why the branch of the future is a key industry initiative monique gibelli vice president

Why the Branch of the Future is a Key Industry Initiative

Monique GibelliVice President

(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 2

Agenda

What have we learned?

Customer Care and Channel Requirements

Branch of the Future: Vision and Reality

Looking ahead


What Have We Learned….

Surveyed executives at 91 financial institutions using a global and cross-segment sample methodology

Survey focused on business initiatives driving IT choices and IT spending

Participants selected from the top 1000 institutions:

– Banks ranked by assets

– Capital markets ranked by capital or assets under management

– Insurance ranked by premiums written


Technology Driven

Selective Investments Worthwhile

Indifferent to Technology

Technology not Strategically Valuable

0% 20% 40% 60% 80% 100%

Asia Pacific

Europe

North America

All Banks

% of Respondents

N: All Banks=45; NA= 27; Europe =11; APAC = 7

CEO Perceptions of Technology

Source: Financial Insights 2004 IT Spending Survey


Impact of Initiatives Varies by Industry Segment


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Regulatory Compliance

Financial Reporting

Operational Risk

Front Office

Centralized Customer Mgmt

Core Accounting

Back Office

Infrastructure

% of Respondents Ranking Initiative as Important or Very Important

BanksCapital MarketsInsurance

N=91



Drivers for Change at Banks

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Financial Reporting

Operational Risk

Front Office

Centralized Customer Mgmt.

Core Accounting

Back Office

Infrastructure

% of Respondents

Acquisition

Regulation

Market

Cost

N=45



Annual Technology Impact by Business Priority at Banks


Financial Reporting

Operational Risk

Front Office

Centralized Customer Mgmt

Core Accounting

Back Office

Infrastructure

0% 10% 20% 30% 40% 50% 60%

% of Respondents

<$1M

$2–5 M

>$5M

N=45


Channel Preferences of All Respondents by Age

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0-20 21-30 31-40 41-50 51-60 61-70 71-80 81-120

Age

ATM

Branch

Call Center

IVR

Online

This is Figure L from “Consumer Channel Utilization: A Demographic Analysis of Preferences in the US ” document #FIN1500, August 2004

Source: Financial Insights, Federal Reserve Board Survey of Consumer Finance


Channel Preferences of All Respondents by Income

Source: Financial Insights, Federal Reserve Board Survey of Consumer Finance

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

$0 -$25K

$25K -$50K

$50K -$100K

$100K -$250K

$250K -$500K

$500K -$1M

>$1M

ATM

Branch

Call Center

IVR

On line

This is Figure P from “Consumer Channel Utilization: A Demographic Analysis of Preferences in the US ” document #FIN1500, August 2004


Top Two Ranking of Business Priorities Top Two Ranking of Business Priorities – – Brazil Banks in 2005Brazil Banks in 2005Top Two Ranking of Business Priorities Top Two Ranking of Business Priorities – – Brazil Banks in 2005Brazil Banks in 2005

0% 10% 20% 30% 40% 50%

Large Banks

Small Banks

1 Increase credit operations

2 Increase number of clients

3 Increase number of products offering

4 Increase banking operational efficiency

5 Increase number of branches

6 Bacen/Basel II e Sarbanex Oxley requirements

7 Increase number of channels to achieve C/D/E

8 Integrate databases (unique client view)

9 Modernize their branches


How Can Institutions Sustain Competitive Advantage?

Product leadership

Price leadership

Superior service and customer relationships

Service is the only sustainable advantage for the vast majority of institutions


Service Is

Service isn’t the contact center or the branch …

It is a business strategy that pervades the institutionDelivery

Support

HelpingAcross

Across

Channels

Channels

Products

Products


Customer Care Overview

Where does customer care fit…– in the customer management framework?– in the organization?

Where is customer care going?


Customer Management Evolution

1990 mid-90s late-90s-2002 2002+

- Point solutions- Low adoption- Fragmented

DOS/mid-range

Windows Web Services/ Data Management

- Usability improves- Adoption increases- Silo mentality prevails

Web-Gen #1Unix/J2EE

- Multichannel begins- Hype cycle starts & almost kills CRM

- Collaborative infrastructure, data- base virtualization- Customer hub born

Mass Customization

Dynamic Marketing

eCare & Self Service

Customer Profitability & Risk

Sales force automation

Integrated sales & service begins

Wider deployment/

access (Web tech)

CRM & care begin to bepart of channel framework


Where Does Customer Care Fit?

Employee PortalCustomer Portal Service Channels

Data/Resource Virtualization (Hub)

Product

Sales/Pipeline

Collaboration

MiddleOffice

BackOffice

FrontOffice

Process Automation

Profitability

Risk

Customer Care

System OperationLOB Silos

Implementation


But, ….. Channels Are Saturated

Institutions can’t afford more channels

Customer adoption slow or low

Who needs more channels?

Integration is complex

Source: Meridien Research

Agency & BranchATMs

VideotexDial-in DOS PC banking

Kiosks

SMS Mobile Phones Video Conferencing

WebTV

Internet Interactive TV

In-Store Branches

Dial-in Windows PC banking

1975 1985 1995 2000 2005

IP Telephony

Call Centers

???

Growth in number of financial service delivery channels

SimpleSimple ProliferationProliferation Complex, saturatedComplex, saturated


Source: Financial Insights

Full-service BranchInquiry

TransferDeposit

WithdrawalAccount OpeningLoan Origination

TradingFin’l Planning

SeminarsTraining

AT

MIn

qu

iryT

ran

sfer

De

po

sitW

ithd

raw

al

Shared Infrastructure and Legacy Systems

Online

Inquiry

Transfer

Bill pay

Account Opening

Loan Origination

Trading

Fin’l Planning

Webinars

Autom

ated

Phone

Inqu

iryTra

nsfe

rBill

pay

Integrated, Multichannel Vision Is Necessary For Full Service Banks

Ca

ll C

en

ter

Inq

uiry

Tra

nsf

er

De

po

sit

With

dra

wa

lA

cco

un

t O

pe

nin

gL

oa

n O

rigin

atio

nT

rad

ing

Fin

’l P

lan

nin

g


Traditionalbranch activities

Operational excellence

Customer focused

Expandedproduct set

Branch

BranchServers

Platform Web platform IP Telephony

Web teller

Web kiosk

Web ATM

Web video conference

MultichannelWeb

ApplicationServers

External ATM

& BankNetworks

VoiceNetwork

ProductSpecialists

Enterprise Network

ContactCenter

Core Application

s

Business PartnerExtranet

DataWarehouse

CIF/CIS

Customer Analytics

…IntranetExtranet

IP Wan

Branch of the Future


Retail Bank Branch of the Future 30 years in the making

Marketplace changes More channels

– 90% of customers use branch– 70% use > 1 channel

Continuous competitive pressure Undifferentiated products

Technology changes Moore’s law : power, cost Bandwidth explosion Multichannel delivery Internet & Web technologies

Traditionalbranch activities

Operational excellence

Customer focused

Expandedproduct set

Market Vision

Technology Vision• IP Telephony• Web branch … platform & teller• Common IP voice & data backbone

No

w

• Web ATMs & Kiosk• Wireless LAN

Nea

r T

erm

• Video

Fu

ture


Architecture for the Future

Branch

BranchServers

Platform Web platform IP Telephony

Web teller

Web kiosk

Web ATM

Web video conference

MultichannelWeb

ApplicationServers

External ATM& Bank

Networks

VoiceNetwork

ProductSpecialists

Enterprise Network

ContactCenter

Core Applications

Business PartnerExtranet

DataWarehouse

CIF/CIS

Customer Analytics

…

IntranetExtranet

IP WAN


Competitive Advantages• Improve efficiency ratio• Increase customer

satisfaction• Increase retention • Improved lead generation• Increased market share• Increased wallet share

Lower Cost

Improved Service

Branch of the Future Business Case

Future Benefits• Shorter time to market• M & A consolidation• Speeds business process

deployment• Sustains existing

investments


Product Complexity Affects Interaction

Product/Service Complexity

Product or Customer Profitability

Online Banking

Call Center Agent

Branch Teller/Platform

Branch Video

Meetings with Expert

ATM

High

High

Low

Source: Financial Insights, 2005.


Em

plo

yee

Co

mfo

rt L

evel

High

Low

Customer Appreciation HighLow

Amount of B

usiness

Process Change

High

Low

Source: Financial Insights, 2005.

High ValueInteractionsHigh ValueInteractions

Technology Must Solve Multiple Needs


Case Study: NECU (Australia) Cooperative Bank in New South Wales, Australia

– Competes with the Big 4 (CBA, NAB, ANZ, Westpac) – Customer base of 45,000 consumers– $320M in assets, 22 branches (ranging from 2-23 staff)– 20% market share in rural NSW– Products: insurance, investments, lending, and deposits – Branch network spans 1,500 km

Post Year 2000 strategic analysis– Executives recognized branch network was most

valuable asset– Key requirement: effectively control and simultaneously

improve customer service across the branch network– Conclusion: invest in centralized communication

technologies with high bandwidth network


NECU Leveraged IPT and Video to Focus on Five Objectives

1. Create and enhance contact center experience by efficiently using resources

2. Training across the network

– Centralize Specialists in Sydney then train rest using video

3. Expand wealth management reach

– Financial service regulation change

– Real-time service w/ certified adviser

4. Offer instant service on key products

– Higher margin loans & investments

– Extends coverage for staff absence

5. Conduct management meetings

Bac

k O

ffic

e S

yste

ms

CoreSystemsCoreSystemsCoreSystems



Knowledge

Interaction

Customer

Knowledge Factories

Sh

ared

Del

iver

y In

fras

tru

ctu

re

Pre

sen

tati

on

Co

nte

nt

Tra

nsa

ctio

ns

Bu

sin

ess

Ru

les

Bu

sin

ess

Ob

ject

sM

ess

agin

g

Co

nn

ecti

vity

PFM

ManagementManagement

MetricsMetrics


NECU Business Benefits (2005 vs. 2002)

Productivity up, internal travel down

Optimized HR across the branch network

Increased sales per branch

Delivering higher quality customer service


3.53x

3.61x

3.71x

3.80x

2001 2002 2003 2004

Source: BCP Investor Presentations.

Cross-Sell at Banco Comercial Portugues

78%VideoClose rate

78%VideoClose rate

Focused on small businesses and self-employed customers about high-value services (including retirement products)


Attrition Rates at Key Bank and Wachovia

0%

4%

8%

12%

16%

20%

2000 2001 2002 2003 2004

Wachovia Attrition

Key Bank Attrition

Source: Wachovia and Key Bank Annual Reports, Financial Insights estimates.


Success Factors

Project execution is critical

– Getting something of value is better than having nothing now

Leverage current investments

– You don’t have the money to start again

– Build toward the future with each decision

Invest for the long term…but with short-term return to the business

– Senior management can’t/won’t wait for results

– BUT, you should not be shortsighted


Looking ahead

Channel convergence around customer is key

Real-time data access for customers required

Leaders will leverage in multiple directions

– Value-added services for customers will distinguish winners from losers

– Across employers to their employees

– Partner with complementary product companies

– Open and secure architecture for flexibility and scalability

– Aura of leadership position adds to momentum


Questions?

Monique GibelliVice President

IDC Latin America8200 NW 41 ST Miami, FL 33166 [email protected]

+1.305.351.3200

why the branch of the future is a key industry initiative monique gibelli vice president

Documents

financial insights

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customer relationships

customer management

customer management