Highly automated, scalable technology solutions. No physical distribution channels. Advanced data analytics usage to more effectively credit score consumers. AI/ML usage to exploit consumer interactions on social media to offer more personalized services. Millennials, small businesses & underbanked love their solutions - cost effective, remote delivery & distribution and innovation. What is really working forthem?
  12. 12. Digital Transformation Themes
  13. 13. Banking with Fintechs WANT WANT Digital Expertise Innovative Culture Agility Shift Holistic Experiences Scale Customer Acquisition Data Better Valuations Fintechs Banks
  14. 14. Q&A