Retail Banking: Mile Long Queues or Mile High Club?

Ghost-written article for Cisco Systems EMEA.
Published in Retail Banking magazine, UK, October 2003.

There were several set backs along the way – 9/11 most notably – but it is now almost safe to conclude that the travel industry is well on the way to embracing internet protocol (IP) as a quasi-industry standard for IT operations. Major global airlines are migrating their internal networks to IP, the major airline alliances are using IP as a commonality to enable inter-organisational communications, and the internet itself has rewritten the rankings of organisations within the travel industry, as well as creating whole new industry sub-sections.

What can this possibly have to do with retail banking? Well, the impact of the internet on the air transport part of the travel industry in particular has quickly demonstrated those areas where IP can be harnessed to reduce costs, improve operational efficiency, and enhance customer service. By default, it has also determined where IP is not suited. The main issue that determines this in the travel industry also determines it in the retail banking industry.

That issue is simply that there is still only a relatively small proportion of the travel market that will purchase a package holiday or flight online. Despite everything you’ve read or heard, high street travel agents are not going out of business, and they never will. The reason for this is two fold. Firstly, certain types of customer will always prefer face-to-face contact with the seller when making a purchasing decision. It feels more tangible, more ‘proper’, and with a particular person and location associated with the transaction, the customer feels more comfortable because a method or recourse, should something go wrong, is much more obvious. In this case, the quantity of people booking online will not change until the demographics of the target market age with time. The fact is, the younger you are, the greater the proportion of your life has been spent in the presence of the internet, and therefore the more comfortable you are with it.

Secondly, certain types of transaction are inherently complicated. A round-the-world trip using different airlines from different alliances, an expedition that – literally - required planes, trains and automobiles, or a solitary journey where the customer cannot specify either the departure or return date would be examples. This would give even a seasoned IP expert or systems integrator a run for their money, and where the customer is concerned, the human need for reassurance that everything has been booked correctly may require something more tangible than an e-ticket or a pop-up window stating, “Complete. Return to homepage?”.

Humans do not and, in fact, cannot cease this pattern of behaviour when they leave the travel agent having booked their holiday, and head for the bank to get their foreign currency. It’s of little surprise then that according to Datamonitor, in spite of online banking, telephone banking, and mobile payments, 79 per cent of European consumers prefer physically visiting their humble local bank branch over any other channel. Retail banking and travel are very similar in this respect, and it is likely that the more expensive the transaction being made, the more likely the customer will require face-to-face contact. Think about it at a personal level – if you wanted to arrange an overdraft or a loan, wouldn’t your first instinct be to meet the bank manager in person? To a lesser extent, the last time you had a cheque for a sizeable sum to pay into your bank account, did you trust the express pay-in envelope? Or, like me, did you queue in the bank, despite it taking a large proportion of your precious lunch hour, because you felt more comfortable seeing it passed over the counter than sitting at the bottom of a perspex box fixed to a pillar somewhere? Face-to-face contact is still essential where a large or complex transaction is concerned. For some people, such contact is essential for all transactions.

This is a headache for the retail banking industry. Despite investing in online banking, neither the cost of staffing a branch can be reduced nor the efficiency of it increased while customers still prefer to use the branch to any other channel. The most pessimistic banker might decide that IP had nothing to offer the retail banking industry because of this issue, but that is not necessarily the case.

One just needs to turn the problem on its head. Rather than just trying to harness the internet as a method to get customers to complete transactions themselves, IP can be used to improve the efficiency of not only one branch, but all branches in a banking empire. Once one has the opportunity to think about it, the fact that bank branches all over Europe are crammed with impatient customers in their lunch hour is actually a blessing in disguise. After all, how many organisations would love to be able to predict where their customers will be and when, so that promotional offers could be targeted at them? The fact that in retail banking the target customer is most likely to be inside a branch, presents an opportunity to communicate with them. The personnel each customer is exposed to within the branch offers another opportunity for that bank to differentiate itself through provision of superior service. Even the kiosks within the branch could offer revenue opportunities for the bank from third parties, a means to promote complimentary services, or the beginnings of CRM with a personalised experience for each individual.

From the customer’s point of view, imagine approaching the till merely to pay that same cheque in, but then being informed by the cashier that your mortgage quotation was ready to be collected. At the same time, you’re reminded with the gleeful news that there are now only two monthly payments left on the loan you took out 18 months ago (meaning you might be able to afford that skiing holiday after all), and that if you were to open a joint account with your fiancé rather than just having separate accounts, you’d both get a better rate of interest anyway. Before you leave, you’re also given the opportunity to have a quick chat to the manager about that long-term savings plan you’d telephoned a bank branch 50 miles away about earlier in the week, which you’d completely forgotten about.

Conversely, imagine operating a bank where particular products or services could be offered just once to a customer most likely to need it, with a greatly increased possibility of the service suiting that customer and therefore a successful sale. Imagine also that no selling time was wasted – ever. Your marketing department or their local branch targeted customers individually, rather than in a slapdash group of people of the same age, disposable income, or postcode. Also, particular products or services were discussed once and once only with each customer, and at the right time – no, “Didn’t you call me about this last week?” or, “You were supposed to get back to me about this a fortnight ago!” responses. All this is entirely feasible through IP.

So, how would IP let the cashier know about all the banking needs of an individual customer rather than just the one need they have at that moment in time? If your organisation is going to embrace IP, then the return on investment will be greater if the quantity of places where IP reaches can be maximised. Put simply, if your bank’s call centres and branches are both running on IP, then there is no reason why the information used by either party cannot be shared. All in all, this means the customer’s local branch will know when the head office has contacted someone regarding a new promotional offer, or in response to a request for information from that customer. Similarly head office will know how quickly the customer responded by visiting their local branch, what questions they asked, and how the eventual service was tailored when the sale was closed. This is just one possibility though. With the same technology, it is also possible to do this in reverse.

For example, if the customer should contact the head office from outside the branch, then an IP-based telephony system can direct that individual’s call immediately to the personnel with appropriate expertise in the head office. However, the same call could also be redirected to someone working within the customer’s local branch, to the extent that the IP system will intuitively page the particular member of staff needed, wherever they are. This benefits the customer experience by ensuring that query calls are not endlessly transferred to various members of staff not equipped to answer the customer’s questions. It also means that the customer’s local branch will be able to develop a more comprehensive understanding of each customers’ lifestyle and needs, and therefore be able to tailor their overall retail banking experience to suit. In short, IP isn’t just a way to improve your telephony; it’s the start of an enterprise-wide CRM system, and the beginning of the end for missed opportunities to up-sell or cross-sell.

IP does not have to be restricted to its native ground of networked PCs and telephones. In-branch security surveillance could also run on IP, deliver real-time camera footage to the bank’s head office or, if needs be, the police. However, the same footage could be used by the bank’s marketing department to assess the impact of an in-store point of sale or other promotional campaign. Staffing levels could also be monitored, even customer behaviour in relation to new branch layouts and signage. Peak traffic times could be ascertained and staffing guidelines adapted accordingly. There is no limit to what can be done if the appropriate information is shared with those personnel that most need it.

As far as the customer is concerned, a trip to the local bank will never be like going on holiday – there is only so much that IP can do! However, once you accept that until the entire population of Europe becomes so comfortable with the internet that they never need to visit their branch, then the same issue that affects the travel industry will continue to affect the retail banking industry. Even if you ignore the issue, then one still has to accept that there are many opportunities for high street banks. Sales can be increased, customer satisfaction levels can be improved, and generally the bank stands to gain from literally wringing the most productivity out of the information its already has. John Paul Getty once said, “Money is like manure. You have to spread it around or it smells”. Metaphorically, information is the same. Once you realise that the best way to use it is to spread it around your organisation, then the only thing left to do is to decide how - and IP is the answer.