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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. Agenda. What have we learned? Customer Care and Channel Requirements Branch of the Future: Vision and Reality Looking ahead. What Have We Learned….

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Why the Branch of the Future is a Key Industry Initiative

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  1. Monique Gibelli Vice President Why the Branch of the Future is a Key Industry Initiative

  2. Agenda • What have we learned? • Customer Care and Channel Requirements • Branch of the Future: Vision and Reality • Looking ahead

  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

  4. All Banks North America Europe Asia Pacific 0% 20% 40% 60% 80% 100% % of Respondents Technology Driven N: All Banks=45; NA= 27; Europe =11; APAC = 7 Selective Investments Worthwhile Indifferent to Technology Technology not Strategically Valuable CEO Perceptions of Technology Source: Financial Insights 2004 IT Spending Survey

  5. Infrastructure Back Office Core Accounting Centralized Customer Mgmt Front Office Operational Risk Financial Reporting Regulatory Compliance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% % of Respondents Ranking Initiative as Important or Very Important Banks N=91 Capital Markets Insurance Impact of Initiatives Varies by Industry Segment Source: Financial Insights 2004 IT Spending Survey

  6. Infrastructure Back Office Core Accounting Acquisition Centralized Customer Mgmt. Regulation Market Front Office Cost Operational Risk Financial Reporting Regulatory Compliance 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% % of Respondents N=45 Drivers for Change at Banks Source: Financial Insights 2004 IT Spending Survey

  7. Infrastructure Back Office Core Accounting Centralized Customer Mgmt Front Office Operational Risk Financial Reporting Regulatory Compliance <$1M $2–5 M >$5M 0% 10% 20% 30% 40% 50% 60% % of Respondents N=45 Annual Technology Impact by Business Priority at Banks Source: Financial Insights 2004 IT Spending Survey

  8. Channel Preferences of All Respondents by Age Source: Financial Insights, Federal Reserve Board Survey of Consumer Finance This is Figure L from “Consumer Channel Utilization: A Demographic Analysis of Preferences in the US ” document #FIN1500, August 2004

  9. Channel Preferences of All Respondents by Income Source: Financial Insights, Federal Reserve Board Survey of Consumer Finance This is Figure P from “Consumer Channel Utilization: A Demographic Analysis of Preferences in the US ” document #FIN1500, August 2004

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

  11. Product leadership Price leadership Superior service and customer relationships Service is the only sustainable advantage for the vast majority of institutions How Can Institutions Sustain Competitive Advantage?

  12. Helping Across Channels Products Support Delivery Service Is Service isn’t the contact center or the branch … It is a business strategy that pervades the institution

  13. Customer Care Overview • Where does customer care fit… • in the customer management framework? • in the organization? • Where is customer care going?

  14. Customer Management Evolution Dynamic Marketing eCare & Self Service Mass Customization Customer Profitability & Risk mid-90s late-90s-2002 2002+ 1990 Sales force automation CRM & care begin to bepart of channel framework Integrated sales & service begins Wider deployment/ access (Web tech) - Point solutions - Low adoption - Fragmented - Usability improves - Adoption increases - Silo mentality prevails - Collaborative infrastructure, data- base virtualization - Customer hub born - Multichannel begins - Hype cycle starts & almost kills CRM DOS/mid-range Windows Web Services/ Data Management Web-Gen #1Unix/J2EE

  15. Where Does Customer Care Fit? System Operation Product LOB BackOffice Silos Customer Care Risk Process Automation Profitability MiddleOffice Data/Resource Virtualization (Hub) Collaboration Implementation FrontOffice Sales/Pipeline Service Channels Customer Portal Employee Portal

  16. But, ….. Channels Are Saturated • Institutions can’t afford more channels • Customer adoption slow or low • Who needs more channels? • Integration is complex ??? IP Telephony WebTV SMS Mobile Phones Video Conferencing Interactive TV Internet Dial-in Windows PC banking Growth in number of financial service delivery channels Kiosks In-Store Branches Dial-in DOS PC banking Videotex Call Centers ATMs Agency & Branch Simple Proliferation Complex, saturated 1975 1985 1995 2000 2005 Source: Meridien Research

  17. ATM Inquiry Transfer Deposit Withdrawal Automated Phone Inquiry Transfer Bill pay Integrated, Multichannel Vision Is Necessary For Full Service Banks Shared Infrastructure and Legacy Systems Full-service Branch Inquiry Transfer Deposit Withdrawal Account Opening Loan Origination Trading Fin’l Planning Seminars Training Online Inquiry Transfer Bill pay Account Opening Loan Origination Trading Fin’l Planning Webinars Call Center Inquiry Transfer Deposit Withdrawal Account Opening Loan Origination Trading Fin’l Planning Source: Financial Insights

  18. Business Partner Extranet Multichannel Web Application Servers Platform Web platform IP Telephony Branch Servers Core Applications Branch Enterprise Network Product Specialists Web teller CIF/CIS Traditionalbranch activities Expandedproduct set Data Warehouse Web kiosk Voice Network Customer Analytics Contact Center Web ATM Intranet Extranet Operational excellence Customer focused … IP Wan Web video conference External ATM & Bank Networks Branch of the Future financial services merchant Web & Internet Technology

  19. 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 Expandedproduct set • IP Telephony • Web branch … platform & teller • Common IP voice & data backbone Market Vision Now • Web ATMs & Kiosk • Wireless LAN Customer focused Near Term Financial Services Merchant Storefront • Video Future Operational excellence Retail Bank Branch of the Future 30 years in the making Technology Vision

  20. Business Partner Extranet Branch Enterprise Network Multichannel Web Application Servers Platform Web platform IP Telephony Branch Servers Core Applications Product Specialists Web teller CIF/CIS Data Warehouse Voice Network Web kiosk Intranet Extranet Customer Analytics Contact Center Web ATM … IP WAN Web video conference External ATM & Bank Networks Architecture for the Future

  21. Lower Cost Competitive Advantages • Improve efficiency ratio • Increase customer satisfaction • Increase retention • Improved lead generation • Increased market share • Increased wallet share Improved Service Future Benefits • Shorter time to market • M & A consolidation • Speeds business process deployment • Sustains existing investments Branch of the Future Business Case

  22. Product Complexity Affects Interaction Product/Service Complexity High Branch Video Meetings with Expert Branch Teller/Platform Call Center Agent Online Banking ATM Low High Product or Customer Profitability Source: Financial Insights, 2005.

  23. High Value Interactions High High Employee Comfort Level Amount of Business Process Change Low Low Customer Appreciation Low High Technology Must Solve Multiple Needs Source: Financial Insights, 2005.

  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

  25. Metrics Core Systems Core Systems Core Systems Core Systems Core Systems Core Systems Core Systems Core Systems Core Systems Presentation Connectivity Content Transactions Business Rules Business Objects Back Office Systems Messaging Shared Delivery Infrastructure Customer Management PFM Knowledge Interaction Knowledge Factories NECU Leveraged IPT and Video to Focus on Five Objectives • Create and enhance contact center experience by efficiently using resources • Training across the network • Centralize Specialists in Sydney then train rest using video • Expand wealth management reach • Financial service regulation change • Real-time service w/ certified adviser • Offer instant service on key products • Higher margin loans & investments • Extends coverage for staff absence • Conduct management meetings

  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

  27. Cross-Sell at Banco Comercial Portugues • Focused on small businesses and self-employed customers about high-value services (including retirement products) 78%Video Close rate Source: BCP Investor Presentations.

  28. Attrition Rates at Key Bank and Wachovia Source: Wachovia and Key Bank Annual Reports, Financial Insights estimates.

  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

  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

  31. Questions? Monique Gibelli Vice President IDC Latin America 8200 NW 41 ST Miami, FL 33166 USA mgibelli@idc.com +1.305.351.3200

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