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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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 3
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 4
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 5
Impact of Initiatives Varies by Industry Segment
Source: Financial Insights 2004 IT Spending Survey
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 6
Source: Financial Insights 2004 IT Spending Survey
Drivers for Change at Banks
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
Acquisition
Regulation
Market
Cost
N=45
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 7
Source: Financial Insights 2004 IT Spending Survey
Annual Technology Impact by Business Priority at Banks
Regulatory Compliance
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 8
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 9
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 10
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 11
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 12
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 13
Customer Care Overview
Where does customer care fit…– in the customer management framework?– in the organization?
Where is customer care going?
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 14
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 15
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 16
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 17
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 18
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 19
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 20
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 21
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 22
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.
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 23
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 24
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 25
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
CoreSystemsCoreSystemsCoreSystems
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 26
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 27
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)
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 28
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.
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 29
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 30
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
(c) 2005, Financial Insights, an IDC company, All rights reserved. www.financial-insights.com 31
Questions?
Monique GibelliVice President
IDC Latin America8200 NW 41 ST Miami, FL 33166 [email protected]
+1.305.351.3200