THE FINANCIAL SERVICES FORUM Retail Banking

BANK TO THE FUTURE The high street banks have alienated many of their customers in their search for efficiency, depersonalising the whole experience with offshore call centres and centralised lending decisions. Malcolm Oliver looks at how two relative newcomers to the UK retail banking scene are reviving the old concept of real bank managers and personal service.

The future of retail banking is a self-evidently important The key to success is often not the development of theme, and indeed one that The Financial Services Forum the ideas themselves but having the confidence (and addresses each year in the slightly broader context of its perhaps the commercial and professional courage) to Future of Retail Financial Services conferences. stand out and not dismiss them, like most of the herd, But between the positive idea and the delivered reality as passé or inappropriate to the needs of twenty-first- can fall a huge shadow. If speakers really have cracked century customers. As Allan Leighton said recently, in the problem in a way that will deliver lasting customer his new book on leadership, “the biggest challenge to satisfaction and regulatory approval and sustainable senior management is being able to listen effectively to profitability, why on earth would they want to give their those below who know what will and will not work”. secrets away to commercial rivals? Just reflect on how many financial services companies The Forum largely avoids this problem by its in the last decade or so have put in place new strategies membership formula, which means that most presenters to relocate call centres overseas, or to close local will already have built informal relationships with most of branches, or to withdraw free ATMs, or to restrict opening the audience, and will therefore feel that they are talking hours – only to have to perform an embarrassing volte- amongst friends rather than competitors. Yet the more face when the idea from the ‘research’ fails to match with open-market approach taken by the Institute of the reality of the customer reaction. Economic Affairs at its own retail banking conference I have long argued that British banks threw out an last month clearly worked as well, as the presentations enormous amount of what I call, after the manner of were in the main challenging and insightful. modern cosmologists, ‘dark value’ when they One reason for the openness is that some of the pensioned off Captain Mainwaring and his successors successful strategies and tactics described are almost in the 1970s. Dark value is easy to miss, because it is as old as banking itself – certainly the sort of things that difficult to observe or quantify. It is difficult even to Captain Mainwaring, or even young Pike when he rose decide exactly what it is made of when looking through to management status himself in his late fifties, would the telescope from the top of a Docklands tower – but have taken for granted. ultimately it holds together the commercial universe.

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So I found it refreshing to hear two of the speakers, Crucially, Handelsbanken budgets are assembled from Magnus Uggla of Handelsbanken and Glenn King of the bottom up, by aggregating the individual branch plans – National Australia Bank, talk of the back to the future the central influence is focused on benchmarking against approach that their companies have adopted. competitors – rather than the more usual setting of global In the case of Handelsbanken, in fact, it is not so targets and the crude and uninformed division of these much a question of rediscovering the past as never targets between local outlets. having abandoned it. Magnus (who will be developing Many Forum members may also be a little alarmed his theme at a forthcoming Forum event) explained that that the central support, and also the consistency of although the bank had obviously moved to embrace image, is there to be called on, but again, the branch is technology over the last thirty years, the fundamental firmly in charge. I was impressed that Sir Brian Pitman, in the concluding discussion of the conference, was clearly A further step forwards for the bank very familiar with the Handelsbanken model, although it was not so obvious why he had not made more use of involved stepping backwards, to the way it whilst he was running LloydsTSB. Perhaps it is the perception that Sweden is another country, and they do that branches used to be in the 1970s. things differently there – but that is what they used to say about Volvo and Saab. And it doesn’t explain why, or how, Handelsbanken has also quietly built a network structures and principles that are important to of forty branches in Britain – all successful businesses, customers and staff (real-world customers and staff, that and still growing. A space worth watching. is, rather than those who respond to research surveys) Rather more Forum members will, I suspect, be familiar have been carefully maintained. Whilst other banks have with the success, across the world and in this country, of used modernization as a spun euphemism for wholesale National Australia Bank, not least because Yorkshire cost-cutting and deskilling, Handelsbanken has only Bank and Clydesdale Bank have done very well over the modernized where this has had a positive influence on years in the Forum’s annual Awards for Marketing the customer experience and the value perceived by Effectiveness. The two banks have consistently the customer. impressed judges with their instinctive customer focus, So, on the one hand, each branch has its own and Glenn King, the general manager of NAB’s British website; on the other, the branch manager is still truly in operations, explained some of the reasons why. charge. He acts, in effect, as chief executive of a local One of the key philosophies has been to recognize business, rather than as a senior salesman following that good ideas are not always successful. So although prompts from a computer screen and encouraging staff the portfolio of four banks in the British Isles may have to deliver the monthly or weekly targets that have been appeared well balanced, NAB recognized a few years sent down from on high. ago that, overall, it was going backwards in terms of And, as you would expect from a chief executive, it is customer focus, innovation and staff performance, and the branch manager who decides how many staff to that it was not providing the strongly-differentiated recruit, how much to pay them, what competence offerings that are usually vital for smaller banks. This profiles to seek, which customers to target, which was partly related to the problems of running four different banking systems, partly to questions of scale, and partly to focus. With hindsight, the resulting decision to sell Northern The contact centres were benchmarked Bank in Ulster and National Irish Bank in Eire, and to against staff experience, customer experience focus on the Yorkshire and Clydesdale franchises, has been an important rite of passage. and financial performance, and were found Having cleared the corporate decks, the company to be underperforming on all measures. explored the impact of its different distribution channels on product sales. For example, the contact centres were benchmarked against staff experience, customer experience and financial performance, and were found products to offer, and how to price them. Branch to be underperforming on all measures. management, you may not now be surprised to learn, is But the bank’s reaction was not to change the people – also seen as a career role, rather than simply a post to the underperformance was largely not their fault – but to be occupied for a year or two ‘for experience’ by a seek to align the contact centres and their processes with graduate trainee on the fast track between college quad the desired staff and customer experiences. This also and the corporate high table. meant eschewing the usual option of regarding a call

44 Volume 6 Issue 3 Argent www.thefsforum.co.uk THE FINANCIAL SERVICES FORUM

The bank regards most central marketing as “a waste of money” – but the key word is central. Marketing too is the responsibility of individual branches, to be delivered in whatever way they feel is most appropriate for their particular customers. centre as a cost to be trimmed. The investment is bearing test of their philosophies will come as and when tangible results. customer demand pushes them to challenge some of As most Forum members will know (the initiative the majors in terms of scale. But the ideas are well- was commended in last year’s awards), Yorkshire and tested in their home markets, and both Yorkshire and Clydesdale have also harnessed the power of their Clydesdale already have a significant presence in their core channels by, for example, introducing audio- core geographical markets. So it would not surprise me enablement on all their ATMs. This was of direct to see all three companies continue to win customer benefit, of course, to all their partially-sighted acclaim and Forum awards for their effective marketing. customers, but also demonstrated the bank’s real It would not surprise me either to see some of their commitment to delivering its corporate social rivals discovering the attractions of moving backwards responsibility goals, and sent a powerful message to into the future. customers of other banks each time they used a Yorkshire or Clydesdale ATM. Malcolm Oliver is a writer and management consultant, and A further move to integrate activity across all the edited Argent from 2001 to 2006. distribution channels in order to optimize (not, note, maximize) cross-selling opportunities is also redolent of the Handelsbanken approach. As Glenn put it, a further Also available online ... step forwards for the bank involved stepping backwards, Visit www.thefsforum.co.uk/knowledge to the way that branches used to be in the 1970s. for the following articles: This has not (yet) been a network-wide move, but 70 branches so far have been refocused so that local Good Advice Philip Kotler has perhaps contributed more to the management really does run the business. The development of modern marketing practice than any other structure is a bit different from the Handelsbanken person. He discusses how his marketing concepts and approach, being based on a professional partnership principles can and should be applied to financial services. model which is better suited to the bank’s broad range Do you really ken your customers? of product and distribution channels. It is not what you know about your customer but how you A ‘managing partner’ acts as the local chair of all the know him that counts. Malcolm Oliver introduces the theme operations, with senior partners and partners below, for a recent issue of Argent and suggests that knowing your delivering discrete elements of the customer customer is fundamental to good marketing. experience. And for the customer, everything (including The idols of the tribe the physical layout and facilities in the branches) is The trouble in marketing is that we tend to stand on the designed to make them feel like members of a club – shoulders of the latest ephemeral technique that has proved welcome at any time to make use of all that is available. its worth for all of twelve months. Malcolm Oliver looks at the errors that can arise from the limitations in the collective It is a genuine relationship proposition – and a far cry understanding of the tribe of man. from the annual fee and a once-a-year visit from a (usually new) ‘relationship manager’ that some other banks still see as the meaning of the term. Handelsbanken and National Australia Bank are both, of course, small-scale operations in Britain and the real

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