Marketing - S4 - Tailieu Bank Branch Transformation
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IBM Business Consulting Services
Bank branch transformation The root of a multichannel success strategy With the popularization of the Worldwide Web, the conventional wisdom was that banks would begin to lose branches like a willow in a windstorm, opting to build more cost-effective business models around the virtual advantages of the Internet. But customers made it clear they still wanted the human touch, and savvy banks now are transforming branches to play key roles in a more expansive, multichannel strategy. Every retail bank has a different idea about branch renewal, though, and the look of new branch blueprints can range all the way from radical to retro-chic. But the underlying business objectives are pretty much the same, and to that extent banks should be guided by some fundamental considerations – the first of which can be summarized by an old Oliver Cromwell quote: "Think it possible you may be mistaken."1 At least you may be underestimating how customers may respond. That’s exactly what happened when retail banks saw the Internet as a potential way to offload the significant overhead costs of brick-and-mortar branch offices. There was a growing public fascination with the Web, to be sure. But, at about the same time, the financial services sector was going through a period of intense consolidation, which generally leads merged banks to conclude that they’re suddenly branch-heavy and in need of some paring. Add to that high teller turnover rates and it’s easy to imagine that the story that bank managers wanted to hear was one of the cost-effective virtues of virtual branches.
Read on … But, that turns out to have been only part of the plot line. The cost benefits of selfservice Internet sites aside, customers made it clear there was a value to them in doing business with a real person. They liked being able to talk with somebody, both behind the counter and while in line. Without that comforting personal interaction customers felt a palpable loss of a sense of community.
ibm.com/bcs
As appeared in Building an Edge, October 2004
1
IBM Business Consulting Services
It’s also likely that a four-dimensional personal interaction adds to a customer’s confidence in the finality of the transaction. They prefer to hand their deposit to someone they can see, hear and watch, and know that their deposit has moved directly into their account. No questions. No doubts. Just an honest-to-goodness paper receipt. And with the latest focus on the dangers of identity theft, branch customers can enjoy a sense of assurance in being recognized by name and face. But equally important, customers have made it clear that they want access to a variety of channels – the Internet for some transactions and balance updates, ATMs for a quick influx of cash, telephones for those times when a computer isn’t available, and walk-in branches when only a person will do.
By the numbers In fact, leading U. S. banks are looking to differentiate themselves from competitors by increasing their investments in distribution channels. One survey shows that, if bank executives had additional technology spending money available to them to improve retail bank profitability, they probably would spend 20 percent on new product development, 20 percent to offset product pricing, and a full 60 percent on development of delivery channel solutions.2 Even with more access to alternative channels, bank customers continue to demand in-person branch service. Market research has shown that 92 percent of U.S. retail banking customers use a physical branch at least once a month, and 50 percent actually prefer branch offices to automated channels.3 That’s why branch transformation needs to be an integral part of an overall retail banking strategy that focuses on sustaining, maintaining and investing in multiple channels, especially for U.S. financial services institutions. Generally speaking, most banks see branch transformation in terms of a move toward customer self-service, but there is no single model being followed by any one business organization. Washington Mutual, for instance, operates a few Ocasio sites, a relatively radical approach in which a branch office operates essentially like a store. Transaction areas are open and airy, and tellers go to the customers to assist them with the specific business they want to conduct. Savings accounts? Aisle 6. Certificates of deposit? Aisle 3. Consumers can even buy hats and t-shirts and coffee mugs.
ibm.com/bcs
As appeared in Building an Edge, October 2004
2
IBM Business Consulting Services
Can we take your order? Commerce Bank branches set themselves apart by being open every day, including Sundays, and ING Direct CEO Arkadi Kuhlmann likens his retail bank to financial services fast food. "The difference between ING Direct and the rest of the financial industry is like the difference between take-out food and a sit-down restaurant. The business isn’t based on relationships; it’s based on a commodity product that’s highvolume and low-margin. We need to keep expenses down, which doesn’t work when customers want a lot of empathetic contact."4 ING Direct’s strategy is to target a specific retail banking niche – the 8 percent of customers who don’t visit a branch office approximately every 30 days.5 But, for banks more interested in the nine out of ten customers who do visit at least monthly, the essential objectives for branch transformation are to: • Create competitive cost of operation by improving efficiency and effectiveness • Update, replace and reengineer processes and systems to more efficiently support staff and customers • Leverage all retail channels to optimize value to customers and the bank • Grow revenue by becoming the provider of choice • Improve service delivery by deploying a more flexible, reliable IT infrastructure. The idea is to market to each customer while he or she is on the premises. To accomplish that, banks need to have a more complete picture of that customer, including their current financial requirements, their current life events and the kinds of services that can be presented as sensible follow-up offers. There are no single solutions to the problem, but there are a series of incremental steps that banks can and should be taking to develop their own particular models. For instance, each bank should make up-front decisions about functional and operational issues. Are tellers going to be transaction-processors, or, as part of an effort to imbue a deeper sales and service culture, will they sell, too? Maybe the better approach is to have them do both – and refer services at the same time. Any of these choices requires training. And what about technology? Is it flexible and resilient enough to support a multchannel architecture and provide a common and comfortable customer experience? In answering that key question, banks need to consider not only backoffice systems, but front-office equipment, cross-enterprise networking infrastructures and the cost and strategic benefits of leading-edge technology such as voice-over IP and customer relationship management software. To enhance security, some banks are beginning to move toward fingerprint stamping and retina scanning, for
ibm.com/bcs
As appeared in Building an Edge, October 2004
3
© Copyright IBM Corporation 2004
example. Others are revamping to incorporate broadcast readers and smart cards to instantly recognize customers as they walk through the front door, alerting managers and sales persons, not only about their physical presence, but their financial and account histories as well. In the end, functionality, ease-of-use and customer interaction will be determined by the IT infrastructure on which a branch bank is built. The bottom line in bank branches is this: They’re how a financial institution’s customers see and talk to the firm itself, and to that extent, branches are invaluable assets in terms of capitalizing on customer needs and market opportunities. Transforming them – taking them to the next level as a key part of an overarching, multichannel business plan designed to differentiate services and raise customer satisfaction – can help banks to reduce operational costs, generate new revenue, reverse employee turnover and position the business for rapid market and customer response.
IBM Global Services Route 100 Somers, NY 10589 U.S.A. Produced in the United States of America 11-04 All Rights Reserved IBM and the IBM logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates.
About the author: Jim Clarkeson is a certified Managing Consultant in the Multichannel Transformation Solutions Practice of IBM Business Consulting Services. He has 25 years experience in the financial services and telecommunications industries, with broad experience in mergers and acquisitions, process analysis and currently specializes in retail bank transformation. You can reach Jim at [email protected].
About IBM Business Consulting Services With consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world’s largest consulting services organization. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues and the ability to design, build and run those solutions in a way that delivers bottom-line business value.
References 1
Quotes of Oliver Cromwell, 1599-1658. Accessed November 3, 2004. http://www.olivercromwell.org/quotes1.htm
2
TowerGroup and IBM Institute for Business Value 2002 survey.
3
Retail Bank Branch of the Future, Tower Group, August 2001.
4
“How to Get Tough With Bad Customers,” Business 2.0, October 2004.
5
Ibid.
G510-3980-00
Bank branch transformation The root of a multichannel success strategy With the popularization of the Worldwide Web, the conventional wisdom was that banks would begin to lose branches like a willow in a windstorm, opting to build more cost-effective business models around the virtual advantages of the Internet. But customers made it clear they still wanted the human touch, and savvy banks now are transforming branches to play key roles in a more expansive, multichannel strategy. Every retail bank has a different idea about branch renewal, though, and the look of new branch blueprints can range all the way from radical to retro-chic. But the underlying business objectives are pretty much the same, and to that extent banks should be guided by some fundamental considerations – the first of which can be summarized by an old Oliver Cromwell quote: "Think it possible you may be mistaken."1 At least you may be underestimating how customers may respond. That’s exactly what happened when retail banks saw the Internet as a potential way to offload the significant overhead costs of brick-and-mortar branch offices. There was a growing public fascination with the Web, to be sure. But, at about the same time, the financial services sector was going through a period of intense consolidation, which generally leads merged banks to conclude that they’re suddenly branch-heavy and in need of some paring. Add to that high teller turnover rates and it’s easy to imagine that the story that bank managers wanted to hear was one of the cost-effective virtues of virtual branches.
Read on … But, that turns out to have been only part of the plot line. The cost benefits of selfservice Internet sites aside, customers made it clear there was a value to them in doing business with a real person. They liked being able to talk with somebody, both behind the counter and while in line. Without that comforting personal interaction customers felt a palpable loss of a sense of community.
ibm.com/bcs
As appeared in Building an Edge, October 2004
1
IBM Business Consulting Services
It’s also likely that a four-dimensional personal interaction adds to a customer’s confidence in the finality of the transaction. They prefer to hand their deposit to someone they can see, hear and watch, and know that their deposit has moved directly into their account. No questions. No doubts. Just an honest-to-goodness paper receipt. And with the latest focus on the dangers of identity theft, branch customers can enjoy a sense of assurance in being recognized by name and face. But equally important, customers have made it clear that they want access to a variety of channels – the Internet for some transactions and balance updates, ATMs for a quick influx of cash, telephones for those times when a computer isn’t available, and walk-in branches when only a person will do.
By the numbers In fact, leading U. S. banks are looking to differentiate themselves from competitors by increasing their investments in distribution channels. One survey shows that, if bank executives had additional technology spending money available to them to improve retail bank profitability, they probably would spend 20 percent on new product development, 20 percent to offset product pricing, and a full 60 percent on development of delivery channel solutions.2 Even with more access to alternative channels, bank customers continue to demand in-person branch service. Market research has shown that 92 percent of U.S. retail banking customers use a physical branch at least once a month, and 50 percent actually prefer branch offices to automated channels.3 That’s why branch transformation needs to be an integral part of an overall retail banking strategy that focuses on sustaining, maintaining and investing in multiple channels, especially for U.S. financial services institutions. Generally speaking, most banks see branch transformation in terms of a move toward customer self-service, but there is no single model being followed by any one business organization. Washington Mutual, for instance, operates a few Ocasio sites, a relatively radical approach in which a branch office operates essentially like a store. Transaction areas are open and airy, and tellers go to the customers to assist them with the specific business they want to conduct. Savings accounts? Aisle 6. Certificates of deposit? Aisle 3. Consumers can even buy hats and t-shirts and coffee mugs.
ibm.com/bcs
As appeared in Building an Edge, October 2004
2
IBM Business Consulting Services
Can we take your order? Commerce Bank branches set themselves apart by being open every day, including Sundays, and ING Direct CEO Arkadi Kuhlmann likens his retail bank to financial services fast food. "The difference between ING Direct and the rest of the financial industry is like the difference between take-out food and a sit-down restaurant. The business isn’t based on relationships; it’s based on a commodity product that’s highvolume and low-margin. We need to keep expenses down, which doesn’t work when customers want a lot of empathetic contact."4 ING Direct’s strategy is to target a specific retail banking niche – the 8 percent of customers who don’t visit a branch office approximately every 30 days.5 But, for banks more interested in the nine out of ten customers who do visit at least monthly, the essential objectives for branch transformation are to: • Create competitive cost of operation by improving efficiency and effectiveness • Update, replace and reengineer processes and systems to more efficiently support staff and customers • Leverage all retail channels to optimize value to customers and the bank • Grow revenue by becoming the provider of choice • Improve service delivery by deploying a more flexible, reliable IT infrastructure. The idea is to market to each customer while he or she is on the premises. To accomplish that, banks need to have a more complete picture of that customer, including their current financial requirements, their current life events and the kinds of services that can be presented as sensible follow-up offers. There are no single solutions to the problem, but there are a series of incremental steps that banks can and should be taking to develop their own particular models. For instance, each bank should make up-front decisions about functional and operational issues. Are tellers going to be transaction-processors, or, as part of an effort to imbue a deeper sales and service culture, will they sell, too? Maybe the better approach is to have them do both – and refer services at the same time. Any of these choices requires training. And what about technology? Is it flexible and resilient enough to support a multchannel architecture and provide a common and comfortable customer experience? In answering that key question, banks need to consider not only backoffice systems, but front-office equipment, cross-enterprise networking infrastructures and the cost and strategic benefits of leading-edge technology such as voice-over IP and customer relationship management software. To enhance security, some banks are beginning to move toward fingerprint stamping and retina scanning, for
ibm.com/bcs
As appeared in Building an Edge, October 2004
3
© Copyright IBM Corporation 2004
example. Others are revamping to incorporate broadcast readers and smart cards to instantly recognize customers as they walk through the front door, alerting managers and sales persons, not only about their physical presence, but their financial and account histories as well. In the end, functionality, ease-of-use and customer interaction will be determined by the IT infrastructure on which a branch bank is built. The bottom line in bank branches is this: They’re how a financial institution’s customers see and talk to the firm itself, and to that extent, branches are invaluable assets in terms of capitalizing on customer needs and market opportunities. Transforming them – taking them to the next level as a key part of an overarching, multichannel business plan designed to differentiate services and raise customer satisfaction – can help banks to reduce operational costs, generate new revenue, reverse employee turnover and position the business for rapid market and customer response.
IBM Global Services Route 100 Somers, NY 10589 U.S.A. Produced in the United States of America 11-04 All Rights Reserved IBM and the IBM logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates.
About the author: Jim Clarkeson is a certified Managing Consultant in the Multichannel Transformation Solutions Practice of IBM Business Consulting Services. He has 25 years experience in the financial services and telecommunications industries, with broad experience in mergers and acquisitions, process analysis and currently specializes in retail bank transformation. You can reach Jim at [email protected].
About IBM Business Consulting Services With consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world’s largest consulting services organization. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues and the ability to design, build and run those solutions in a way that delivers bottom-line business value.
References 1
Quotes of Oliver Cromwell, 1599-1658. Accessed November 3, 2004. http://www.olivercromwell.org/quotes1.htm
2
TowerGroup and IBM Institute for Business Value 2002 survey.
3
Retail Bank Branch of the Future, Tower Group, August 2001.
4
“How to Get Tough With Bad Customers,” Business 2.0, October 2004.
5
Ibid.
G510-3980-00
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