dr Adam Becht

1. dr Adam Becht May 17th , 2011

2. Each year Capgemini, in co-ordination with Unicredit and Efma, publishes insights on the Retail Banking sector 2008 2009 2010 2011 The Future Role of the Branch in a Multi-Channel, Multi-Product Environment Organic Growth in Domestic Markets Managing Mortgage Profitability: Retail Banks at a Crossroad Small Business Banking and the Crisis: Managing development and risk The World Retail Banking Report is a leading, industry report that provides strategic insights into critical issues and trends impacting the global banking industry.

3. Key Findings Overview Contact Information

4. The report’s findings draw on the ‘Voice of Customer’ survey data and executive interviews with ~50 senior banking executives Countries Included in Voice of Customer Survey and Region CEI Leaders, 2011 The 2011 WRBR highlights the top CEI ranked country in each of the five regions.

5. The 2011 WRBR proudly introduces the new ‘Customer Experience Index’ and analyzes the Future Role of the Branch Customer Experience Index Future Role of the Branch in a Multi-Channel, Multi-Product Environment • The CEI model provides information about how customers are viewing the banking industry, specifically what is important to customers and how satisfied they are currently. • The model uncovers how customers interact with the bank in regards to sales, service, and information gathering across products and channels. • The model analyzes the experiences of customers across select banking products and channels. The typical banking lifecycle of the average customer was divided into four discrete stages in order to provide a more granular view of the customer experience. • The branch channel remains a key consideration in a firms overall retail delivery strategy. • However, banks can not afford to let their branches stay stagnant but must transform them to be an effective resource within a multi-product, multi-channel environment. • Innovative trends and leading practices are being implemented to overcome people, process and technology challenges resulting from the branch evolution which are converging across four main areas: branch layout & design, technology, sales & service, and staff & people .

6. The 2011 WRBR Customer Experience Index (CEI) measures the customer experience across three dimensions Customer Lifecycle Products Channels Dimensions of Capgemini’s Customer Experience Index (CEI) • Current, Depository Accounts & Payments • Credit Cards • Loans • Mortgages • Information Gathering • Transacting • Problem Resolution • Account Status & History CEI • Branch • Internet • Mobile • Phone • ATM The 2011 WRBR Voice of the Customer (VoC) provides insights into customer perceptions and current satisfaction levels with retail banking products. Source: Capgemini Analysis, 2011.

7. Key Findings from WRBR 2011 • Customers are generally satisfied, but opportunities exist to increase satisfaction in the areas that matter most: • Globally, banks’ success in delivering positive customer experiences is high, with a global average Customer Experience Index rating of 72.2 out of 100. • However, banks have been far less successful in generating high levels of satisfaction in the areas that matter most to customers achieving a global average of only 35.8% of satisfaction with regards to experience levers that are most important to customers. • Channels are the key differentiators in satisfying customers on what they perceive as important: • Customers still consider the branch a top channel for carrying out their banking business, despite the growing influence of direct channels. A shift is also underway as customers increasingly view the branch as fulfilling an advisory role thought they still use the branch to carry out basic financial transactions. • The branch is still a valued channel for customers, but it’s role must evolve to meet changing preferences and expectations: • Banks are evaluating six major themes for adoption as they transition their branch networks to play a more effective role in today’s retail banking environment. While there is no “one-size-fits-all” approach, each bank will gradually shift to one or more of these themes as they redefine their channel strategies.

8. Despite low levels of banking clients’ trust and confidence, customers globally emerge quite satisfied with their banks Customer Satisfaction with Primary Bank, Region Leaders (%), 2011 Although a majority of customers are generally satisfied with their primary banks, opportunities still exist to enhance the overall banking customer experience. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011

9. Globally, banks have been fairly successful in delivering a positive level of overall customer experience Customer Experience Index, Region Leaders, 2011 Four different regions were represented in the top six ranked CEI countries. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011

10. Despite delivering an overall positive experience, banks in most countries have not generated the ‘Wow’ factor Customers with a Positive/Negative Experience, Region Leaders, (%), 2011 Banks will need to differentiate themselves from the competition by offering an outstanding banking experience in the areas deemed most important by customers. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011

11. High customer satisfaction levels of a bank do not always translate to high positive customer experience levels Positive Customer SatisfactionaVs. Positive Customer Experienceb, 2011 While most countries had 50% - 70% of customers with positive satisfaction, positive customer experience typically ranged from 30%-40%. a) Positive Satisfaction has been defined as positive or very positive; b) Positive Experience has been defined as positive or very positive; Note: Only Top 10 CEI Countries labeled. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011

12. Key Findings from WRBR 2011 • Customers are generally satisfied, but opportunities exist to increase satisfaction in the areas that matter most: • Globally, banks’ success in delivering positive customer experiences is high, with a global average Customer Experience Index rating of 72.2 out of 100. • However, banks have been far less successful in generating high levels of satisfaction in the areas that matter most to customers achieving a global average of only 35.8% of satisfaction with regards to experience levers that are most important to customers. • Channels are the key differentiators in satisfying customers on what they perceive as important: • Customers still consider the branch a top channel for carrying out their banking business, despite the growing influence of direct channels. A shift is also underway as customers increasingly view the branch as fulfilling an advisory role thought they still use the branch to carry out basic financial transactions. • The branch is still a valued channel for customers, but it’s role must evolve to meet changing preferences and expectations: • Banks are evaluating six major themes for adoption as they transition their branch networks to play a more effective role in today’s retail banking environment. While there is no “one-size-fits-all” approach, each bank will gradually shift to one or more of these themes as they redefine their channel strategies.

13. Satisfaction levels with most channels for each lifecycle stage generally correlates to their perceived importance Global Customer Importance Vs. Satisfaction of Channels by Life Cycle, across all Products, 2011 Importance and satisfaction for most lifecycles is highest with the internet and lowest with mobile banking. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011

14. Though online has emerged as a key banking channel, branches remain important for daily banking activities Customers still prefer visiting branches for problem resolution or buying complex products such as loans and mortgages. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011; Capgemini Analysis, 2011 Note: The importance of branch relative to direct channels by products and lifecycle stage is rated on a scale of 1-7 with 7 being very important and 1 being the not at all important

15. The internet and branch are the most successful channels offering a positive experience across all age groups Customers with a Positive Experience by Channel, Region, and Age (%), 2011 However, banks have not been successful in delivering as positive an experience with the mobile and phone. Source: Capgemini Analysis, 2011

16. Despite the growing influence of new channels, the branch has remained a cornerstone of banks’ sales and service The existence of large branch networks continue to create cost challenges for banks. Source: Capgemini Analysis, 2011

17. Customers continue to see the branch as an important channel for carrying out financial transactions Most Important Role of the Branch to Customers in the Past, Present, and Future (%), 2011 Financial Transactions in the branch are expected to continue to decline while Advisory Services are expected to increase Customers primarily visit the branch to carry out financial transactions but are increasingly expecting advisory services and more relationship management. Source: 2011 Retail Banking Voice of the Customer Survey, Capgemini, 2011; Capgemini Analysis, 2011

18. Key Findings from WRBR 2011 • Customers are generally satisfied, but opportunities exist to increase satisfaction in the areas that matter most: • Globally, banks’ success in delivering positive customer experiences is high, with a global average Customer Experience Index rating of 72.2 out of 100. • However, banks have been far less successful in generating high levels of satisfaction in the areas that matter most to customers achieving a global average of only 35.8% of satisfaction with regards to experience levers that are most important to customers. • Channels are the key differentiators in satisfying customers on what they perceive as important: • Customers still consider the branch a top channel for carrying out their banking business, despite the growing influence of direct channels. A shift is also underway as customers increasingly view the branch as fulfilling an advisory role thought they still use the branch to carry out basic financial transactions. • The branch is still a valued channel for customers but it’s role must evolve to meet changing preferences and expectations: • Banks are evaluating six major themes for adoption as they transition their branch networks to play a more effective role in today’s retail banking environment. While there is no “one-size-fits-all” approach, each bank will gradually shift to one or more of these themes as they redefine their channel strategies.

19. Positioning the branch to play an effective role in an overall retail delivery strategy will require changes across four areas Challenges • Outdated and Awkward Layouts • Format Optimization • Personalization and Customization • In-Branch Service Model Emerging Trends • Branch Re-Design • Branch Automation to Improve Convenience & Service • Branch Layout Aligned with Customer Needs • Customized Branches for Different Customer Segments Challenges • Legacy Systems • Cross-Channel Integration • Adoption of Modern Technologies • Customer Analytics/Intelligence • Customer Personalization Technologies Emerging Trends • Customer Analytics/ Business Intelligence • Seamless Multi-Channel Integration • Adoption of Modern/ Innovative Technology • Customer Personalization Technology Branch Layout & Design Staff & People Technology Key Areas Around Branch Transformation Challenges • Inefficient Sales Process • Lack of Targeted Sales & Service Strategies • Lack of Multi-Channel Sales and Service Strategies • Moving from Transactional to Relationship/ Advisory Based Sales Emerging Trends • Targeted Service Strategies for Customer Segments • Improving Efficiencies Across Sales Process Through Automation • Multi-Channel Based Sales and Service Strategies • Shifting from Transactional to Advisory Relationship Challenges • Outdated Skill-Sets of Branch Staff • Lack of Authority to Act • Misaligned Incentive System • Unavailability of Tools • Recruitment & Training of Branch Staff Emerging Trends • Empowerment of Branch Staff • Enhancing Quality of Branch Staff • Investments in Training and Development of Employees • Elevation of Customer Experience as a KPIs for Branch Staff Sales & Service Source: Capgemini Analysis, 2011

20. Six themes are emerging around the future role of the branch network in the retail banking space Key Themes Emerging Around Future Role of the Branch Network, 2011 Physical Space for Virtual Relationship Branchless • Branch doesn’t handle transactions but provides space for customers to come and have video conferences with specialists (mortgages, investments) • Banks that are strictly online or mobile and do not have a brick and mortar presence Independent Network • Banks use a space that doesn’t belong to them such as a post office, supermarket or pharmacy allowing customers to bank while doing other activities Core of a Multi-Channel Network • Branch is at the core of the network and owns the customers Bank Branch Seamless Multi-Channel Network Trusted Advisor • Customers have a consistent experience that allows them to start/stop any transactions seamlessly utilizing any channel for the banking relationship • Banks wants the branch to be viewed as a trusted advisor and prefers for the customer to handle day to day banking transactions through other channels There is no one size fit all approach and banks will adapt one or more of these themes depending on their channel and business strategy. Source: Capgemini Analysis, 2011

21. ‘Branch at the Core of a Multi-Channel Network’ and is the key relationship hub between the bank and its customers Branch at the Core of a Multi-Channel Network Commentary • The branch is at the center of the customer relationship where they open and manage customer relationships, providing a full array of advisory and day-to-day transactional services. • Direct channels are deployed more as aids for basic financial transactions or information gathering • Advantages: • Ideal for attracting high-value customers • Advisory services for more complex products and services w/ higher margins • Disadvantages: • High overhead and operating costs for people and technology • Maintaining and updating branch designs and layouts Source: Capgemini Analysis, 2011

22. ‘Branch As a Trusted Advisor for Customers’ with all the day-to-day banking transactions moving to direct/ alternate channels Branch As a Trusted Advisor for Customers Commentary • The branch provides advisory services and builds the relationship, as daily financial transactions move to direct channels • The branch manages the relationship with predictive sales processes and excellent customer support • Advantages: • Focus on profitable high-margin sales • Clear customer segmentation based on relationship management • Disadvantages: • Significant training to upgrade staff skill sets for regulatory requirements and to understand needs-based selling • Investments to maintain and keep direct channels functioning well so customers utilize those channels for basic transactions Source: Capgemini Analysis, 2011

23. Moving branches to ‘Independent Networks’ where current and prospective customers visit frequently to improve access to banks Branch As an Independent Network Commentary • Branches are positioned in unconventional locations such as, grocery stores, super markets, and pharmacies to provide banking services at the customer’s convenience • Advantages: • Minimal marketing expenses for customer acquisition due to a built-in client base • Reduced cost by utilizing existing infrastructure • Strong deposit gathering capabilities • Disadvantages: • Simple products with no customization or personalization • Regulatory compliance and privacy laws related to sharing customer data • Bank partner may decide to become a competitor (i.e., Wal-Mart and Tesco) Source: Capgemini Analysis, 2011

24. The ‘Branchless Bank’ has attracted a loyal customer base due to high interest rates and convenience/ease of use The Branchless Bank Commentary • Branchless banks have no brick-and-mortar presence allowing the channel to own the customer relationship while delivering banking sales and services • Direct banks enter the market with either a full banking or niche product approach • Advantages: • Greatly reduced cost structure • Can offer lower fees and higher rates on products • Disadvantages: • No physical location for clients to visit • Reliance on strong marketing campaigns to attract new customers • May attract “rate chasers” and fail to develop a loyal customer base Source: Capgemini Analysis, 2011

25. ‘Branch As a Part of a Seamless Multi-Channel Network’ where the customer relationship is managed through multiple channels Branch As a Part of Seamless Multi-Channel Network Commentary • The branch is an equal partner with the direct channels in managing the customer relationship. This approach recognizes the branch is important but direct channels have become essential elements for retail delivery. • Advantages: • Strong competitive advantage in the market • Clear customer segmentation and clearly defined product offerings • Elimination of channel conflicts related to customer ownership and revenue • Disadvantages: • Large investments to integrate all channels • Internal change management issues related to breaking down channel silos • Maintenance expenses related to technology to keep channels functioning properly TWITTER FACEBOOK Source: Capgemini Analysis, 2011; Multichannel Banking in Europe, Finalta, 2011

26. ‘Branch As a Physical Space for Virtual Interactions’ helps in enhancing trust and create brand awareness amongst customers Branch as a Physical Space for Virtual Relationship Management Commentary • The branch provides a physical space for customers executing virtual interactions or banking transactions • Branches also act as experience centers designed to reinforce a particular brand image or value proposition • Advantages: • Recognized by customers and the market as innovators • Unique way of connecting with and engaging clients • Disadvantages: • Expensive to redesign or build branches for this approach • Training to upgrade staff skill sets • Changing customer perceptions to accept new concept Source: Capgemini Analysis, 2011

27. Deciding how best to leverage the branch network will require a thorough consideration and analysis of the themes Advantages and Challenges for Banks While Adopting Emerging Themes Branchless Banking Branch Is a Bank Branch As an Advisor Multi-Channel Integration Independent Network Banks Physical Space • Advantages • Increased convenience/ accessibility • Reduction in operating costs • Overhead costs savings helps pay higher interest rates or charge lesser fee • Personal relationship/ face to face interaction • Attracts high value transactions & clients to branch • Delivers advisory services • Clear client segmentation • Product offerings are aligned to the segments • Branch are purely advisory oriented with Low value transactions pushed to direct channels • Strong multi-channel capabilities • Different channels have different roles for different client segments • Client satisfaction oriented service delivery • Accessible to a large client base • Encourages client self-service • Reduced operating cost • Deferred model that piggy backs on an existing relationship • Innovative and unique concept to enhance client engagement and service • Strongly reinforce banks brand image and value proposition • Challenges • Limited and basic products on offer • Regulatory barriers limits banks to the extent they can leverage direct channels • Price is the biggest differentiator • High operating costs (People, technology) • Requires highly trained staff • High investment required in existing branches • Sophisticated technology upgrades required • Up-skilling of branch staff • Renewed strategy to hire right skills • Invest to build strong multi-channel capabilities and automation • High degree of business transformation risk • Huge upfront investment to upgrade systems/ technology • Only sell simple products • Bank partner can become competitor, e.g. Tesco Banks • Advanced system support required • Data sharing may lead to privacy issues • High input cost with un-tangible benefits • Banks have to make efforts to shift client perception to accept the new concept branches Banks are not limited to only one theme but may implement various themes across different regions or demographics depending on their strategy and business priorities. Source: Capgemini Analysis, 2011

28. Conclusion • Despite customers’ lack of trust in the banking system, globally, banks have done relatively well ensuring customers are satisfied: • However, the number of customers having a positive customer experience around levers most important to them is not as high, putting banks at the risk of losing customers unless they significantly improve the customer experience • Identifying the factors of greatest importance to their customers and then delivering on those dimensions will help banks drive positive customer experience • Globally, customers have the most positive customer experience with the branch and the internet, the least positive with mobile banking: • While customers perceive the internet as the most important channel for most lifecycle stages, they still view the branch as the most important channel for problem solving, suggesting customers prefer a human touch in certain interactions with the bank. • The branch is still a valued channel and banks are transforming them to meet changing customer preferences and expectations: • Innovative trends and leading practices are being implemented globally and regionally to overcome people, process and technology challenges resulting from the branch evolution. • Determining how to leverage the branch in a multi-product, multi-channel environment remains a key consideration in a firms overall retail delivery strategy: • Six key themes are shaping the channel landscape and redefining the future role of the branch. Banks are not limited by only one theme but have the ability to implement various themes across different regions or demographics depending on their business priorities and targeted customer base.

29. www.capgemini.com/financialservices www.capgemini.com/financialservices