Innovation in Multi-Channel Management

John Kirkbright

Chief Executive K-Strat International

Senior Retail Banking Adviser to EFMA

Chairman EFMA Banking Advisory Council

Moscow March 2010

Background to EFMA

Banking Advisory Council

EFMA Banking Advisory Council established in 2005 with the support of Microsoft

Senior Executives from leading European Banks meeting 4 times a year to discuss trends and create a blueprint for future financial services delivery

Members include ABN Amro, BNP Paribas Unicredit, Lloydstsb, Caja Madrid, Citibank, Nordea, Fortis, Rabobank, Bankinter, Erste Bank etc

First report on the Future of Multi-channel Delivery published in 2006

2009- Survival 2010 - Rebuild

2009 has seen the unprecedented demise

of many well known banks either through

takeover , state aid or bankruptcy.

“ 85% of the banks who have failed are

either focused on one product or one

geography”

2010 – a year to rebuild customer trust and

confidence and establish a new banking

model to suit the new economic

environment

Key Channel Facts

Most banks sell 80-90% of their products

through branches

Most banks want to increase the % of sales

through remote channels from 8-10% to

20-30%

Finalta estimate that online banking

activity will increase by 30-50% in the

next 5-10 years

5

SALES BY CHANNEL

Across Europe, the branch is the dominant sales channel today –

by volume and value

What percentage of your product sales (by volume) are carried out through the

following channels in 2007?

Source: Finalta / EFMA Multichannel study 2007

Branches

Telephony

Internet

Other

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fra BEN IB Italy GAS CE UKI SEE EE Nord Average

% of products

sold through

each channel

79%

7%

6%

8%

Region

Innovation in Multi-Channel

Conclusions of the 2009 Report

Innovation in multi-channel is an essential ingredient of success but progress is slow and needs to be accelerated

Banks are still too reliant for sales on branches and need to significantly increase sales through non branch channels

Providing a truly integrated customer experience is becoming a major strategic priority for many banks

Banks need to move towards streamlined processes with an emphasis on major cost reduction

Customers have lost considerable trust and confidence in their banks – rebuilding it will be a priority

The rewards for success in the multi-channel area are immense – real winners and losers will emerge sooner rather than later

What bankers say about Multichannel

“We have not yet created an „Amazon‟ buying experience in

financial services

“Having the right people for each channel is key.”

“We will lose 5-10% of our clients if we do not make products easily available through other channels”

“Perhaps the best buying experience for

the customer is directly related to the investment made in a

channel”

What keeps Senior Banking Executives

awake at night

Compliance and regulation

How to radically reduce costs

Making staff redundant

Creating a truly integrated overall customer

experience

Increasing the sales efficiency of all channels

Recruiting and training the bank staff of the

future

Communicating with customers more effectively.

Bankers priority investment plans

Anything that is essential to make them compliant and

meet regulatory needs to keep their “banking licences”

Anything that reduces cost without significantly harming

customer service

CRM that assists retaining most profitable customers

Channel migration support that reduces cost to serve

Investments in the on line buying experience

Channel integration interconnectivity that has quick

payback on investment

Key buzz words for 2010 Bankers

Reducing the cost to serve

Accelerating the “tipping point” to getting customers to using other channels

Developing needs based selling techniques branches?

Improving the customer experience

Having a two way dialogue with customers

Collecting and using customer insights

Understanding the customer journey – customer mapping

Developing end to end processes

Bankers Priority Check List

Compliance and Regulation

Reduce costs

Find new sources of income – non interest fee income

Retain profitable customers

Sell more products through on line channels

Migrate customers to less expensive channels

Building the right people skills for each channel

Understand customer needs better

Match products to customer needs – needs based selling

Trust and Confidence in Banking

“The bank becomes more trustworthy when the channel is perceived to be so”

“Building trust in buying through on line channels will be very challenging in the current environment”

“Trust is the number one priority :so that customers feel they are getting the best advice”

“You are less likely to trust on line services if you do not trust the bank already”

ABN Amro Teleportal Branch

ABN Amro Teleportal Branch

ABN Amro Teleportal Branch

Rabobank

Use of LCD interactive technology in new look branch

Deutsche Bank

Relaxed open

style format

Deutsche Bank

A relaxed “department store feel and look”

Deutsche Bank

Deutsche Bank

Unicredit

Segmented micro-market branch formats

BNP Paribas

Automated branches with high self-service

Chebanca

Chebanca – Cheek to Cheek Banking

Chebanca branch interior

• Welcoming Customers

• Educating on Capitalia

Delta2 services and

opportunities

• Facilitating access to

banking products and

services

• Handling of

appointments with

external professionals

• Queue management

Role & Responsibilities

CAPITALIA DELTA 2 - The Concierge

Channel Innovation Examples

A webdesk, a television channel and blogging

Pre-paid phone cards through ATMs and all paper output being made available online

Online banking with enrolment – customers with ATM or credit card can access on line banking without using a branch

Mobile SMS for fraud prevention, mobile portal, pre approved consumer loans, electronic identity cards

Innovation is the key...

• MobileLoan

• WebLoan

• smsLoan

• ATMLoan

• Loan Machine

• Business Partners

• Specialized

Branches

“Loan Machine”: Credit origination in 7 steps, without going to branch

Gets personal

information

Takes the signature

Takes a photo

of the customer

Sends credit

response via SMS

Hands over the

consumer loan card

Prints out the

credit agreement

Scans the ID

card

ROYAL BANK OF SCOTLAND

Remote Mortgage Sales and Fulfilment

Creating the Smarter Knowledge Bank

Bankinter - Videocall

•Access to a bank relationship manager - but without the need to physically visit the branch

•The convenience of telephone banking -but with the option of sharing written information

•Efficient „to-the-point‟ communication as with Internet banking

- but with the ability to ask questions and interact with bank staff in real time

Banco Best Web 2.0 approach

Banco Best – New Virtual Branch

Branch Transformation Programmes

Automation

Branch formats

Sales efficiency

Sales platform

Interconnectivity with other channels

Branch closures

Branch closures

Still a very sensitive but critical issue for all European banks

Some large European banks may have to close 20%-30% of their branch networks

“Having the right branch format and location for the branch will be absolutely essential.”

Providing acceptable alternatives to the branch

Selling through non-branch channels

“We now have more online than branch customers, but most of our sales are still through our branches.”

“The online customer experience at most banks is still very poor -a lot can still be done to improve the buying experience through non-branch channels.”

“Our biggest challenge is to be able to ensure bigger sales through our non-branch channels.”

“The cost of sales is likely to go up – not down – so it will become increasingly important to drive sales through cheaper direct channels.”

European Regional Differences

Turkey – very young population, innovative product environment

Austria – ageing population – more focus on branch

Scandinavia – pioneers of on line banking – now need to develop step change in on line buying experience

Spain- very intensive branch coverage may be under pressure to change

Customer Relationship model

Key challenges:

Customers are more in control

Customers have access to a far wider range of channels and information sources

What combination of face to face and remote?

How much self –help?

Pricing to reflect the level of customer relationship management provided

Bankers worst dreams

Replacing lost sources of revenue – developing non-interest fee incomethart

the regulators find acceptable

Ethical banking – using customer information in an ethically responsible

manner

Managing large levels of branch closures

Displacing large numbers of branch staff

Retaining your best staff

Takeover or state bail-out

Key issues for Bankers in 2010

Find ways of reducing distribution costs and the cost to serve without impacting service levels negatively

Improving the retrieval and use of customer insights and customer knowledge

Rebuilding customer trust and confidence

Developing two-way communication channels with customers

Accelerate the “ tipping point” to get customers to use and buy through on-line channels

Essential to equip all distribution channel teams with the right knowledge and support tools

Conclusions – Council member quotes

“We have to do something to radically reduce costs.”

“Its a matter of offering the same service and capabilities across all channels worldwide”

“There will only be two types of bank in the future: those

with a reasonable service and those with an excellent service”

Conclusions – Council member quotes

“We need to offer as many end-to-end processes as we can to make the overall customer buying experience easier”

“There is no substitute for knowing what the customer knows about what he needs. So we have to give them the opportunity to tell us.”

Ideal Scenario – Customer perspective

Start a transaction in one channel, continue in another and finish in another

Receive timely informative communications from the bank

Be able to use the bank‟s channels as and when I want to use them

Have the bank channel identify me on entry and treat me as an individual to understand my needs

Have one phone number and one person to speak to regarding complaints or problems

Deal face-to-face with the bank on more complex products.

The Customer Acid Tests

Pricing – do they reward my loyalty?

Flexibility and Commitment – do they love my dog?

Buying – How easy is it? Do I have to go in a branch?

Service – how convenient is it for me to use them?

Interconnectivity of Channels – the 9.00am teller test

Communication – how can I contact them

Brand – do they deliver their brand promises?

Do they love my dog?

Do they love my dog?

Keep It Simple

Simplicity and speed to organise

ICICI Bank India – Fastest growing bank in the world have

30 million customers and aim to reach 70 million in 5 years –

“If it can’t be done in 90 days don’t do it”

Speed, agility and simplicity aids customer focus and flexibility

Customer Insights and Intelligence

perspectives

“Bankers need to focus on the human element and how we interact with customers as this is what will make the real difference”

“We need to get the right information from the client and increase ways of getting our clients interest”

“We need to ask customers which channels they want to be contacted on and use every contact we can”

The Future – Bank Executive Quotes

“The challenge is how to provide advice at the right cost level. How can technology help a branch network provide a high

quality customer advisory service?”

“Branches are our best point of sale but in the future we need to focus more on our people and on segmentation and

personalisation. We also need to know how other channels can push branch sales. This is where future potential lies.”

“The majority of our branches in future will focus on selling no more than four

core products which we believe will meet the majority

of our customers‟ needs.”

Key Challenges for Banks in 2010

Decide which type of operating model to focus on – distribution, cost or product led

Get the right mix of distribution channels

Develop an integrated customer experience

Obtain and develop the right people skills and provide staff with the support to give excellent service and advice

Ensure processing excellence

Get the right balance between sales and service

Balance short and long term needs but remain truly customer centric

Future Focus

“Getting channel management right is critical to

our future – the price for getting it wrong is we will

not survive”

“Recent events are a wake-up call to banks

to rebuild customer trust and relationships”