towards zero friction in the desire economy

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  • DISRUPTING FINTECHS TOWARDS ZERO FRICTION

    An evidence-based analysis of the drivers behind the fintech phenomenon

  • FRICTION, NOT FINTECH, IS THE REAL THREAT TO BANKS?

    2

    For hundreds of years, frictionsurrounding any type of transaction has been hindering business growth: goods, money and data are never transferred

    fast enough.

    For hundreds of years the same problem, and for hundreds of years the same answer: More. More manpower for more goods, more bank counters for

    more money, more keyboards for more data.

    Simple. Costly. Absolutely not practical. Completely unscalable.

    Fintechs are now on a mission

    to solve the friction,

    money and data problems

  • SMART STARTUPS ARE MOVING TOWARDS ZERO FRICTION

    3

  • BUT THEY ARE SUPPLY-DRIVEN NOT DEMAND-DRIVENTheir entrepreneurs confuse technology with insight:

    4

    Were focused on millennials, in part based on the realization that the theyre just entering their acquisitive years and the majority of their purchases leave the type of digital exhaust that allows you to collect info on their value and track changes over time.

    Scott WalchekFounder TROV

  • WHY IS FRICTION A THREAT TO BANKS? The real driver of the fintech phenomenon is the exploding consumer shift towards zero friction

    Fintechs are moving towards zero friction by removing process steps AND removing traditional banks from the

    process

    So, deep disintermediation is imminent, not by fintechs but by the mega platforms taking consumers towards zero friction

    Facebook, for example, will use lending to make its ads more valuable click on the ad and buy the thing, taking

    you from ad to purchase with zero friction. It might even give away the credit to lift revenue from ads & commerce

    Even the value of Google AdWords will be under siege AdWords generates revenue for Google via cost-per-click & cost-per-acquisition fees. Frictionless payments will make clicking an advertisers link & shopping trolley payment platforms obsolete

    In the towards zero friction customer cohort, traditional banks can forget originating revenue, credit card fee revenue, loan fee revenue, interest revenue, deep share of wallet, loyalty & lifetime value

    Remove friction and customers can forget money choosing life experience over transaction5

    3. Roy Morgan Single Source, Dec 2015. n=255,777

  • WHAT IS THE SIZE OF THE THREAT TO BANKS?The real threat comes from knowing (or NOT knowing) which customers are the most likely to be impacted by digital disruption and to have an appetite for zero friction threatening share of wallet. They will most likely be:

    Younger (under 45)

    Urban

    Tech savvy

    Tertiary qualified

    Big spenders

    Comfortable with debt & leveraging assets

    Dissatisfied with big banks

    Unhappy with the traditional banking system

    Unhappy with the corporate / institutional branding of traditional banks

    Open to digital disrupters 6

  • WHAT IS THE SIZE OF THE THREAT TO BANKS?In what is known as the Desire Economy, the 4.5 million high-value consumers are:

    Younger 62% are under 45 years-old cf. 52% of the population

    Urban 71% live in Australias capitals cf. 63% pop

    Tech savvy 39% are early adopters cf. 17% pop

    University qualified 50% have a degree cf. 31% pop

    Big Spenders 91% are in the top third of discretionary spenders cf. 33% pop

    Big savers have (mean) savings & investments of $275K cf. $181K pop

    Comfortable with debt 40% cf. 31% pop

    Dissatisfied with big banks 16% more than pop (more likely to be with smaller brands)

    Unhappy with traditional bank branches 64% of them: 28% more than pop

    Open to digital disrupters UBER 109% more than pop, Spotify 87%, Skype 55%

    Unhappy with the corporate / institutional branding of traditional banks the Desire Economy mantra is: Think

    small. And stop shouting, we cant hear you

    The share of wallet of 4.5 million banking customers is at risk7

    Source: Roy Morgan Single Source, Dec 2015. n=255,777

  • BUT IS FRICTIONLESS ACTUALLY AN OPPORTUNITY FOR BANKS?Fintechs are just supply-side technology platforms delivering products entrepreneurs consider relevant

    Fintechs targeting ALL Millennials is a good example of technology without insight. Only Desire Economy

    Millennials are valuable

    When the credit cycle turns and rates rise, first generation fintechs will be at risk (e.g. defaults on higher-risk loans)

    The real banking threat (or opportunity) is from the digital mindset coming to life and demanding truly relevant experiences via frictionless technology. Fintechs are merely stimulating this awakening desire to forget money

    8Roy Morgan Single Source, Dec 2015. n=255,777

    AustralianPopulation

    AllMillennials DesireEconomyMillennials(1.5m)

    TraditionalEconomyMillennials(1.8m)

    EarlyAdopters 17% 27% 52% 8.2%BigSpenders 33 38 90 5ABs 20 24 40 10UniversityDegree 28 41 53 9

  • CREATE FRICTIONLESS UX AUTOMATE EVERYTHING

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    And do it on mobile

    Personal Loan Origination

    Business Loan Origination

    Mortgage Origination

    Payments

    Portfolio Management

    SMSF

    Customer Dashboard

  • WHAT IS THE DESIRE ECONOMY MINDSET?

    10

    A peak experience is one that surprises us, stays with us, changes us, inspires

    us and then becomes the norm

    A Desire Economy consumer is 2.6 times more valuable

    than a traditional consumer

    The Desire Economy is a sanctuary from the traditional orthodoxy of product/price

    marketing. Its where Desire consumers & SMEs gather & yearn for a peak experience

    Typically, Desire Economy accounts for more than two-thirds of a banks premium or affluent segments, while accounting for half

    the mass retail segments. But they are not another segment

    In fact, they are not taxonomic at all, they are dimensional. In other words, they can be identified, mapped and measured with surgical precision, but

    their dimensional mindset transcends conventional classification or segmentation

    This mindset modelling integrates seamlessly with a

    clients own customer segments

  • Desire Mindset is defined by 194 factors:

    12 elective spending 82 attitudinal

    100 behavioural

    WHAT IS THE DESIRE ECONOMY MINDSET?

    11

    The $600 billion Desire Economy is fuelled by 4.5

    million high-value consumers with 194 Desire mindset

    attributes

    The Traditional Economy is constituted by 9 million consumers

    with a low-spending transactional mindset

  • HOW DO WE KNOW THIS WORKS?

    12

    $45:1 ROI using predictive analytics to reveal & target most

    valuable customers (Qantas)

    780% revenue uplift in value-added

    products using precision targeting for most valuable customers (Energex Retail Energy)

    20% sales growth using peak experience

    creative for most valuable customers (Lexus)

    $2m lift in sales using a brand & value

    proposition for most valuable customers (Australian ski resort

    client)

    $2m saving in advertising spend

    optimisation for most valuable customers (Qantas)

    $80m discovery of hidden value using predictive analytics on just one

    customer segment (Telstra)

  • HOW DO WE KNOW THIS WORKS?

    13

    Following an exhaustive evaluation across the USADesire Economy algorithms were accredited by KPMG (USA)as worlds-best-practice

  • A DATA AND EVIDENCE-BASED END-TO-END PROCESS

    14

    Business Goals

    Predictive Analytics

    Clients highest-value-potential

    customers

    High-value Mindset

    Modelling

    High-ValueStrategy for

    actual + desired customers

    Frictionless Customer

    Experience Design

    Precision Reach Channel + Media

    Desire Economy Content + Creative

    DigitalMeasurement

    across all devices

    Evolve + Adapt

    Unlocking hidden value from consumers with the highest-value-potential

  • 15

    TOWARDS ZERO FRICTION