Presentation synopsis of enclosed talk given by Clive Woodger, Chairman of SCG London at Retail Business Summit organised by BBCG in Moscow, September 2012.

Retail Banking – Anywhere … Anytime?

The following presentation was given at the BBCG Retail Summit Moscow on 14 September. The aim was to provide an overview of current retail banking trends and issues and what that means for branch design strategy and design.

1. The Title of the Presentation – Anywhere … Anytime? is a reminder of what customers worldwide would like and in many cases are already enjoying.

2. The Agenda indicates the overview approach in covering global trends and challenges with some international examples of latest concepts and a recent Russian example completed by SCG London, Moscommertsbank. A reference to latest digital challenges and app design is followed by a comment on the importance of developing a positive staff culture. This is ultimately the best differentiation a service brand can achieve and an example of our work for HSBC on their worldwide offices environments is included.

3. SCG Clients SCG London works extensively in the retail sector and some international and Russian clients indicated. This gives us a particular in sight into creating the customer friendly environments that banks are trying to achieve.

4. SCG Clients Some financial sector clients of SCG London are represented.

5. Global Picture The reputation and image of banks is at all time low in many countries. The investment ‘casino’ banks are seen to be the cause of the worldwide financial crisis and their retail arms are now viewed as the key to changing their image and long term business success. The internet is fundamentally changing the way customers interact with their bank and the different functions a physical bank branch should now provide.However, the internet has not changed the growth of branches in many countries. While rationalising locations and bank formats the need for branches is still recognised.

6. Retail Banking Challenges. Bank margins are under pressure with a drop in incomes, low interest rates, rising costs of locations, people and computer systems. Banks with internal different computer systems face technology issues and those like Santander with a common platform across ten countries can leverage their advantage. Apps create three times the number of engagements between the customer and bank. Stiffer legislation, demands for greater capital reserves and slashed fees are forcing market consolidation. The UK has a problem in changing the historical principle of free banking and now the banks needing to charge for every possible activity or default.

7&8. Retail Banking Challenges – Who Needs Banks? Customer can now find other ways to pay bills and access money – note Paypal’s 100 million customers, Zopa, Wonga, Yandex offer alternatives.

9. Customer Needs and Inspirations. The primary need of bank customers is the assurance their money and interests will be looked after. There is a strong psychological comfort in a physical bank. It is where you feel your money is kept and protected. Recapturing the old idea of your local bank as a place to socialise and interact with staff who know you is a tough challenge but achieving that sense of connection is an important emotional and rational factor in how you feel about your bank. The function of branches is changing to focus on customer relations less transactions which can be automated. Their physical design and presence makes them highly efficient billboards despite the expense. Smart banking that meets the 24/7 anywhere requirements is now increasing customer interactions and meeting the needs of a generation brought up with computers and mobiles. Retailers, travel companies, hotels, theatres the tax man have now ‘trained’ their customers to organise, book and pay online. Self-service like the retail sector puts the customer in more control and releases staff to focus on customer needs.

10. Customer Experience – Touchpoints The interconnected touchpoints with a bank through human, branch and digital contacts and interactions should ideally be aligned effectively to achieve the desired customer perception. However, each of those experiences can enhance or ruin the relationship. Call centres remote from the branch and customer country can be seen as a barrier and not a service. The branch design and layout should encourage friendly and relaxed staff and customer interaction. Ultimately the experience whether in the branch, on the mobile or on the website needs to meet the criteria listed – was it personal and service orientated? was it a convenient and efficient process? did it give you a sense this was good value in terms of experience and cost? and could be it seen as a pleasure? These criteria will create the differentiation with the competitors. Sadly dealing with banks is still seen as a distress purchase, a necessary evil!

11. Branch Design – Reinvention Branches now need to meet changing functions given the internet, mobiles and ATMs have removed the need for typical transactional activities. Some banks deliberately do not talk about having branches preferring to see them as ‘stores’ and service destinations. The concept of ‘coffee and iPads’ is the new thinking for progressive bank venues. With less transactions, the aim is to develop more personal contact and services which can lead to more income from customers

12&13. Branch Design – Smart Banking Citibank Images from Citibank branches in Malaysia, Japan, Hong Kong and New York show the ‘Apple store’ approach to creating a contemporary high tech, customer centre experience and environment.

14. Brand Design – BNP Paribas Flagship ‘Concept Store’ The images of this business club/hotel reception concept appear to have taken the view that the customer wants an exclusive VIP experi ence that from the Bank’s viewpoint will encourage strong business relationships.

15. Branch Design ING Direct Café An extreme version of a coffee and iPads experience – a café in San Francisco just providing advice.

16. Branch Design – Metro Bank London As a new bank purely focused on London this bank is determined to be a retailer in the way it talks to customers. Metro Bank staff recruitment policy is to deliberately identify people from the leisure and retail sectors – not banking!

17. Retailers Becoming Banks – Tesco, Sainsbury’s, Coop Tesco and Sainsbury as major UK retailers have provided banking services using their customer database advantages. It is about trust ultimately and such retailers can leverage their knowledge of their customers needs and profiles to offer the appropriate services. The Coop has just acquired 600 banks from Lloyds Bank in the UK and can use their ethical credibility to further develop their banking services.

18. Retailers Becoming Banks – Magazine Luiza This Brazilian electronics retailer uses its 600 shops as a customer service point for small loans as well as encouraging frequent customer contact.

19. Branch Design – Bankinter This technology-led Spanish bank has a very contemporary branch image. Their virtual kids bank is a great way of encouraging the next generation of customers to think of their bank as a part of their life.

20. Bradesco, Brazil – Touchpoints The ATMs of this bank are technically advanced to react to a customers touch but they also have a floating branch service on the Amazon!

21. Digital Banking The migration of bank services to mobile and internet from the branch is a major factor in rethinking the functions of a branch and the people and services that need to be provided.

22. Digital Banking – App Appeal This review of some banking apps is an interesting reminder of how to optimise your brand image on a small screen. As a key touch point for many, the mobile interface becomes increasingly important component in contributing to the customer’s perception of the bank.

23. Russian Overview Russian still has too many banks – 978 as of January 2012 and the new requirements for increased capital reserves will see further rationalising and together with the challenges that mergers and acquisitions create in maintaining customer and staff loyalty. The Russian market still has a very low card and internet usage as the charts indicate - 45% not owning a credit card and 87% not using online banking.

24&25. Brand and Branch Development – Moscommertsbank We developed new branch concepts which reflected the new positioning incorporating contemporary customer services and a positive friendly environment. Modular branch concepts that could be flexibly implemented to create effective zones and intuitive customer circulation have been created to allow for different location, size, market and building criteria.

26&27. VIP Banks – Russian Standard ‘Imperia’ – Premium Retail Having worked with Russian Standard developing their branch and communications SCG London were asked to develop their VIP Imperia bank. Like the premium vodka profile this was to create an exclusive club experience. Every touchpoint such as the literature, reception experience lounge areas had to be of the highest standard to ensure the consistent perception of high quality.

28. Ocean Bank – Delivering the Promise? We developed the brand identity and internet communication for this digital bank, a first in Russia five years ago. The aim was to create a relaxing image using the name as the theming to get away from traditional bank imagery. Unfortunately judging by the negative internet comments about their service they have not been delivering the promise of a better customer experience! The importance of ensuring a website experience and process lives up to every claim made by a service brand such as a bank is critical.

29. Retail Bank Marketing – Differentiation Challenge Banks typically have very similar values … trust … honesty … etc. The best is ‘doing what you say you do’ and being ready to say sorry personally for example. Banks are traditionally poor at addressing customer complaints but a real differentiator is the personal experience of the customer and bank staff. Do your people make the difference? If not what can you do about it?

30. Technology Challenges – Knowing Your Customer The cartoon shows a classic issue – the computer saying one thing ignoring the customer reality. The challenge is crunching data and translating information into usable support and help for staff dealing directly with customers. This is the future of the effective customer service. Amazon and Tesco lead the way in using their personal knowledge of their customer to best advantage for both the customer and retailer. There is a balancing act, however, between helping customers and the danger of privacy intrusion. Do you really want your bank to advise you cannot really afford the next purchase?

31. Bank Staff Culture Corporations have increasingly recognised the benefit of inspired, engaged and motivated staff. Our work with HSBC was to create workplace environments across their 78000 offices worldwide which reflected the Banks values and attributes. They understand different cultures and mindsets needed to have different solutions but with a common approach that reflected the Bank’s ethos. Some examples of the work are included. The key point is the importance of addressing back-of-house issues as well as customer facing communication and environments. Ideally every brand strategy should reflect this holistic approach – satisfying target consumers and attracting and retaining the best people – your inner customers.

This presentation has touched on a range of issues from strategy to design when addressing the development of successful financial brands. I hope this will encourage all parties to see brand development as a top management challenge as it ideally requires all departments to work ef-fectively together to understand their role in contributing to a successful positive experience for their target external and internal audiences.

Clive WoodgerSeptember 2012

Retail BankingAnywhere ... Any time?

Agenda

Retail banking

• Global picture• Challenges• Competion• Customer needs/ experience• Branch design - renventions, trends• Digital• Culture

SCG London Clients include - Retail

SCG Clients - Financial

• ReputationandImage Postcrisisthecredibilityofbanksisstillatanalltimelow -‘casino’investmentbankperception...highreturns/bigrisks -retailbankingseenaskeydrivertoregaincustomertrustandrevenue

• TheInternet Banksadaptingtochangewithtechnology-enabledcustomerschanging branch functions

• Branches Stillmorebanksonmainstreetsgloballythan10yearsago US+22%since2000 Europesteadyincrease-Spainhastoomany43,000!

Global Picture

Profitability-marginssqueezed-incomedrop,lowinterestrates -banksneedtoreducecostsandrestoreprofit -branchesareexpensive-location,manningstaffrepresent 40-60%operatingcosts,therestiscomputersystems

Technology -encouragingcustomerstoincreaseonlineactivitycreates moretransactions -appscreate3timesmore‘engagements’/interactions -needforsamesystemplatformseverywhere-Santander hasthesamein10countries

Legislation -tightercontrol/regulations - slashed fees -banksmustholdmorecapital

BigEuropeanbankslosemoneyon50%ofcustomeraccounts ‘FreeBanking’=opaquechargesinUK

RetailBankingChallenges

RetailBankingChallenges-Competition- Who needs banks?

PayPal-‘theworldsbiggestbank’100millionaccountholders

...

Otherplayers...

RetailBankingChallenges-Competition- Who needs banks?

Yandex Money

CustomerNeedsandAspirations-Newmindsets/behaviours?

Assurance moneyisspecial -trustinabankwithoutphysicalpresence? -locationperception-whereyouthinkyourmoneyis...beinglookedafter -abranchnearby... -interactingwithhumans... Banksarestillexpandingbranchnetworks-‘branchesexpensivebuthighlyeffiicientbillboards’

‘Smart’Banking -anywhere,anytime24/7‘technologysavvy’

appsinUSenablingcustomerstophotochequestodeposit

Self Service Culture -ATM’sacceptednorm -‘Onlinecomfort’-peopleofallgenerationsdoingmorecomplicatedthings online-taxreturns,airlinetickets...

PayPal-‘theworldsbiggestbank’100millionaccountholders

CustomerExperience-Touchpoints

BranchFacetofaceHumanPhone-ATMVideo-Callcentre-website-Counter-app-Interview

Social..pitstopVIPclub

DifferentiationCriteria‘personal’‘service’‘convenience’ ‘effeciency’‘value’‘pleasure?’

Touchpoints...consistent...coordinated...satisfying

Differentiation Criteria‘personal’‘service’‘convenience’ ‘efficiency’‘value’‘pleasure?’

-ATM- Counter-Interview

Social..pitstop

- Call centre

- Website-app...

Phone

Phone

Face to Face...

Video

Branch Digital

Human

VIPClub

...consistent...coordinated...satisfying

BranchDesign-‘Reinvention’

moreproximitymoreinteractionsmorepersonalcontact

lesstransactionsmoreservices

Changing-Functions...Staffactivities...Image

Banksbecome‘smart’...retailers...cafes...clubs...lounges

Nomore‘branches’...‘coffeeandiPads’

JapanKualaLumpur,Malaysia

UnionSquare,NewYork UnionSquare,NewYork

BranchDesign-‘SmartBanking’...‘AppleStore’ citibank

citibankBranchDesign-‘SmartBanking’...‘AppleStore’

JapanJapan

MongKok,HongKong UnionSquare,NewYork

BNPParibas’sflagshipconceptstore

BranchDesign- Lounge...club...meetingplace

INGDirectCafé BranchDesign- Cafe!notransactions...justadvice

Metro BankLondon

BranchDesign-RetailerEthos

Retailersbecomingbanks- UK-Tesco,Sainsbury’s,TheCo-operative

electronics retailer600shops-fastgrowingproviderofsmallloans

Retailersbecomingbanks-MagazineLuiza-Brazil

virtual kids bank

BranchDesign-TechnologyledBankinter-fifthlargestSpanishbank

Sophisticated ATM service banking

... floating branch...

Bradesco-BrazilTouchpoints

DigitalBanking...AppappealMigrationofbranchtomobileandinternet

Russian Standard Bank | Russian Standard Bank | Initial concepts

RSB Online RSB Online RSB OnlineRSB Online

RSB Online

RSB Online

RSB Online RSB Online RSB Online RSB Online

DigitalBanking...AppappealTouchpointdesignchallenge

Russian Standard Bank | Benchmarking

Overview of existing digital banking app identities Effective icon design: What works and why...

1 Simple, bold, iconic

2 High contrast

3 Effective use of bright background colour to lift icon

4 Effective use of dark background to highlight logo

5 Simplified logo with recognisable connection to main brand identity

6 “Bucking the trend” - using flat, non-reflective icon to create differentiation

7 “Bucking the trend” - using abstract fragmented contrasting colour to create differentiation

1

2

3

4

5

6

7

RussianOverview

Marketconsolidation-978January2012Reducing number of banks - 158 banks lost in the last 5 years

Low card usage

Low Internet usage

Branddevelopment-frombusinesstouniversalMoscommertsbank:Moscow

Branchdesign-frombusinesstouniversalMoscommertsbank:Moscow

VIPBanks-RussianStandard‘Imperia’-‘Premium’Retail

VIPBanks-RussianStandard‘Imperia’-‘Premium’Retail

DigitalBanking-FirstinRussia-deliveringthepromise?

RetailBankMarketing-DifferentiationChallenge

GenericValues...Trust...Stability...Service...CustomerCentric...Honesty...Convenience...

Similaroffers andproducts!

Sowhatreallymakesyoufirstchoice?

customerexperience-bankbehaviour

Doyourpeoplemakethedifference?

TechnologyChallenge-crunchingdata...knowingyourcustomer

•Highcostoffightingcardfraud

•Datahelpstosellproductstocustomers

•Leveragingspendingpatterns (eg.Tesco,Amazon)

•Balancingact- helpingcustomersv.privacyintrusion

BankStaffCulture-inspire,engage,motivate— HSBCworkplacesworldwide— 87countries78,000offices

BankStaffCulture-inspire,engage,motivate— HSBCworkplacesworldwide

BankStaffCulture-inspire,engage,motivate— HSBCworkplacesworldwide

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