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Citi GPS: Global Perspectives & Solutions March 2018 © 2018 Citigroup 14 Figure 6. Estimated Volume Lost to Disruptive Models by 2025 * Disruptive models vary across product – Investments: low price, digital only brokerage and robo-advisor; Mortgages: digital-only robo-mortgage, new credit scoring ; Personal, credit card, and SME lending: digital only, P2P marketplace; Payments: digital payment via wallets; P2P or A2A and digital only cross-currency exchange. Source: Citi Global digital Strategy, “Bang and Fuse” model, Citi Research A dissection of global banks’ profits by product shows that lending accounts for over 50% of the banks’ total risk-adjusted revenues, f ollowed by savings and investments (21%), capital markets (16%), and payments (7%). Interestingly, personal and SME is the most profitable segment for banks, accounting for nearly half of profits, followed by corporate (35%) and investment banking & markets (~20%). Figure 7. Global Banks Profit Breakdown By Product and Customer Segments Based on banks under Citi coverage; Profit split by customer segments based on company reports or analyst estimates; the profit is then allocated across products. Profit splits by product segments estimated based on selected banks that disclose revenue splits by products. Source: Citi Research Estimates Re-imaging versus Re-engineering Finance Finance is being re-imagined and re-created in emerging markets by FinTech and BigTech players. New entrants have made a mark in the consumer payments and finance space in Asia, including the likes of Alipay and Tenpay (WeChat) in China and Kakao Bank and Paytm in India. In developed markets, Business-to-Consumer (B2C) FinTech plays have not reached the scale of their Asian peers with a few exceptions, most notably PayPal. “10x” improvements are more likely in new markets that can “leapfrog” established technology − e.g., go mobile first/only, skipping the landline phase in telecom. North America Europe China Developed Asia Emerging Asia Payments 6% 34% 6% 34% 9% 50% 6% 34% 2% 36% Investments 6% 34% 6% 34% 9% 50% 6% 34% 2% 36% Personal Lending 6% 34% 2% 17% 6% 34% 2% 17% 1% 24% Credit Card Lending 2% 17% 2% 17% 2% 28% 2% 17% 1% 24% SME Lending 6% 34% 6% 34% 2% 28% 2% 17% 2% 36% Mortgage 6% 34% 2% 17% 1% 14% 2% 17% 0% 12% Payments Savings and Investment Lending Capital Markets Overall Personal/SME 4% 12% 29% 1% 46% Corporate 3% 6% 21% 5% 35% IB/Markets 0% 3% 6% 10% 19% Overall 7% 21% 56% 16% 100%

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