boozco - the new banking channel network.pdf

8/10/2019 BoozCo - the new banking channel network.pdf

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The New Banking

Channel NetworkImproving the Bottom Line

through Channel Optimization

Leading Research Paul HydeAshish JainKumar KanagasabaiJavier Sepulveda-Navarro


2/13

Booz & Company 1

Trends 20092015 Profitability

Gen Y

Gen Y and younger to grow from 26% to about 40% of the workforce by 2015

Rely heavily on new media (e.g., social networking, iPhone applications) in day-to-day activities

Mass

Future income stream hit by unemployment and flat/falling wages

Demand for lending products contracting as customers seek to de-leverand increase savings rate

Retirees

Population ages 65 and older to grow by 30% to almost 50 million by 2015

Demand increasing for investment products to supplement uncertain Social Security payments

Acceptance of online delivery methods is increasing

Small Business

Small businesses appetite for, and access to, debt will recover slowly, and banks and businessescontinue to de-lever

Small business profits to recover slowly, in line with the economy and consumer spending

Segment

Mass Affluent

Income and home assets hit, but recovering as earning power more resilient and wealth diversified

Debt servicing capacity recovering, with balance sheet and income leading to some lending growth

Strong preference for remote channels for day-to-day transactions

Current Trends across Market Segments Point to a Difficult Low-

Growth Environment for Banks


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Booz & Company 2

TotalOnline/Mobile

5%

Call Center

10%

ATM

10%

Branch

75%

These Trends Are Creating New Pressures to Reduce Branch-Based

Costs and Reinvest in Alternative Low-Cost Channels

Channel Cost Structure -

Banks

ReduceCosts

Increase Investments

Pressures on the Branch Network

Aggressive branch growth resulting inoversupply in certain markets

Shifting of branch volume for servicingand transactions to virtual channelsdriving higher unit cost at branch

70% of the branch traffic is driven by theleast profitable customers (i.e., massmarket)

Limited branch channel usage by

younger, more affluent customers Customer expectation for ubiquitous

connectivity and seamless integrationacross all channels


4/13Booz & Company 3

Previous Attempts to Develop a Coherent Multichannel Model

Proved Unsuccessful

Poor ChannelAlternatives

Customer PushRather Than Pull

Continued ChannelConflict

CustomerReluctance toMigrate

Transactions

Limited functionalities offered by alternative channels for banking needs

Poor customer experience in using the alternative channels (e.g., onerous voice response menus,

fragmented and difficult-to-navigate online channels)

Introduction of penalty fees to drive customers toward the low-cost channels (i.e., stick insteadof carrot)

Lack of systematic education of customers on capabilities and benefits of alternative channels

Lack of channel role clarity to perform sales, servicing, and transactions

Competing capabilities built across channels with limited integration, driven by siloed approach tochannel management

Strong preference by most of the customer base to interact with banks through the branch

Reluctance to use alternative channels for banking needs because of lack of functionality,

perceived lack of comfort and security

1

2

3

4


5/13Booz & Company 4

Today, Customers Are Ready to Adopt Multichannel Access Points

to Transact with Banks

Credit Card 15% 85%

SavingsAccount

39% 61%

PersonalCheckingAccount

38% 62%

Might Obtain by Phone, Mail, or InternetWould Only Obtain Face-to-Face

Simple Product Origination

42%58%

Mortgage 64% 36%

InvestmentManagement

Account

Personal Loan 61% 39%

Complex Product Origination

1


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Booz & Company 5

ATM

With Significant Improvements in Alternative Channel

Capabilities, Integrated Multichannel Strategy Is a RealityEvolution of the Channel Network

(19902010)

1990

2000

2010

Branch

ATM

Call Center

Poor channel alternativesto the branch

Siloed delivery network

ATM BankWebsite

Emergence of online channel

Basic functionality in non-branch channels

CallCenter

Branch

Call Center

Proliferation of attractive alternativechannels (e.g., new media & mobile)

Increasing adoption of alternativechannels by customers

Push toward channel integration

Mobile

Branch

Customers

BankWebsite

Social Media

OnlineBudgeting

2

Customers


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Booz & Company 6

However, to Make the Switch, Customers Need to Be Educated

about Alternative Channel Capabilities

Aware of capability,but do not use

Not aware of ATM cashdeposit capability

All Segments

55%

45%

Prefers to do cashdeposits in theBranch

Prefers to do cash

deposits in the ATM

CASH DEPOSIT EXAMPLE

7%

Branch

ATM

Other

All Segments

75%

18%

75% of customers prefer the branchto make a cash deposit1

However, 45% of those customers are not awarethey could do this transaction at the ATM2

3

1) Represents answer to question in survey -

In what way do you prefer to make a cash deposit?2) Represents answer to question in survey -

Does your bank offer you the capability to make a cash deposit at the ATM?Source: Booz & Company proprietary research

4


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Booz & Company 7

An Integrated Channel Architecture Is Required to Deliver on

Segment Preferences, Economics, and Product Complexity

Deposits/

Withdraw-

alsPaymentsTransfers

Problem

Resolu-

tionInquiriesServicing

Cross-

SellingClosing

Applica-

tionResearch

TransactionOrigination Customer Service

Products

Mass

SmallB

usiness

Simple

Complex

Online

ATM

Online

ATMOnline/Call Center

Branch

All

Channels

Branch

Online/Call Center

Simple

Complex

ATMATM/OnlineBranchAll

Channels

Branch/Call CenterOnline/Call

Center

Branch

Online

BranchCall

Center Branch

4


9/13

Booz & Company 8

This Tailoring Will Result in a New Segment-Driven Branch

Model with a Greater Focus on Sales

Mass Affluent Branch

MarketCharacteristics

Mortgage Tax IRA Treasury Merchant Services

Emerging Affluent

BranchModel

BranchAttributes

High-end branches exuding exclusivity

Personalized service

Support need for privacy

Extended hours

Dedicated service personnel for business clients

Integrated ATM capability

Small Business Segment

Small Business Branch

Remote Product Specialists Remote Product Specialists

High home ownership rate, withaccessible equity

High-income area

High business density

High proportion of business customers

VaultServices

BusinessServices

BusinessServices

WealthRM

ATMImaging

ATMsBusiness

RM


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Booz & Company 9

Specific Capabilities Need to Be Developed to Support Each

Channels MissionRequired Channel Capabilities -

Examples

Single governing body managing investments across channels and ensuring alignment ofchannel roles to client needs

Incentives for channel owners to cooperate, not compete, with each other

Training and ongoing education for client-facing employees to understand client needs,enable collaboration and referrals across channels

Massive customer education campaigns to nurture better understanding of the capabilities inalternative channels

Improved sales collaboration and warm handoff processes across channels

Increased consistency and standardization of processes and policies across channels

Standardized customer experience aligned to segment needs and value across channels

Access to single view of customer across channels to understand current relationships andpotential needs

Consistent information availability and customer data capture across channels

Integrated channels across origination, customer service, and transaction value chain

Channel

Governance

People

Process

Technology


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Booz & Company 10

Implementing the New Channel Network Drives 10% to 15% Cost

Savings

75

45

TotalStaff-Related

Technology

5

Staff

Support Services

25

Staff Reduction

Note: Based on a fully loaded RM salary of $100,000 per year.

Source: Booz & Company proprietary research

EXAMPLE:

Branch costbase of $700M

Fully Loaded Branch Cost Savings(US$, in millions)

Channel Network Benefits

5% to 7% cost savings from reduced branchstaff driven by transactional volume transfersto alternative channels

3% to 5% cost savings from streamlinedbranch support services - e.g., efficiencies inthe internal call center

2% to 3% cost savings from a reduction inFTE-driven technology costs - e.g., softwarelicenses and equipment

ILLUSTRATIVE


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Booz & Company 11

Contact Information

Chicago

Ashish Jain

[email protected]

New York

Paul [email protected]

Kumar KanagasabaiPrincipal

[email protected]

Javier Sepulveda-NavarroSenior Associate

[email protected]


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Booz & Company 12

Booz & Company is a leading global management consultingfirm, helping the worlds top businesses, governments, andorganizations.

Our founder, Edwin Booz, defined the profession when heestablished the first management consulting firm in 1914.

Today, with more than 3,300 people in 60 offices around theworld, we bring foresight and knowledge, deep functionalexpertise, and a practical approach to building capabilitiesand delivering real impact. We work closely with our clients

to create and deliver essential advantage.

For our management magazine strategy+business, visitwww.strategy-business.com.

Visit www.booz.com to learn more about Booz & Company.

2010 Booz & Company Inc.

The most recentlist of our offices

and affiliates, withaddresses andtelephone numbers,can be found onour website,www.booz.com

WorldwideOffices

AsiaBeijingDelhiHong KongMumbaiSeoulShanghaiTaipeiTokyo

Australia,New Zealand &Southeast Asia

AdelaideAucklandBangkokBrisbaneCanberraJakarta

Kuala LumpurMelbourneSydney

EuropeAmsterdamBerlinCopenhagenDublinDsseldorfFrankfurtHelsinkiIstanbulLondonMadridMilan

MoscowMunichOsloParisRomeStockholmStuttgartViennaWarsawZurich

Middle EastAbu DhabiBeirutCairoDubaiRiyadh

North AmericaAtlantaChicagoClevelandDallasDCDetroitFlorham ParkHoustonLos AngelesMexico CityNew York CityParsippanySan Francisco

South AmericaBuenos AiresRio de JaneiroSantiagoSo Paulo

boozco - the new banking channel network.pdf

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