IBM – Bank branch transformation: The new multi-channel reality

By: Patrick Brazel, CEO Eontec Limited and Mark Greene, General Manager, Global Banking Industry, IBM Corporation

“… the emergence of branch renewal within a broader integrated multi-channel delivery infrastructure for retail banking continues to be one of the most significant trends today.” — Retail Banking Fact Sheet 2002, 2002, The TowerGroup

Representing and protecting the brand of an organization, providing a physical presence and serving the full range of customer needs, the branch network has always been the heart of a bank’s franchise and revenue generating potential.

Yet not all that long ago, many analysts and industry commentators were convinced that the bank branch was going the way of the dinosaur. And who could blame them? The evidence was clear for all to see. A combination of increased competition, especially from non-banks with trusted proven brands combined with tougher economic conditions, and industry consolidation meant that achieving rapid cost savings was right at the top of the management agenda. The result was that some banks started closing branches, sometimes in great numbers and often with what seemed, at least to many of the banks’ customers, with undue haste.

Similarly, rapid changes to demographic and commuting patterns left increasingly time-poor customers looking for alternatives to having to visit their local branch. Advances in self-service banking, particularly by phone, through ATMs and over the Internet, seemed just what the customer needed and appeared to make branches totally redundant.

However, the bursting of the Internet bubble mirrored a marked transformation in the way banks now view their branch networks. As more and more customers access banking products and services through multiple channels, banks have come to realize that the distinctions between the channels are not nearly as clear and defined as once believed.

Customers are increasingly clear (not to mention vocal) about how they view their branches. While they like the convenience of Internet Banking, they also like the personal nature of branch banking. For example, research in the UK published by Deloitte & Touche, “Bring back the Branch: September 2002,” underlines the importance of the branch as part of a multi-channel network and stresses the role of the branch as an engine for future growth. According to this research, the branch is used by more than 80% of all bank customers and is the preferred channel for 52% of consumers interviewed. The Deloitte & Touche research also directly contradicts the entrenched belief that young consumers prefer the Internet finding that 78% of 16-year-old to 24-year-old account holders use branches in preference to the Internet or phone.

Similarly in the United States, customers are reinforcing the multi-channel role of the branch in how they wish to do business with their bank. Research from Forrester , “Comparing Channel Usage At The Top US Banks: Forrester Techstrategy, June 2003,” indicates that 47% of online U.S. households say they have used an electronic channel to manage their financial accounts in the past, but they plan to use human channels in the future. The same research shows that only one in three online financial services consumers intends to do routine transactions electronically in the future.

In addition to a blurring of distinctions between channels, revitalized branch networks have re-emerged as combined centers for advice-based product sales and service, as well as more traditional banking transactions. Customers want more than just a place to complete transactions. They want a full-service center for all their needs — from banking products to brokerage services.

Under the trend towards multi-channel banking and the growth of full-product sales and service centers is the realization that whether a customer accesses a bank’s products and services through a branch, the Internet or via a call center, the provision of real-time customer knowledge is the key to ensuring consistency of product and service. Ensuring consistency of product and service is the key to retaining profitable customers — especially in today’s competitive banking environment where customers are increasingly mobile and fickle. In fact, almost half of U.S. consumers have dumped their primary financial provider at least once. (“Winning The Changing Financial Consumer — Forrester Techstrategy: July 2003.”)

Branches — A New Multi-Channel Reality

Any banker can easily prove that electronic transactions, like balance inquiries and account transfers, are exponentially cheaper than the same transaction conducted through a bank representative either in a branch or through a call center. Yet at the same time, face-to-face contact with a bank representative is still the most effective way of building revenue from high value sales and services. Optimizing the channel mix as part of a multi-channel strategy to service and sell to customers is the new reality — and at the heart of this reality remains the branch.

Yet, today’s transformed branches bear little resemblance to what preceded them. Rather than a banking hall with a limited range of mainly cash focused functionality, transformed branches are destined to become collaborative-networked service centers that sell multiple product streams. Lightly staffed and highly adaptive to local market niches and conditions, transformed branches are differentiated by open standards, connectivity to internal or external service networks through integration hubs, and the ability to easily add additional customer- focused banking services to meet changing customer demands.

While branches may be transforming, some things will remain the same for banks: the need to reduce costs, decrease risk and increase sales.

* Reductions in development costs, time to market, implementation costs, maintenance costs and total cost of ownership (TCO) can be achieved by reusing and deploying applications built from proven banking services across multiple channels and disparate systems. Such banking services should of course operate independently of the channel that uses them. Thus, whether a balance check is performed in a branch, online or by telephone the same service is being used, resulting in a consistent outcome for the customer and the bank.
* Operational risk may be reduced by leveraging a bank s existing systems, maintaining a rigorous and disciplined software development and delivery environment and by deploying proven software applications that are flexible and scalable enough to meet the most challenging of future demands. Further reductions in risk may be achieved by using a proven platform such as the IBM WebSphere software platform, which offers a comprehensive set of integrated e-business solutions, based on industry standards as eXtensible Markup Language (XML) and Java technologies.
* Increased sales can be delivered by boosting cross-selling and up-selling opportunities. To best achieve this, banks need to excel at two things — the ability to quickly roll out new and enhanced products to meet specific customer needs and to leverage customer knowledge where it counts — at the point of customer contact. Using Eontec component-based solutions allows a bank to rapidly address the origination and fulfillment of additional financial products by quickly extending Eontec Banking Services across more customer interaction points, thus achieving even greater ROI, increased operational efficiencies and shorter time to value.

Equally important is the need for tellers to leverage customer knowledge. Tellers and call center agents don’t have time to assimilate and analyze exhaustive databases when dealing with customers – they need a simple, intuitive, informative view of the customer. That’s why Eontec infuses every customer contact point with specific information relevant to that customer. Presented visually, with a single glance, and supported by more detailed information and contact history at the touch of a button — the end result is increased conversion of customer contacts into closed sales and deepened relationships.

For banks, branch transformation is rapidly becoming one of the key drivers of competitive advantage allowing them to maximize revenue opportunities by delivering highly focused banking services to their customers while at the same time managing costs and improving productivity. Transforming branches — especially as part of a multi-channel strategy — means that an asset, which was once isolated and undervalued, is now a vital profit center.

Read other articles in this issue:

* The case for business transformation outsourcing in the financial markets industry
* Update on internet insurance
* The technology challenge for corporations from International Accounting Standard No. 39
* Technology isn’t enough…the key to customer management
* Mistakes that might sink your wealth management initiative