Point of view

Retail Banking: regaining customers’ confidence How to remain a trusted partner in a commoditised banking world

To get there. Together. Editorial

Contents Retail Banking: regaining customers’ confidence How to remain a trusted partner in a commoditised banking world Customer trends in a fast-moving world 4 The current economic environment has highlighted just how significant a role retail banks play in our society. In the midst of the financial turmoil, Multi-channels: the right retail banks have found themselves firmly in the spotlight. channel at the right time 10 Although the sector has, in the main, weathered the economic storm, it Moving to next has prompted banks to reconsider their activities and put customer service generation branches 16 back at the heart of their strategies, thus contributing to rebuilding trust. However, retail banks are still facing many challenges: customers’ changing behaviour, the impact of new technologies, but also the emergence of new Online banking: competitors and new banking models from emerging countries. an essential component of the new banking model 22 How retail banks control their position and image in society and coordinate their multi-channel offerings, such as online and mobile banking, contact Money goes mobile: centres and social media, all need to be discussed and understood in the payments on the move 28 context of this constantly-changing environment.

Performance management: BearingPoint would like to share some of our thoughts on the trends in exceeding short-term retail banking and in doing so, highlight a number of best practices among financial vision 36 retail banks. To do this, we have drawn on the expertise of our consultants in the fields of retail banking and customer relationship management Contacts 43 across Europe.

We hope you find the following points of view useful and insightful.

Philippe Auther Werner Kreutzmann Partner Partner

Point of view 3 Customer trends in a fast-moving world

Gauging what customers expect from their bank has A shift in the balance of power never been easy. Rising education levels, greater wealth and major technological shifts1 have all had The balance of power has now shifted in the an impact on the relationship between customers customer’s favour. Customers are much more and retail banks. Customers are now more financially savvy and are better informed about demanding, they expect more from their banks. The different banking offerings, notably through various recent financial crisis and the associated scandals communication channels (TV, websites, social within the financial services sector have only served media). This means that when customers now shops Customer trends to make customers even more discerning. for a new bank product they will almost always compare different products from different banks. In A ‘‘bank for life’’ is a thing of the past other words, banks have become providers of basic in a fast-moving world goods and services that can be easily substituted by As illustrated by the advertising slogan “To be a competitor. Even worse, with the increasing use honest, I’m interested in your money”2, the banking of social media, banks’ reputations can be gained or model of the 1970s put the bank and often, its lost overnight as customers voice their opinions in “You can’t just ask customers what they want and then try to give local branch manager, as the sole point of contact cyberspace. for customers. The customer accepted the bank’s that to them. By the time you get it built, they’ll want something standard offerings and bowed to the bank’s As a result of these trends, the exclusive ‘‘bank for expertise without questioning it. Indeed, because life’ relationship has become less and less common. new” – Steve Jobs the customer had little or no information on other The banking relationship is now often fragmented banks’ offerings, and limited financial knowledge, among various financial establishments. Customers the bank could easily ‘‘manage’’ the customer. view their bank as just one part of their network alongside other banks or financial services providers. This captivity was increased by a generational effect, as children would simply go on to be customers at So how can banks fight back and adapt, while their parents’ or grandparents’ banks. The customer still taking into account key issues for an optimal was putting the bank at the heart of their life, just as customer relationship? they did with their solicitor or employer. We believe banks must provide customers with: • Access to their bank anywhere, anytime and

1 further insights into these digital technologies can be found in anyplace, BearingPoint’s book “Customer Paradoxes in the digital world” • Simple offerings that are still personalised, 2 Original advertising slogan “Pour parler franchement, votre • Transparent, risk adverse, ethical products and argent m’interresse” created by Daniel Robert in 1973 for the services. French bank BNP

Point of view 5 On the other hand, customers still want to have Need for more ethical products The bank yesterday The bank today products tailored to their needs. In response to this, Customers increasingly consider themselves to be banks have created semi-standardised products part of a wider, more socially-responsible community, similar to the auto or computer manufacturers of and have expressed the need for products that have the 90s. The offerings are based on a limited number an obvious social usefulness. Banks have therefore of platforms, but have many additional options that developed financial products with a positive social/ can be chosen by the customer. We can clearly see environmental impact, such as ethical investment this in the banking card business where there is a funds. In parallel, community-focused solutions such wide range of personalisation options ranging from as micro-finance or peer-to-peer finance arise as well. product functionalities (credit-debit) to affinity From a static, …to a challenged, chosen captive relationship… relationship (football club credit card) and co-branding (American Need for more transparency Express/Skyteam). Customers want clear product information from Source: BearingPoint, 2011 their banks. Mainly as a result of pressure from Anywhere, anytime, anyplace A key trend we are seeing in response to customers’ Customers are also seeking recognition and are regulators, banks are working on giving customers request for quick access to information and services increasingly interested in loyalty programmes. more understandable advice, thus avoiding some of Customers want access to information immediately is the growth of self-care technologies, both online These can take various forms: the misunderstandings of the past. In practical terms, and everywhere. In that respect, they have become and in branches. These technologies have obvious • Transactional point scheme: Points can be this means training customer relationship managers more sensitive to the benefits of multi-modal/ cost advantages and provide clients with quick collected based on transactions and may be used to be better able to embed key product information alternative relationships (online access, mobile, call access to their account balances, IBAN printing, for discounts or other benefits. An example is the in the sales pitch. Improved transparency will centre, ATM, branches relationship managers). For cheque book orders, bank transfers and so on. “loyalty saver” proposed by ING where they offer a benefit the customer, as they will be more aware instance, in a standard credit purchasing process, higher rate of interest for not making withdrawals of possible product risks. The drawback for the bank the customer may first find the information on the Mobile phones also represent a tremendous on savings. would be that, because of the new transparency internet, then may call a remote assistance desk opportunity to slip the bank into the customers’ pocket • Relational loyalty programme: Benefits are based requirements, some relationship managers will stop for additional information, go back again on the by helping to facilitate everyday life with services on an enhanced customer experience rather than pushing offerings they may find too complex to sell. internet to compare competitive offerings and finally such as mobile banking or mobile payment. Despite on collecting points. One example is the high- confirm the credit request in a branch nearby. this opportunity, banks have actually been very slow end partnership programme offered by HSBC (VIP A paradigm shift to position themselves at the forefront of mobile access to hotels, restaurants and so on). Optimal development of cross-channel relationships is payment solutions. We discuss this in more detail in The shift in power has definitely moved from the certainly the best response banks could make to meet ‘‘Money goes mobile: payments on the move’’. Security, ethics and transparency bank to the customer. As a result customers are less these expectations. However, leveraging the most loyal, more ambivalent and quicker to criticise their appropriate channel for the interaction at the right Simple yet personal Need for more secure investments relationship with banks. time still remains a real challenge for most banks. In the recent uncertain economic environment, Customers are often overwhelmed with the choice customers have become much more concerned with The future leaders in the field of retail banking will For example, banks work hard to ensure basic and range of financial products. They are becoming their financial security. In response, banks have be the ones who can anticipate these needs most products can be bought online. However, trying to more discerning about the quality of product and recently made big efforts to adapt their offerings accurately and respond to them swiftly. offer more complex products online is often more service provided, the relationship with their bank around key moments of life. For example, there difficult because of regulatory constraints, and often and the value added by the bank’s relationship are now products that are built around refunding leads to endless discussions between marketing and managers. More and more customers are seeking healthcare expenses, investments encompassing compliance departments. simple and easy to understand products, most death and disability insurance, mortgages, and notably in terms of pricing. pensions.

6 Point of view Point of view 7 Spotlight on… Retail banks’ leading role in society

“It is well enough that people do not understand changed the role of banking institutions in our banking and monetary system, for if they Western societies. Banks have moved towards did, I believe there would be a revolution before a model where the “common public interest” is tomorrow morning” – Henry Ford less easy to grasp. This is particularly the case when banks go public, as this puts increased Community vs. profitability pressure and scrutiny on their financial results.

Banks play a pivotal role in our economic For example, fees have been implemented on system – put simply, they link society’s financing some transactions such as cash withdrawals needs. In an economy where the tertiary sector at the counter, or ATM withdrawals in non- Regaining ground necessity to pay for financial services (interests has overtaken the industrial sector, the role of partner banks. Many customers feel that this margin or fees). In order to change this customer banks has become more and more significant. shift in banks’ strategies is a betrayal of their Support growth through financing perception, banks have to better communicate Through their products and services, banks – and “common public interest” role. Customers feel The capability of banks to support growth through their proposed services’ added value. One in particular, retail banks – have become one trapped between the obligation to have a bank corporate and individual customer financing is can already observe this trend as banks place of the most important players within Western account and the requirement to potentially pay key. However, short-term credit profitability is customers and value at the heart of their TV and societies. However, this significance has created fees on it. Public suspicion and scepticism about today at stake because of pressure on margins web communication campaigns. a challenge for retail banks: how can they banking institutions have increased significantly, and the increased requirement for regulatory continue to show a “common public interest” especially as the state/taxpayer has had to bail capital. In this context, it is imperative for credit Focus operations on the customer whilst still maintaining their ability to pay out some Western banks in the wake of the specialists to rethink their business model. To Showing added value means banks need to dividends to their private shareholders? economic crisis (for instance, RBS in the UK, ABN that end, they are already investigating new develop a more customer-focused culture across AMRO in the Netherlands, Allied Irish Banks and initiatives, which include enlarging their product the whole of its value chain. Back offices or This situation is not really new. In France, for Bank of Ireland in Ireland and Commerzbank in offering to encompass insurance and savings any other customer support functions should instance, the four main banks were nationalised Germany). products. These could contribute to rebuilding be involved in overall customer relationship in 1945 to avoid speculation and to support the economical sustainability. management. Even though they are not front- country’s post-war reconstruction. The banks’ The reputation of retail banks in Europe has been office staff like branch advisors, they should still role was to be part of a large public services seriously damaged, and they must work hard to Stress banking services’ added value be made aware that they are a fundamental spectrum and was considered by customers as regain their customers’ trust. They must redefine Facing low intermediation margins and high part of the overall customer relationship. Senior such. their role within society, or at least, become volatility, banks developed services generating management can do much to instill this attitude more transparent. To achieve these goals, banks fee-based revenues, thus securing Net Banking across the organisation. Banks are not average companies need to support growth through financing, stress Income. However, financial services are by their services’ added value and ensure that their definition dematerialised and intangible. For In order rebuild trust and to retain, banks need The increasing need for liquidity at the beginning entire operation is more customer focused. instance, although people have no problem to continually adapt their role for a changing of the 80s and transaction margin levels have paying fees to access mobile phone services, it’s society. often more difficult for customers to grasp the

8 Point of view Point of view 9 Multi-channels: the right channel at the right time

Over the past decade, one question has gone To their credit, banks have quickly understood through every retail banker’s mind: should the bank that they were losing control of the customer attempt to take control of its customer relationship? relationship and that it was important not to have Too much control is dangerous. such a mechanical approach towards it. Banks are also facing dual, even schizophrenic, customer The continuous evolution of customer behaviour, behaviour: customers, who are already sceptical combined with the fact that telecommunication about banks after the recent financial turmoil, are and digitalisation methods have reached maturity, loudly proclaiming their right to freely use banking Multi-channels: the right has increased the use of multiple channels in the services. banking environment. Traditionnal channels are back in channel at the right time In fact, convinced that the local branch would favour no longer play a pivotal role in the customer relationship, banks have devoted impressive financial The financial crisis has confirmed to banks that resources to develop new remote functionalities they should view customer management on a long- “Coming together is a beginning, staying together is progress, and to implement integrated customer relationship term basis in order to limit the attrition rate, secure tools. Banks have also changed their organisation the customer portfolio and, most of all, create an and working together is success” – Henry Ford in order to be more customer-focused and to break enhanced customer experience. down barriers between their traditional distribution channels. One of the most significant results of this situation is that local branches are back in favour. They now The reasoning behind these changes was mainly have a key role with respect to customer experience. to take over the new multi-channel behaviour of This explains why banks such as Deutsche bank customers. At the very beginning, banks wanted or La Banque Postale are trialling new types of to take advantage of the fantastic development branches. These look more like Internet cafés and in internet digital communication to drive the aim to enhance customer experience, most notably customer-buying process. This could be tailored by combining humanness and immediatness (for according to the value of the interaction: for instance, by providing web conferencing facilities for example, customised processing for high potential customers to have access to relevant bank expertise). customers vs. automated processing for low potential customers. But is redesigning local branches and setting up new sales methods effective enough to bring customers However, while initiating these changes, banks have back into local branches and, most of all, make them forgotten the key principle, which is that customer stay loyal to the bank? relationship is a long-term issue and that customers only become comfortable with their relationship with their bank after repeated low-value contacts.

Point of view 11 decision-making process of the bank’s employees. Stage 2: Conduct simulations on volume and on cost Contact Social Banks should enlarge the employee’s responsibilities aspects to assess the feasibility of different multi- Branch Website Mobile centre media and design a new management hierarchy to convert channel scenarios. The identification of priority Information them to being “bank ambassadors”. channels in this particular stage should be used to drive investment and organisational decisions. Traditional customer journey This new organisational chart must also be Advices complemented by improvements to the bank’s A useful additional stage could be to assess the Alternative customer journeys intelligence and knowledge of social networks or complexity of incoming tasks and to better organise Purchase consumer advocacy groups. Indeed, understanding the timeframe. This could bring a new perspective social media or consumer advocacy groups, which on the multi-channel role, processing costs, are efficient trend indicators, could be a good organisation and on management. After-sales Source: BearingPoint, 2011 method to foresee customer needs and to master their related risks (mainly reputational risk or In it to win it: build a successful multi- Understand the customer journey Guide the customer class action). As an example, BNP Paribas uses its channel strategy Facebook group “L’Atelier” to manage a community We believe that retail banks should change their Embracing the typical customer journey, however, of interests around new banking concepts and Some prerequisites are necessary to build an efficient global organisation to be more flexible in their should not prevent banks from guiding the customer customer uses. multi-channel strategy. multi-channel approach. Of course, optimising the across the different channels by using either branches or their website is important, but banks incentive or deterrence policies. Multi-channels drive the customer First, all banking channels should be continuously should also be more focused on the excellence of experience forwards improved, as customers are linking the relevance of their internal processes and on the smoothness and An incentive policy consists in promoting the use bank’s offerings with the technology used. efficiency of the customer journey through each of of a defined way of interaction with the bank. This Multi-channel management in retail banking is a the channels. could be done by giving customers a bonus for using powerful tool. Banks should adopt a multi-channel Secondly, banks should thoroughly understand selected channels (for instance, via special offers or master plan and define an associated three-to-five their customers’ multi-channel behaviour. This A relevant multi-channel strategy should be designed financial incentives). Barclays, for example, offers year roadmap to drive the strategy onwards. Such a could be done by the implementation of customer to understand a customer’s typical journey. By doing higher deposit rates for new accounts 100% opened plan is designed around two main stages: information-gathering tools and data warehouses. this, banks could identify and then improve some on the internet, while BNP Paribas has introduced Stage 1: Collate and examine both external and critical points of the journey. This could prevent promotional offers solely for its internet customers. internal data about multi-channel opportunities. Third, bridges and connections between the some current situations, where branch managers are • Analyse customer needs and expectations channels should be almost perfect, so customers can unable to handle operations that have been started A deterrence policy charges customers that are (quantitative surveys, customer satisfaction experience an easy and smooth journey. by customers on the internet or over the phone. choosing non-target interaction channels. Penalties enquiries, external analysis). could be either financial (billing of additional • Conduct a quantitative analysis of the internal Retail banks need to put in place a robust multi- The customer journey could be interpreted as a services) or service related (by limiting the offering). situation (number of customer interactions, channel strategy which uses joined-up thinking to sequence of interactions (from the information- A multi-channel approach should lean upon customer acquisition, processing costs). answer and anticipate customers’ questions and seeking phase to the post-sales support) between the appropriate organisation and sales policies. Each • Insert in the multi-channel master plan the requests – with the sole aim of providing first-class, bank and the customer. To qualify as a multi-channel customer-facing employee should be encouraged to bank’s key objectives (customer satisfaction innovative customer service. journey, the customer should be able to move from direct customers to multiple channels. improvement, increasing the sales, cost cutting, one phase to the other by using a different channel reducing the attrition rate). easily (online information seeking, receiving advice However, such a responsibility could not be • Illustrate the master plan with best practices and at the local branch, and so on). performed without an increased flexibility in the trends (benchmarks).

12 Point of view Point of view 13 Spotlight on… Reinventing customer intimacy through contact centres

“There are no traffic jams along the extra mile” centre and what to expect from it, only 34% of Roger Staubach customers say they are regular or occasional users of the contact centre of their main bank2. Across all sectors, retail banking has been lagging behind in terms of contact centre The evolution of the contact centre maturity. Sales orientation, leverage of outsourcing capabilities1, development of Recent major technological shifts and evolving formalised procedures and knowledge bases customers’ expectations call for reinventing the have developed more slowly than in other service contact centre as we know it. We’re witnessing lines like telecommunications or utilities. the rise of a wealthy, dynamic, mobile customer identified on their website, to embody a reactive, • Sharing customer knowledge across all touch segment, looking to interact with their main personalised relationship. points The retail banking contact centre has traditionally (and multiple!) banks through remote channels. • Leveraging communications tools (visio, web been considered as a supplementary channel They are increasingly reluctant to enter a branch. Join the dots to improve conferencing, click to call) within a branch-led business. This “alternative” The contact centre is a key differentiator the customer journey • Boosting sales and training for advisors, channel has been positioned to deal with lower for many upcoming pure players (Bforbank, • Simplifying and demystifying procedures (for value-added transactions. Cost constraints, lack Monabanq, Fortuneo, and others). Their focus is So are these models sustainable? Well, managing instance, authentication) of customer records’ availability and relatively on service, reactivity, building trust and loyalty phone numbers, staffing and retention are just • Reviewing portfolio definition and weak advisor training are some of the reasons for through each and every transaction. For retail a few pitfalls behind these recent set-ups. And commissioning to create synergy with the this “second-hand” positioning. A major internal banks leveraging a physical network, the focus based on BearingPoint’s annual Customer Award branches. impediment to value contact centres properly is on giving customers a “choice” of channel and survey3, retail banking customers’ expectations is also the branches’ perception of them: a emphasising personalisation. are more about getting a complete, personalised Put simply, banks have to develop intimacy and potential enemy screening their portfolio and answer fast (“once and done”) than in interacting trust with their customers while promoting the cannibalising their commissions. Providing high-value services, up- and cross- with a single banker. merits of both remote and physical channels. selling product bundles and retaining customers As mobile banking applications and online From an external standpoint, customers have are at the heart of the business model. To that Long-term call handling in retail banking must communities expand, the next challenge historically opted for a personalised relationship end, BNP Paribas now provides their customers enable large-scale operations while allowing will be for banks to integrate new contact with their trustworthy bank advisor. Due to a with the phone and email contacts of their for personalisation and building trust. Several centre capabilities around online community lack of information on how to access the contact advisor. Like Société Générale, they have recently initiatives can support this goal: management, claims handling, and predictive rerouted calls towards local branches. Cortal behavioural customer data mining. Consors offers a dedicated pool of four advisors, 1 Based on BearingPoint’s SP2C annual study involving the 3 BearingPoint’s eighth edition of the Annual Customer main French outsourcers, the banking industry is the third Award Event in partnership with TNS Sofres, assesses CRM outsourcing sector behind telecommunications and utilities best practices of 130 companies in 11 sectors, based on 4,000 (8% of total turnover) 2 Ibid. customer interviews

14 Point of view Point of view 15 Moving to next generation branches

Bank branches fight back enhanced image ATMs to interactive sales screens, the flagship branch concept uses technology to make With the arrival of Automated Teller Machines (ATM), life a little easier for customers. And because they are internet banking, and more recently, mobile banking, open 24/7, customers visiting after hours can access many financial analysts predicted a huge decrease in banking support via live video conferencing. the number of local branches. It was expected that other channels would take the place of the traditional While the creation of these next generation branches bank branch. Many examples support this expectation, is in full swing and results have been positive, there Moving to next such as statistics showing the decline in cashier are actually many different types of branches co- transactions and bank visits, as well as the increasing existing today. use of mobile and internet banking. The growth generation branches of direct and discount banking also demonstrates Some direct banks only need a small kiosk with that certain customer segments no longer need a a few ATMs where people can make deposits. traditional branch and traditional account managers. Internet-only banks are creating places where actual transactions are not even possible; the sole goal is “We see our customers as invited guests to a party, and we are However, we are now witnessing a renaissance relationship building. For example, ING Direct is an of the bank branch, which is best explain by a too online bank, but the bank’s management realised the hosts. It’s our job every day to make every important aspect fast alternative channel ramp-up as well as further the bank needed some physical presence to reassure customer intimacy requirements. Many banks have the public its offering was more than a billboard. of the customer experience a little bit better” – Jeff Bezos invested in their branch network and have upgraded So executives devised the ING café, which looks like their physical presence on the high street. Starbucks; people can go to have coffee, smoothies, use a free wireless connection and learn about ING if One size does not fit all they choose. These “branches” have no transactional ability whatsoever; people still must sign up and do The kind of branch and branch network a bank needs transactions online. depends on which segments they are serving, what products they are offering, where they are located In addition, we can see the rise of specialised, and what competition they are facing. segment-oriented, type of branches (SME, private banking...) which focus their services toward specific For instance, some banks, such as Citibank and BNP customers’ needs. These dedicated branches formats Paribas, are investing heavily in so-called “flagship allow the bank to further develop its customer branches”. With the help of new technologies and relationship. concepts from the retail sector, these new flagship branches are designed to meet both customers’ Branch design and “in-flight” technology also differ, higher expectations in terms of reception, know-how/ not only from one country to another, but also within expertise, aftersales services and a more professional countries themselves. For example, customers in customer relationship. Equipped with everything from more rural areas may prefer to enter the branch and

Point of view 17 see their advisor on a regular basis, whereas in urban bank employees need to be trained across functions areas, customers maybe more likely to leverage and will require advanced skill sets. Waiting space Welcome desk technologies within the branch or from home. Sales representatives will need in-depth training Whatever the branch design, the branch is still a on relationship management and financial advice Self banking Expertise space channel of choice to build customer relationships. “The counselling. Frequent updates on the latest products Branch zoning biggest thing in banking is the relationship, and you and services being offered by the bank will need to can’t do that online”, says Lani Hayward, Executive be quickly and clearly conveyed to customers. The Customer Experience Vice-President of Creative Strategies at Umpqua Bank. objective however is to develop intimacy by assisting “You can make mistake after mistake after mistake, customers with medium-term projects rather than R.F.I.D. Video Conf. and the customer will stay with you if they believe pushing products onto them. you’ll take care of them”. To ensure staff turnover rates stay low, it is key that Automated Interactive The challenge is therefore to create branches that will employers offer flexibility within the workplace, as well tellers screens Branch technologies help build this relationship and encourage employees as training and personal development opportunities. Source: BearingPoint, 2011 to engage with customers. Branch design and technology can only contribute so much to a customer Always put the customer first communication is made either via automated Manage the relationship with your experience. Relationship building requires advanced, cashiers, interactive wall screen advertisements and customers carefully face-to-face customer service. This needs to come from So what exactly does the bank of the future look like? promotions (Citi’s “Interactive Media Wall”) or via the bank employee. virtual branch relationship managers. Much attention It is clear that customers will be using a number Firstly, with every element specified to the highest is given to ensuring that the customer can easily of channels for their banking needs. For the bank The bank workers of the future quality, from technology to flooring, furniture and navigate through all the content (by using touch branch of the future to provide the service and advice lighting, these banks look more like a five star hotel buttons placed outside the window, for example). customers require, it is imperative to invest in a solid To meet the changing needs and interaction than a traditional bank branch. multi-channel strategy. Only then can local branches preferences of their customers, next generation Give the right kind of advice to be as reactive as other digital channels. This last branches will need to evaluate and to change their Secondly, these banks have a different view on how customers point is particularly important, as quick answers and branch workforce strategies. they communicate with customers, how they advise transparency are perceived as two main differentiation their customers and how they manage the customer In today’s complex world, very few branch managers drivers. Branch bank managers will be expected to take a much relationship in general. have total expertise on the bank’s complete offering. bigger lead in marketing and business development. In order to give the customer as much information It’s clear that local bank branches are being This also includes ensuring the bank and bank Effective communication is key as possible, the bank branch of the future focuses on challenged as never before. The economic crisis, employees take an active role in the community as a expanding its advisory role. For example, BNP Paribas as well as the recent growth of other channels and sponsor of all kinds of events and activities. Branches have invested heavily in communication is experimenting in its Paris flagship store a concept non-banking competitors means local branches over the past decade. Whereas it used to be impossible organised around nine “life points” in which the must change and adapt. While other channels must Tasks performed by cashiers will become more complex to reach your bank except by phone, it is now possible customer can freely move from one event to another be leveraged, the branch remains a key channel for and service-orientated, rather than mainly transaction- to email or even text a relationship manager. The bank via interactive screens. Citi is developing a concept building an engaging customer experience. Banks that based. The transition of moving cashiers and sales of the future goes much further. As an example, banks in which local branches customers can easily reach do this most effectively will certainly gain a decisive representatives into multi-functional positions that are experimenting with new enhanced communication online experts all around the world. competitive advantage. require them to act in a financial advisory role goes means with round-the-clock services in their branches. hand in hand with effective training. This means that In some of Citi’s local branches, for instance, customer

18 Point of view Point of view 19 Spotlight on… Technology in branches: improving the customer journey

“The first rule of any technology used in a business ensuring that their best customers receive more is that automation applied to an efficient operation personalised attention. For instance, as soon will magnify the efficiency. The second is that as a card-bearing Premier customer enters the automation applied to an inefficient operation will branch, RFID readers automatically recognise magnify the inefficiency” – Bill Gates them as a priority customer, prompting bank personnel to give them immediate preferential Banks are increasingly experimenting with new treatment. These particular cards also allow organisational ideas and services for customers – bank staff to detect the purpose of the Premier all of which are supported by an extended use of customer’s visit. new technologies. Make it easier for the customer From futuristic and experimental devices to more commonly-used technologies, all could be Technology in local branches is also widely used leveraged in local branches. to ease the customer journey within the local branch. First of all, advanced self-help ATMs Improve the customer experience for their retail networks. Using this new Microsoft Attract the customer into the and recycling machines have been introduced technology, customers could grab digital contents branch in many local branches. These new devices Improving and enhancing the customer on a screen with their hands and could navigate allow people to carry out standard transactions experience might be the most relevant use of to look for information on products and services One of the first purposes of introducing new without having to queue (potentially for a long technology in local branches. Technology is a with simple gestures and touches. technologies in local branches is to attract and time) to see a bank cashier. fantastic way for banks to provide the customer drive the customer inside the local branch. In with tailor-made and interactive advices. In some Surveys have shown that customers are open to order to do so, compelling digital store fronts Access to wi-fi, or other everyday technological local branch concept stores, colossal interactive using technological devices within local branches. advertising a new campaign or providing other devices such as iPads in attractive open spaces touch screens providing product information have Technology can be an efficient way to improve interesting information have been trialed to are also making the customer journey easier and been implemented. They are designed to channel customer satisfaction as well as customer loyalty. increase customer footfall into the branch. Inside more comfortable. In this way, technology is screen information to people’s personal tablets Like loyalty programmes or promotional offers, the branch, new queue management systems supporting the vision of a branch designed like or smartphones. For more complex advice, Visio high-tech local branches in which the customer can be used to efficiently help and give advice a “living space” where customers are offered teleconference systems can be used to reach bank can easily move around and feel “unique” in the to the customer. Experimented by HSBC Premier an environment where they are able to keep on advisors with specific experience and information very middle of a new technological world should in Hong Kong or Yes Bank in India, RFID (Radio working or do whatever they need. for the customer. These advisors may be located be part of the “package” banks are offering. Retail Frequency Identification) in local branches in the branch back office or be miles away in banks which ignore these seismic technological quickly helps staff in the branch to distinguish “expertise pools”. Some retail banks such as shifts do so at their peril. customers between different segments, thus Barclays are also developing surface technology

20 Point of view Point of view 21 Online banking: an essential component of the new banking model

Listen to what the customer wants The competition hots up

The internet revolution and the growing popularity Nowadays, there are two types of online banking of remote interactions mean that customers are in operation: the “pure players” and the “brick and keen to have easy ways to deal with their bank on mortar” (online players from traditional banks). secure channels. They prefer to use direct channels Online banking: an essential that give them 24/7 remote access, and avoid visiting “Pure players” are only present on the internet. They branches for transactions they can manage online. took the risk of starting online banking (usually) without any physical branch. Most pure players component of the new To meet this demand, banks must aim to develop are historically brokers or savings institutions, such their websites and propose attractive offers for as Boursorama and ING Direct. While ING Direct’s customers. Banks need to keep looking for new strategy was to enter the online banking market products/services to automate and adapt into quickly, and at the lowest cost, Boursorama played banking model processes which customers can easily access online. it safer by keeping 14 small branches as a point of contact to reassure customers. Besides brokers Online banking answers banks’ and customers’ and saving institutions, only a few niche players, needs by offering many advantages to both parties: like BforBank, the Credit Agricole online premium “The internet is the first thing that humanity has built that • Comfort: it is much more convenient for customers, banking or Monabanq, the standalone online bank, as they no longer have to visit their branch entered the pure players’ environment. humanity doesn’t understand, the largest experiment in anarchy and waste time in endless queues for simple that we have ever had” – Eric Schmidt transactions they could have done quickly without Pure players started online banking with a “low-cost” help. strategy to attract customers and compete with • Ubiquity: customers can access their bank account traditional banks. However, they still rely on these anywhere as long as they have internet access. traditional players as, at the moment, a customer With online banking, customers can manage their cannot open an account on a pure player’s website account from home, work or abroad, through without their usual bank account details. a few clicks of the mouse. And now, with the emergence of internet on mobiles, customers can The main concern for pure players is to acquire new communicate with their bank online, everywhere. customers. Unfortunately, they face a big problem • Cost: online banking transfers a substantial of trust because they are new to the financial service workload from the branch onto the customer, market. Customers need to trust the bank in which leading to a significant cost reduction for the they invest their money and brand recognition is a bank that benefits to some extent end customers major factor in their choice of institution. through price drop-offs.

Point of view 23 These online services target two kinds of customers: Today’s main challenge of developing online banking Pure Player Brick & MORTAR those who need self-care offerings in parallel with for traditional banks is to mitigate cannibalisation their branches, and those who want to become pure between the branches and the website. The Online • Model: product centric • Model: client centric internet customers, cutting off most contact with objective of online strategies was to decrease costs • Advantage: fair price offering (low cost) banking • Advantage: trust & image • Risk: lack of trust • Risk: cannibalisation with traditional network their branches. by transferring onto the website non-value added transactions that didn’t require mandatory advisor Mix ‘‘n’’ match for the perfect intervention and to focus on other value-added Source: BearingPoint, 2011 combination processes in branches where the advisor would be of major importance. There are two ways of avoiding Also, as pure players are new to the field, they do Traditional banks step into the fray In order to migrate branch customers towards cannibalisation: the first one is to communicate not control all aspects of customer relationship nor online banking for self-care products/services, banks internally with advisors to explain the role of the the levers in order to develop long-term relationship Following the success of pure players, traditional have to identify customers who are open to using internet and its benefits for the customers, and the and loyalty. banks have adopted a defensive approach. They the internet to manage their finances and define second is to motivate them to promote the website had to implement an internet channel to provide incentives to use this channel over visiting a bank by giving them incentives to increase customers’ The first customers for pure players were affluent online services to their customers in addition to branch. Education is also a major key success factor usage of online services. and autonomous. Most affluent customers have their branches, so as not to lose those customers to support customers who need to be reassured very little time during the day to do their bank interested in remote banking. about the security and reliability of online banking, If you reassure customers, you retain transactions. By banking online, they can access or who need to be guided through new processes. them their accounts whenever and wherever they want. Most traditional banks have already invested in their online bank such as Rabobank (RaboDirect), Traditional banks adopted a strategy of almost Online banking is now an essential way of banking. Nevertheless, as margins are low in this low-cost Santander’s (Online banking service), Abbey similar costs between their branches and websites It is a powerful marketing “weapon” in an model, pure players need to generate volume to National (Cahoot), BNP Paribas (Net Agence) and for products. However, to attract customers, some increasingly competitive environment where trust increase their revenues. Therefore, they are trying many others. have offered promotions on products such as BNP and reassurance remain the key factors of success. to target mass-market customers with traditional Net Agence, which offered a 50% discount on their However, as much as a customer can be digital day-to-day products. For example, ING Direct Their main concerns are customer retention and credit card for new online customers during their and connected, branches will continue to give the proposes online loans subscription and Boursorama loyalty. Therefore, they have developed online first year. customer the option to have face-to-face interaction has recently extended their offers with mortgages. banking to respond to their customers’ new in case they need guidance or advice. However, mass-market customers are less profitable behaviours. They have spotted an opportunity However, as margins are under pressure, banks than affluent customers. Pure players, therefore, for “self-care” where the customer takes charge need to innovate in order to attract customers. For need to identify the limit of their low-cost model to of straightforward transactions such as balance example, BNP Paribas pioneered its videoconference define the scope of customers they can integrate. enquiries or payment transfers. solution, allowing a customer to chat and see their advisor through videoconference for an appointment The challenge for pure players will be to succeed in Those online banks, part of known traditional as if they were face-to-face in a branch. BNP Paribas extending their customers’ scope but differentiate bank groups, benefit from a long banking history also bet on social media by proposing to open between segments in terms of the level of advice and expertise in the banking sector. They enjoy accounts through a single tweet via Twitter. Digital they give about new offerings, such as complex customers’ trust in their brand and have a good evolutions have paved the way for many innovation financing or inheritance management. experience of how to build and maintain strong opportunities that banks should exploit in order to customer relationships. always be active and competitive.

24 Point of view Point of view 25 Spotlight on… interested in it as an information and relationship Making social media work channel: for instance, to pick up other customers’ Social media: banks join the party opinions, or interact with the bank. Probably the There are specific difficulties which banks need to most appreciated function of social media by overcome when engaging with social media. “Right now, with social networks and other tools As a new channel of communication, social media customers is the possibility to review and rate Because banks handle sensitive personal data, it on the internet, millions of people have a way to can help banks reach digital natives in a more products and services (including relationship seems difficult to broadly develop transactional say what they’re thinking and have their voice be personalised and dynamic way: for example, via managers). services via social media (although certain initiatives heard” – Mark Zuckerberg Facebook “fan pages” (official ones or specific ones are emerging). For security and confidentiality such as “Barclays Football”), Twitter accounts, All these initiatives tend to increase brand reasons, regulations (case law from 1924) mean Social media is here to stay blogs or YouTube (for ads, short movies, releases) awareness, better understand customers and financial services companies cannot publicly identify and so on. Uses are not only for marketing: Société improve their satisfaction. Even though some an individual who has an account with them, which With the explosion of social media platforms like Générale, for instance, initiated a Twitter account to initiatives might seem trivial, developing a presence makes responding to customer queries via quasi- Facebook, Google+, Twitter, Xing, YouTube and recruit new employees in parallel with LinkedIn. on social media has become essential. public forums such as Twitter a legal minefield. LinkedIn, banks have a new and highly scalable As social media is time consuming and can implicate channel of communication and a powerful Other banks use social media as a way to animate Fine tune your social media strategy many know-hows within the bank, it is essential to relational tool. Social media allows them to target online communities. They can offer exclusive align the organisation: generally, a community most of their customer base, and in particular, the content, organise online contests with prizes, new Prior to any initiatives, retail banks need to select manager coordinates the bank’s presence on social generation of ‘‘digital natives’’ who have grown experiences or games. Some banks like BNP Paribas the right channels and strategy. They have to media and represents online communities within up with technology and feel more comfortable have even opened a dedicated Twitter account for establish a baseline and clear objectives about what the bank. The manager’s hierarchical link depends engaging online than on the phone or the branch. customer service. they want to achieve. Depending on the level of on the maturity of the digital presence in the commitment, several stages can help structure the organisation. A BearingPoint study on social media in 2011 Social media creates a unique opportunity to social media approach. assessed the level of maturity of existing social develop a participative approach, to generate new Opening up communication in an uncontrolled media initiatives undertaken by retail banks in concepts, improve services/processes or products or • Firstly, listen to the voice of customers online environment can appear risky for a bank. But this Europe. Although Northern countries (Nordic, UK, simply listen to customers. For instance, in Denmark, to identify who is talking (influencers, namely approach implies great transparency between the the Netherlands) have a clear lead, most banks Danske IdeBank has launched the “Better Bank” anyone that can have impact on the company), bank, employees and customers, where everyone are still struggling to find their right social media initiative, a Facebook page to improve its mobile where they are talking and what they’re talking can share the same information. In this respect, strategy. Banks are traditionally very conservative banking solution. Similarly, American Express uses about. employee empowerment is critical; not only to in adopting new ways of communication. Contrary an online “Express Lab” to test every new product • Secondly, engage a dialogue with the various be reactive, but also to ensure consistent and to other industries, they also are very apprehensive with some customers before releasing it. communities and then start building your own appropriate communication; this means specific of the operational risks emerging from social media community. training, reviewing internal policy and driving in terms of communication control or compliance. New services can also emerge from social media, • Measure the success of the initiative with specific cultural change, keeping, above all, customer such as peer-to-peer payments, P2P credits, KPIs (number of followers, community sentiment, satisfaction as the top priority. Social media matters personal finance management tools (with budget net promoter index, customer loyalty). comparison with peers) and account aggregation. • Provide customer support by leveraging the online The final challenge for banks will be to integrate Although very few banks have engaged a fully communities to help answer common questions. social media into their multi-channel strategy to dedicated approach, many isolated initiatives have Social media is currently very seldom used as a • Innovate by co-creating new products with ensure customers enjoy a seamless experience. emerged, revealing different potential uses for transactional channel. Althought levers do exist, communities and improve service levels. social media. most studies show that customers are much more

26 Point of view Point of view 27 Money goes mobile: payments on the move

Digital payments, and mobile payments in Entertaining the masses particular, are seen as the next big wave of innovation in personal banking services. Not a The whole music industry has gone digital. day goes by without a news announcement about Xbox and Wii have forever changed the layout of mobile payments. However, banks are not making people’s living rooms. There are more than 340m the biggest headlines in this area, despite being the active social gamers on the internet every month. obvious payment facilitator for most of us. And with smartphone and tablet PCs, many more people are holding a gaming console in our hands. Money goes mobile: Mobile payments have been embraced by some companies, but ones who we normally don’t Companies that address these human needs associate with financial services and making with their products have captured the public’s payments on the move payments. They offer us fantastic products in a imagination and loyalty – just think of Google, digital world. And they have bet their commercial Facebook, Apple, Microsoft and Zynga1. future on the ever-increasing importance of addressing three innate needs of humans: feeling These companies are also leveraging two massive “Life is like riding a bicycle. To keep your balance you must keep empowered, forming meaningful relationships and drivers and trends of mass consumer behaviour: being entertained. social networking and mobility. Never before was moving” – Albert Einstein a digital device so personal as the smartphone (do Knowledge is power people ever even consider lending their iPhone to anyone else?). And never was a device so tightly Being smart the old way required everyone to linked into someone’s social network (a phone = a remember things or write them down. Then came person’s contacts, and all the different islands of along Google and made everyone (look) smart social contacts are all merged into one device). with internet search engines. With the rise of smartphones, people can carry this powerful tool Companies that exploit these human needs and around at all times, making them feel empowered trends are at the forefront of shaping the future of wherever they go. digital and digital payments.

We are social animals Very few – if any – banks are active participants in this virtuous cycle of product development and If the 1990s belonged to Microsoft and the first half consumer engagement. Is this the “Kodak moment” of 2000s to Google, then probably few would argue that Facebook comes out on top for the second half of 2000s, hitting 1bn users in nearly half the time than Google. The success of social networking is 1 Zynga is the leading online and social gaming company with closely linked to the rise of the smartphone; the over 200m regular monthly users first true “personal” computing device.

Point of view 29 For m-commerce via POS, the balance of power, Wallet6 for POS purchases in partnership with the corresponding business model and the share of MasterCard, Citigroup, First Data and Sprint. And profits are not that clear yet. There are successful PayPal is not far away with its push to leverage its Mobile banking PoS payment/NFC examples of this type of commerce without any online payment service via mobile. bank involvement (for example, the Starbucks Loyalty app that gives customers the ability to pay For banks, having lost the app store and probably for their coffee via the Starbucks iPhone app). And about to lose the non-app m-commerce arena, POS there are other entrants into the payment value m-payments is the last hope to get back into the Ticketing (transports, …) Security/Authentication chain wanting to have a share of the profits – for mindset of consumers and top of wallet again. instance, the telco operators. Key success factors for m-payments Two big telco consortia are working on large- Loyalty/Couponing Online payment scale initiatives to develop m-payments for POS Banks that want to play a major role and not just based on Near Field Communication (NFC) chips be the payment settlement engine at the end of in mobile phones. ISIS3 is a joint venture by AT&T, the consumer purchasing and payment value chain Source: BearingPoint, 2011 Verizon and T-Mobile with the aim to establish a need to invest in several key capabilities. new m-payment network in the US. In order to deliver the core payments functionality, ISIS had to 2 for banks ? Have they missed the biggest change in Blackberry ID and so on. This simple payment/ partner with payment networks (Discover, Visa) and 6 http://www.google.com/wallet/ consumer behaviour and competitive landscape for checkout experience is completely owned by credit card issuers (initially Barclaycard US4 with a generation? the app store providers who have pushed the more to follow). They had to provide requirements actual payment mechanism completely into the and standards to phone manufacturers, SIM Why mobile matters background and via auto-pilot (who still remembers manufacturers and trusted service managers, but which of our cards is linked to what app store?!). also ensure compatibility with existing merchant The mobile phone has become a gateway for Clearly, in this world of in-app mobile commerce payment terminals. consumers to use services and purchase physical there is little value added to consumers if banks and virtual goods. It’s a companion for daily were to enter this value chain. Another joint venture was recently announced in digital and real life. So it’s only natural to ask the Europe by Vodafone, Telefonica and T-Mobile5. As question: why are credit cards and bank accounts However, there is a gap in two additional forms of yet, their business model and scope of partner not yet “linked” to this phone? Or are they already of mobile commerce/payment: non-app-related ecosystem is still unclear. linked, and people haven’t realised it? purchases on a mobile and payment in the real world via a mobile device (often referred to as Finally, there are other players like Google, which Whenever someone buys a song, downloads an m-payment via point-of-sale (POS)). For non-app is heading a consortium to develop the Google app, or a chicken in the Farmville game app using purchases on a mobile, the app store providers are their smartphone, they are happily consenting well placed to leverage their payment mechanism to payment via their Apple ID, Google Account, if they apply a different commission model (in-app 3 http://www.paywithisis.com/ it’s 30%). 4 Barclaycard is already in the market with a m-payments service 2 “Kodak moment” is an industry being turned on its head by via its partnership with Orange in the UK advances in technology, customer behaviour or competitive 5 http://www.bloomberg.com/news/2011-06-16/vodafone- entrants to the market telefonica-everything-everywhere-form-payment-venture.html

30 Point of view Point of view 31 Choose your partners carefully same heritage and therefore need to work much harder to attract digital talent and to develop The route to POS m-payments is currently littered organisational models that bring the best forth of with consortia going for a land grab. Success will its digital resources. Successful banks will actively be based on smartly partnering with organisations hire digital evangelists into their organisation in that have captive customer segments or merchant order to create a delivery partner network with groups, have superior technology and have the digital agencies, experienced consultancies and capability to innovate in a changing environment. software development companies. We would include the wider ecosystem beyond the immediate participants in the payment space, including app developers, game designers, video artists, product designers, hardware manufacturers, security specialists and so on.

Don’t run before you can walk

Many banks still struggle to deliver multi-device, multi-platform mobile banking to their customers that includes basic functionality for information, transaction and help. Linking payment formats to mobile devices in a secure way requires a much higher level of sophistication in terms of software security, hardware security, mobile device management and application maintenance. Every function of the bank (marketing, risk, operations, Consider the needs of customers on Make m-payments work for you – and IT) needs to increase its maturity of dealing with the move the customer! mobile channels and technology before it can think of unleashing a mobile payments product across its The success of the digital power players is based Banks need to develop a clear strategy to determine organisation. on their ability to exploit core human needs in the what role they want to play in the digital payments digital world. This is not an area of expertise that is industry (and beyond). And they need to do it Maximise your digital resources typically well developed at banks. We see a major quickly. Moving from online money transfer and gap between the need and the actual investment credit/debit card to payments needs to be managed What makes digital power players like Google, in digital experts (for instance, strategy, customer by the brightest minds in the organisation, with a Facebook, Microsoft and others so effective in experience design, data management & analytics comprehensive strategy that holistically addresses innovating and delivering digital products is the and so on) needed to help banks understand what mobile payments in the wider context of digital fact that they are the digital natives. They were really drives consumer behaviour and needs, payments, mobile payments, mobile couponing, born to be digital from day one. They are also very and how to address those needs with innovative mobile advertising and so on. adept in integrating other products/companies to products and services. plug a gap in their offering. Banks do not have that

32 Point of view Point of view 33 Spotlight on… Mobile banking: time to get ahead

“To be happy in this world, first you need a cell Start thinking like a gamer phone and then you need an airplane. Then you’re truly wireless” – Ted Turner People are great in managing their Farmville dollars, but struggle to manage their credit card bill or Only a few banks “dare” to not invest in mobile current account statement. Designing a meaningful banking. In Europe, 59% of banks have a mobile customer experience in the mobile and social era site and 47% have some sort of mobile banking of today requires a user experience that is playful, app. The vast majority of banks are planning to intuitive and educational. Playful means that it’s have those capabilities within 12 months . Providing fun and rewarding to engage and interact. Intuitive comprehensive m-banking services to customers means that anyone needs to be able to understand is not only an opportunity for servicing, marketing how it works by just trying it (have you ever seen and communication, but also a foundation for any an Apple manual?). And educational means that the seamlessly with all other channels, both digital and Teach everyone to be mobile-savvy more advanced mobile services like m-payments. interactions need to build on each other and make non-digital. Banks cannot afford for customers to There are several key success factors for any new customers smarter, as they use more and more have a better view of their banking relationship than Adding a new channel to a bank is not just a mobile banking initiative. functionality. the banks themselves. This requires a multi-device, marketing initiative. It requires careful planning and multi-platform approach to delivering well thought- preparation for every function in the bank (brand, Think beyond m-banking Keep it smart but simple out m-banking services, instead of the “let’s get an marketing, risk, customer care, collections, fraud, app out before the end of the year” approach. IT and so on) with regards to policies, procedures, The business case for m-banking has typically M-banking services typically provide functionality customer experience planning and customer included an even mix of cost reduction through for information purposes (balance enquiries and Make marketing matter satisfaction tracking. Positioning m-banking as a digital self-service by customers, increased sales transactions), actions (pay bills, transfer money, stepping stone to m-payments requires a new staff through additional customer contacts and an request a credit limit increase), help (search/browse After so many years of not getting any m-banking skill set, new technology, new partnerships and improvement in acquisition and retention through FAQs, use a two way message centre). Banks need to service, customers have probably given up looking new governance processes that go way beyond some kind of “halo” effect on customers who are think about this channel as a wider communication for it or waiting for it. Banks need to be well prepared anything the banks will have gone through with clearly in awe that their bank has joined the 21st and engagement platform, which means they must by building up a list of marketable email addresses, online banking. century. Given that mobile banking will become a include an ad server, location-based offers/coupons, confirmed mobile phone numbers, statistics on generic asset within the next 12 months, banks need loyalty management, customer -to-customer online active/in-active over the last three to six Mobile banking and mobile payments are only to think beyond basic mobile banking and have a interactions and customer feedback management. months, and any dormant segments that might going to become more popular. With contactless deep understanding of their customers’ needs and have a high mobile propensity. Banks also need to payments, for example, gaining ground, it makes expectations in regards to the customer experience, Construct solid platforms define an incentive plan with offerings and referrals sense for banks to get ahead and really make mobile type of m-banking services, delivery channels and in a mobile context. This will require a new level of matter in their business. how it complements their other banking and non- M-banking is another channel that needs to be sophistication for banks in terms of data acquisition, banking needs. deeply embedded in the bank’s ecosystem of data sharing, merchant partnerships and loyalty the single view of the customer and which fits in partnerships.

34 Point of view Point of view 35 Performance management: exceeding short-term financial vision Retail banking has traditionally enjoyed low • Aligning performance indicators and objectives, volatility, a stable margin and long-term resource planning and allocation with the relationships. It’s therefore set its focus on motivation system, (collective and individual) to quantitative and financial dashboards. However, focus the whole organisation and management with the recent financial turmoil, new competitors model towards the same strategy. (mainly pure online and wholesale players) have • In-house benchmarks, such as Top 10 or Worst entered the market with aggressive strategies. 10, can be a good practice and can develop the Performance management: Customers’ changing behaviours have also spirit of challenge between branches. However, compelled banks to review their strategies and indicators must be common and data comparable align dashboards with appropriate KPIs. Managers and steer the whole branch network to reach the exceeding short-term want dashboards to be a genuine decision-support first quartile performance. tool with no more than 20 indicators. • Monitoring performance using variance analysis, that is, breaking down performance by tracking Improve the effectiveness of variations between the forecast and actual effects financial vision quantitative dashboards (such as impact of interest variation, customer mix, number of active customers, NBI variation). Retail banks are struggling to maintain their • Automation and integration within ERP to market share and improve their operating ratios. reduce the lead times and workload of producing “In the business world, the rear-view mirror is always clearer than Therefore, pressure on sales and distribution units dashboards. is still very strong. In a multi-channel environment, the windshield” – Warren Buffett where customers carry out low-value operations Limits of traditional quantitative themselves through self-care, local branches are dashboards expected to re-focus on high-value advisory and sales. According to BearingPoint’s third Finance- Management Monitor on Dashboards (2010-2011), Some recent initiatives to improve the effectiveness current dashboards do not live up to managers’ of quantitative dashboards tend to generalise expectations. Variously, they are not sufficiently within the branch networks. orientated towards action (61% of respondents) or do not provide enough qualitative information • Contribution to the overall profitability can (50%). Also, they should be more forward-looking be measured by unit, product and customer (44%) and have more relevant indicators (44%). relationship (for example, Net Banking Income (NBI) generated per individual = average NBI per Although critical to drive business, quantitative customer x number of customers). and financial KPIs offer mostly ex-post analyses used as warning systems to see if objectives have

Point of view 37 advanced simulations of their staff levels and and be treated manually. These processes can be wage bills (age pyramid, productivity ratios). New time-consuming and confusing, depending on the performance management indicators to monitor added value of human capital frequency of the reporting, and thus, lead to higher are also appearing. They measure the performance costs. Quantitative Performance Qualitative Performance of the administrative processes, quality of • Net Banking Income • Satisfaction (clients, service, social climate (turnover, resignations) or As dimensions of the dashboard exceed the financial • Volume (products...) employees...) • Commercial activity • Commitment to management of skills. sphere, the legitimacy of management controlling (contacts...) advertised service level the collection and production of non-financial • ... • Net Promoter Score Sustainable development issues also need to be information can be an issue. In BearingPoint’s • ... taken into account. Banks are firmly committed study, 72% of general management respondents to reduce the use of natural resources and control regard management controlling as legitimate. Source: BearingPoint, 2011 their dependence on them. In fact, banks are taking Coordination and general governance between groundbreaking measures in this area. These entities is critical. changes must be overseen and their costs and been reached. Financial indicators are, by their very as customer satisfaction, quality of service, brand impact identified. Be flexible to gain the whole picture nature, orientated towards a result, but can be too awareness, HR, sustainable development issues focused on static observation and not sufficiently and so on. Stay SMART to stay ahead Managing performance in retail banking networks geared towards action. However they very often needs to mix both a quantitative and a qualitative hide some very basic levers. Bank managers expect Adopt a qualitative approach Qualitative KPIs need to obey SMART criteria: approach to grasp a complete set of actionable to be able to contextualise performance results Specific, Measurable, Achievable, Responsible and levers by the management. However, the real with market trends, customer perception and Emerging practices should respond to these Time-bound. Even though some indicators may challenge and expected value added resides in satisfaction and employee motivation. complementary needs. be based on estimates or do not have definite or the reconciliation between those different KPIs, certified sources, they must above all remain the relevant analysis from all those data and the Moreover, quantitative-driven performance Qualitative information is essential, in addition consistent and reliable. This consistency can be capacity to identify appropriate action plans and measures for sales and distribution units are to the raw figures. Analyses such as internal and hard to achieve for a net promoter index or for a follow-ups. mostly focused on short-term targets and can external benchmarks and macroeconomic trends global employee motivation score. The assessment have a negative impact on long-term strategy if are regularly requested by management boards. of its reliability should be defined beforehand. not counterbalanced. The constant pressure to Four fifth (80%) of respondents of the BearingPoint deliver quantifiable results (such as the number of study think qualitative comments are the best way A mixed bottom-up / top-down approach is premium credit cards sold, or volume of loan estate of understanding the results of indicators. legitimate for some qualitative KPI such as credits…) can adversely influence a bank advisor to “customer satisfaction”. Employee empowerment recommend unsuitable products for the customer, To drive a long-term strategy, retail banks need is critical to ensure a general mobilisation of the in order purely to meet targets. to focus on quality of service and customer organisation towards these strategic objectives. satisfaction. These new performance indicators can Finally, as a performance dashboard is designed help ensure there is coherence between delivered The rationalisation and automation of those to help bank managers drive their strategy and performance and perceived quality. qualitative KPIs can become a real challenge. follow up their objectives, it can’t simply focus As reporting and dashboards are always more only on financial information but must also take HR indicators can also help humanise performance integrated into the information systems for into account other structuring dimensions such monitoring. Some banks today use indicators and automatic generation, the results of a satisfaction survey, for instance, may still not be integrated

38 Point of view Point of view 39 Spotlight on… • Systematically measuring customers’ Much can be done to improve the quality of satisfaction for each service using a simple service throughout the whole bank. Reacting Satisfaction: how to ensure customers keep survey is also a good tool to measure general quickly and effectively towards major “satisfaction” and identify specific areas for dissatisfaction issues is probably one of the most coming back improvement. efficient approaches.

“The single most important thing to remember customer base in terms of its main activities, its Satisfaction levels can be identified with more Furthermore, implementing a rigorous approach about any enterprise is that there are no results reliability or reactivity in case of an incident, and “raw” input such as regular focus groups, ad towards quality of service can help measure not inside its walls. The result of a business is a then to follow up globally if those commitments hoc customer surveys, external “surveys”, or only the cost of non-quality (claim management, satisfied customer” – Peter Drucker have been fulfilled on a local level. Step two even claim management. The challenge lies in processes inefficiency, customer attrition) but should be to refine the bank’s commitments synthetising the information into a few indicators also pockets of over-quality, such as for services Customer satisfaction is not only a major loyalty based on its customers’ expectations. Major and using these to improve processes. which don’t directly affect customers and which issue but can also snatch a few more market dissatisfaction might emerge from a gap between might be more effective being directed to a more share points through brand image and customer perceived quality and delivered quality. For instance, ISO 9001-certified banks are customer-facing project. advocacy. expected to put in place a “continuous” quality To be able to define an action plan when of service customer survey. In reality, very few Using social media within the bank can be a Recent initiatives such as French LCL’s campaign dissatisfaction is growing, bank leaders can’t just banks have implemented this. real catalyst for this approach. For instance, of a 48-hour promise for a real estate loan or rely on buzzes coming from their retail network, in France, when Credit Agricole Pyrennées general banks’ communication shifts towards or worse from social media or traditional Get customer service right – the rest Gascogne started a social media experience, greater proximity and advice for customers reveal media. This very “qualitative” data should be will follow 95% of feedback was negative. However, under a better awareness of customer expectations. rationalised, measured and integrated into the CEO, each complaint received a reply and reporting systems. • Integrate the quality of customer service into the bank endeavoured to improve these very Traditional reporting has its limits the bank’s core strategy: defining ambitious specific points within the year. By the end of the Consider customers’ behaviour objectives for service quality within the year, most detractors had became very active Most leaders acknowledge the difficulty in carefully organisation are critical to initiate positive advocates. predicting their customers’ behaviour. Although change. compulsory, operational reporting which follows Some general indicators can help to measure • Drive cultural change with employees to make The biggest challenge for retail banks might be commercial activity, Net Banking Income customer satisfaction if they are combined with customer satisfaction a priority in everyday to reconcile operational performance reporting (NBI), and credit outstanding reveal only the a renewed communication approach: service. Empowering and incentivising with customer satisfaction reporting, and draw results from the last period. Any downturn in • The Net Promoter Index, extracted from employees to improve customer satisfaction an appropriate action plan for the short and long customer activity can’t always be explained by traditional customer surveys, can be a unique at POS level can be easily and effectively term. Strengthening proximity with customers the wider economic situation, and very often, and simple indicator to reflect not only measured. and improving customer relationships and when noticing customers in debit positions, it is customer satisfaction but also brand advocacy. • Measure quality of service with a systematic service should remain key success factors. too late to catch up. A major issue is to adopt a A standardised satisfaction scale and results approach for each “service delivered” (credit, proactive approach on claims / incidents. reliability are critical to make this index appointment, credit card use, mobile services relevant. and so on). The first step in terms of operational reporting • Facebook fans and Twitter followers can also should be to define a bank’s commitments to its reflect brand awareness.

40 Point of view Point of view 41 Contributors Contacts

Publication directors: Philippe Auther Werner Kreutzmann Philippe Auther, Werner Kreutzmann Partner, France Partner, Germany +33 (0)6 18 46 15 15 +49 172 67 67 315 Chief editor: [email protected] [email protected] Thomas Maître

We are particularly grateful to all those who have brought this work from project to reality. Special thanks go to: Johan Bergström Jonathan Charley Philippe Auther, Robert Bosch, Jonathan Charley, Charles de Monchy, Marielle Fernaine, Ronald Frey, Nordics Partner, United Kingdom Jaouad Jbilou, Werner Kreutzmann, Thierry Lalande, Emilie Lefèvre, Muriel Legendre-Monteiro, Laurent +46 733 21 16 95 +44 7854 352 643 Lopez, Thomas Maître, Matthias Mann, Aïcha Mansouri, Jocelyn Micoulet, Andreas Rindler, Annabelle Servy, [email protected] [email protected] Gaurav Sharma, Etienne Soumoy, Eveline Stam, Stéphane Tapu, Michaël Tartar, Angélique Tourneux Charles de Monchy Ronald Frey Partner, Netherlands Partner, Switzerland +31 6 41 26 94 70 +41 79 620 5218 [email protected] [email protected]

Gabriele Hoehler Klaus Kalthoff Partner, Germany Austria +49 172 67 67 856 +49 173 29 62 773 [email protected] [email protected]

Martin McKenna Giovanni Zucchelli Partner, Ireland Director, Russia +353 861 79 11 88 +7 916 640 4993 [email protected] [email protected]

42 Point of view Point of view 43 We are where you are Argentina* Australia Austria Belgium Brazil* Canada* Chile* China* Denmark Finland France Germany Ireland Italy* Japan* Korea* Malaysia* Morocco Netherlands New Zealand Norway Portugal* Romania Russia Singapore* Spain* Sweden Switzerland Taiwan* Thailand* United Kingdom United States* & Emerging Markets in Africa

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