The Bankwatch

Fascinating post on the value of brands, and importantly how that value is developed. I highlighted the Lou Dobbs section, yet that doesn’t do justice to this thoughtful post.

Irving Wladawsky-Berger: The Complex Chemistry between Brands and Customers – Some Personal Experiences

As we know, Lou Dobbs has emerged as one of the major spokesmen rallying against illegal immigration. He has embraced what I consider to be a polarizing, red meat style in his tirades against immigrants, blaming them for all kinds of societal ills, some perhaps justified, others not. Clearly Lou Dobbs is entitled to his opinions, as I am to mine. In a free country with lots of choices, I simply do not have to listen to his program, Lou Dobbs Tonight, which is prominently shown on CNN seven days a week from 6 – 7 pm.

Increasingly, my feelings toward Lou Dobbs Tonight are spilling over toward CNN, which for many years has been my preferred source of news. CNN is a brand I have held in high esteem for a long time. But now I am upset at CNN for giving the angry, strident, divisive views of Lou Dobbs such prominence – although perhaps disappointed may be the more accurate description of my feelings.

The broader point here is that, implementing a reaction to other brands, that you feel are beating you is a bad idea. The Dobbs example is exemplified by the (inexlicably high) ratings of Fox News. Its apparently linked to taking a strong view, and voicing strong opinions. CNN levered the value and credibility of Dobbs, and promoted his book, and encouraged him to voice strident views including town hall promotions of his book.

I have no comment on his book, nor his views. The thoughtful Irving is simply no longer a customer, because the valued the previously news based CNN, versus the opinion based Dobbs.

CNN are guilty of following the leader, and trying to beat the leader.

It only makes sense that brands need to be able to define their purpose and meaning. If they are losing, because that defined purpose is a loser, then so be it, but changing on a dime will alienate and confuse customers.

Well worth the read.

Technorati Tags: brands, customer+experience

 Bank of America has successfully become national, and is now changing its marketing tag line.  This is in keeping with their controversial recent new offerring targeted at new immigrants in the US. 

I expect this will drive some more innovation from BofA.

Having established itself as the only truly nationwide bank through a string of acquisitions in recent years, Bank of America is now taking steps to become more of a national advertiser. It plans a sharp increase in ad spending this year, with its first new ad campaign since 2003.

Source: WSJ.com – Login

 Phil’s article touches on several of the unspoken secrets of Banking that (today) ensures traditional banking drills down into the apparent secret sauce of wealth management for the few, yet leaves untapped the mass group that are sometimes characterised as ‘unbanked’ who represent significant opportunity.

Why?  The average bank will tell you behind closed doors that the ‘average’ annual profit per customer is in the range of $10.  This is the classic average with the lower end being a loss.  If you can add in a group such as unbanked at positive profit, you are basically off to the races.  Welcome to the immigrant banking war we are about to witness. (P.S. how the ‘H’ did I miss this in my 2007 predictions!)

El Banco de Nuestra Comunidad, which targets check-cashers by undercutting them. Imagine that!

Source: Phil Windley’s Technometria | The Longtail of Banking

News from Natwest, and Lloyds with introduction of Polish Banking.  This is in keeping with the earlier pieces we had on addressing immigrants’ needs and seeing that as an opportunity for market protection. 

I don’t see this so much as innovation, because anyone can do that.  However failure to implement such services, will doubtless result in reduced market share over time, as the population becomes more mixed.

Natwest says its new Welcome Account comes with a related money transfer feature that enables Polish customers in the UK to send money back home. Customers can transfer funds straight from the current account into the money transfer account. A family member in Poland, nominated by the customer, can then withdraw funds from the money transfer account from ATMs in Poland using a NatWest card.

…

Last week Lloyds TSB said it was transforming one of its Manchester branches into a city centre banking “superstore” designed to provide tailored services to all new immigrant arrivals, particularly the expanding Polish community in the city.

Source: Finextra: Natwest launches Polish account in the UK

 Payments News has a review of TowerGroup’s Cross-Industry practice 2007 report.  It identifies three macro trends impacting Financial Services.  These are interesting choices, that are different that the usual ones (except for 1).

1. Reinventing Financial Services: The financial services industry has been slow to reinvent itself in the face of an increasingly networked world. Without reinvention, institutions risk being disintermediated by nontraditional industries as new, previously unlikely competitors find their way into financial services. Rather than continuing to make tactical changes in response to shifts in the marketplace, successful firms will be those that consider how to reinvent the financial services institution from a blank slate — rethinking the full spectrum of products, services, and delivery options.
2. Repurposing Financial Services for Global Diversity: Financial institutions must begin responding more effectively to dramatic changes in a continuously shrinking world. Emerging economies will demand a broader range of product and service options to meet wider variations in customer needs and economic status. It is no longer acceptable to operate under a business model focused purely on shareholder value — meaning institutions must develop dynamic capabilities for serving a larger number of more varied and yet more modest customer relationships in a profitable way. Success will mean establishing a lifetime relationship with large numbers of people who were previously outside the normal scope of an institution’s services.
3. Restoring Confidence in an Uncertain World: News of security breaches, loss of customer data, identity theft, fraud, and terrorism has been disturbing to individual financial institutions and the industry as a whole. Meanwhile, none of the industry’s traditional risks (such as those related to credit, catastrophes, investments, or interest rates) have dissipated. To date, most institutions have pursued the single strategy of playing defense against the universe of global threats. Yet institutions have an obligation to take greater control by making an offensive foray into the global need for assurance, responsibility, and security.

Source: Payments News: Three Major Strategic Shifts For Financial Services – November 27, 2006

I find it interesting to contrast different research, so here is the IBM view from August.

IBM – Paradox of Banking – 2015

1. Focus on core strengths and partner for everything else
2. Optimize the potential of each customer relationship
3. Harness the potential of the workforce through effective performance management
4. Recognize that technology will be a critical element of success.

And … IBM why Banking Innovation matters now in November.

Retail banks can’t assume that the growth and returns of the recent past will continue. Amid a throng of banking competitors - including new market entrants, forward-thinking incumbents and non-banks - banks need to differentiate themselves in ways that are not easily duplicated.

To restore confidence and realize strong future returns, banks must set the stage now. It will require uncommon innovation to stand out from the crowd and adapt successfully to marketplace demands.

Analysis:

The three Tower imperatives are active strategies.

1. Reinventing
2. Diversification – new customer base(s)
3. Restoring confidence …

The IBM views in Paradox, are focussed on how to accomplish the strategies, and 1, 2, & 3 are quite aligned with Tower 1 & 2.  The IBM Innovation piece is focussed on the ‘why’.

Diversification:  this explains the push by all Banks to enter markets that they have traditionally ignored – unbanked, and immigrants.

Restoring Confidence:  This is long overdue for Banks.  Banks have recently reacted to phishing by introduction of security guarantees, and multi factor authentication, but it still feels highly reactive.  There is lots of up space to introduce new ways to manage risk, for example, by being on the consumers side with regard to credit. 

The total reliance on FICO scores and the almost real time updates to credit histories remains highly one-sided.  There is real space there for Banks to work interactively with customers to:

1. see their scores
2. understand how the scores are calculated
3. see the direct results within their score related to their credit history
4. learn how to manage their scores

Other areas that Banks can proactively work with customers are in interest rate management.  Today each rate and the terms associated with the rates are individual to each product.  This seems like old thinking, and Banks don’t manage their own products that way.  They are managed as portfolio’s … good customers should be able to buy hedging services that can be traded against credit or deposit products to protect against interest rates.  Of course it would need to be simple and avoidance of the word hedging would be a good idea.

Just a couple of ideas that could fit in the “Restoring Confidence in an Uncertain World” category.

Some fascinating insights into the the strategy of Bank of America. A national franchise, vs state by state.  This is s consequential statement given that Bank of America have a similar number of customers as the population of UK – 55 million customers.

McGee: We’ve been running this business, consumer and small business, as a national business for about five years now. The decision that we faced at the time was whether to become a national franchise or, like most of the other large banks, run it market by market, state by state, etc.

Source: BAI Online | Banking Strategies | September/October 2006 | Investing in the Franchise

To Bank of America, strategic clarity is “making a difference for customers” by providing a consistent level of service and responsiveness across the company’s vast coast-to-coast franchise

The quotes just get better and better ….

We also made the decision to run a more integrated business. We’re different from almost anybody you’d compare us to in that our distribution channels — banking centers, online services, call centers, mortgage sales force, etc. — really work with the product groups in an integrated fashion, with the customer in the center. Most of our competitors run those businesses as silos — the card business is run as a silo, the mortgage business, etc. We’ve run a very integrated model for a long time, and that’s also helped us prioritize against the things that mattered for customers and for our teammates.

And this quote is as memorable as any … again remembering how big they are:

Q: How do you reduce complexity on the frontlines? You’ve got so many products, so many different divisions and services. Do you tell your branch people to focus on just a few?

McGee: We have tended to focus on a few products that we think are the most important for customers and drivers of growth. That doesn’t mean that associates don’t do other things. But it’s easier when you give them a context for what’s important for the customers and what’s important for the shareholders.

It wasn’t always popular at the beginning to do that because some associates might have been focused on other things. But, all of us have learned that if you can prioritize and simplify, the entire boat rises. If you try to be everything to everybody, then no one does well.

The ability to develop a laser like focus down to every front line employee, is a strategic advantage.

Q: Who is that single point of accountability?

McGee: We have five people who run our almost 6,000 stores, and four of the five are responsible for the high growth markets and the fifth the community markets, wherever they may be across America. Under each of them are region executives, the people the product groups are really accountable to—to get the right product, the right process and have that mutual accountability.

Five people – 6,000 branches (stores) – wow!  I know banks in with 1,000 branches, and 15 – 20 people responsible, without counting the SVP’s, VP’s, directors, & senior managers who also are involved.

Finally the positive aspect of dynamic tension:

Q: So, the dynamic tension comes in the discussion and give-and-take between the product groups and the regional executives?

McGee: Well, it’s not at all dissimilar to the classic retail market. You take any retailer and they interact with product manufacturers who want shelf space. The retailer has an accountability to put the product in the right space and sell it. But the retailer will hold the manufacturer accountable if the product does not deliver to the specs ordered and at the price point.

We are very much emulating that dynamic tension. It’s very different from having a head of cards who is only thinking about his or her bottom line. We have an integrated team that really has the new and existing customer as the focal point. So in our company, you have to be very good at running your business or area discipline, but you have to be equally good at balancing that with what’s the best thing for our customers in our enterprise.

That’s why you’ve seen a lot of innovation coming from us in the last couple of years, such as Keep the Change, Mortgage Rewards, Business 24/7 and Safe Send. Take Keep the Change, for example. The reason we were able to do that is, first of all, we spend a lot of time talking to customers. One of the things Six Sigma has taught us is to be very disciplined about the voice of the customer.

Relevance to Bankwatch:

The article is worth reading.  Its a standard bearer for how to organise, and implement across a (very) large organisation.  You are probably smaller than Bank of America, so no excuses.

Read the rest of this entry »

I started to reply to a great comment question to this post on Wal-mart, and realised this deserves a post.

The question from Jeff was “Can this in any way be used as an end run around the opposition in the United States?”, and Jeff started it off on his blog here.

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I have to think it cannot be a co-incidence that Canada and the US are right beside each other. However Canada is tiny (32 million pop) at 10% of the US in population.

When I listened to Jane Thompson speak she went out of her way to demonstrate that the Wal-Mart efforts were intended to provide synergy with their business model, that included, the “unbanked consumer”, and transactional efficiency to support their own payments. The argument being that this is not a space the banks are active in anyway. Of course the American Banks’ don’t buy that.

So the Canadian effort could be an effort by Wal-Mart to demonstrate to the American regulators that the American Banks’ fears are misplaced, and no need to worry.

Time will tell, but these are fascinating plays. My take would be that anything which dilutes the Banks’ efforts is bad for Banks but good for consumers. Its not that I think Banks need to go out of there way to encourage competition, but its a fact that competition will drive efficiency and effectiveness. And its no co-incidence that CitiBank are currently peddling their international payments capabilities to the home countries of North American and European immigrants. Banks everywhere recognise that the demographic shifts arising from immigration require strategy changes.

So bottom line, and just my opinion, but Wal-Mart is a machine.  With sales closing in on $ 350 billion annually, and net profit closing in on $12 billion annually, they can dictate the markets they play in, where the regulations allow them.

There is a real thread developing amongst banks and their strategies, as they realise their marketing to home nationals misses immigrants.  And immigrants form a large part of every country’s make up now.

 Here is a further update on the Canadian Banks efforts to develop market share amongst “new Canadians”.

In order to reach them, RBC too has set up a multilingual website and can facilitate non-resident account openings online. The site averages about 5,000 hits a month.

“The Chinese version is already about 35 per cent of the traffic,” Whitmell said.

“We’ve launched that so that anybody, anywhere around the globe has the ability to initiate that relationship with RBC – even before they arrive in Canada.

Source: NEWS. TALK. SPORTS – 570news.com – Big banks compete to court immigrant clientele; market worth about $3B a year

Banks are using all kinds of activities to attract immigrants:

For its part, Bank of Montreal (TSX:BMO) plans to hold free seminars in Hong Kong and mainland China in the coming months to brief prospective immigrants about Canadian banking, taxation, education, real estate and culture.

Prior to their departure, new Chinese clients are able to establish personal deposit accounts in Canada while also arranging MasterCards, banking cards and residential mortgages.

“We want to be proactive,” said Peggy Sum, BMO’s senior vice-president, Asian market. “All those things are important for settlement.”

There is real incentive to attract new immigrants because their profile is generally positive.

Immigrants, however, are generally encouraged to bring enough to support themselves for at least six months.

That’s creating a lucrative opportunity for Canadian banks given the high savings rate in some Asian countries. In China, that number is high as 40 per cent compared to a negative savings rate in Canada.

Relevance to Bankwatch:

International migration between countries is significant, and unstoppable.  The profile of those migrants is strong because they are advised or required to bring deposits with them for self protection and support. 

I wanted to explore further my earlier post on why new immigrants provide an enormous opportunity for Banks.  I have been having a good discussion today in the comments with Reynold (thank you!) which made me realise I wasn’t clear enough in laying out my thinking.

Clearly immigrants backgrounds required different approaches, based on different cultures and attitudes, but here I am speaking about the size of the opportunity relative to traditional marketing.  Also I am looking here at new business opportunity, not share of wallet.

Continuing with Canada as an example there are 220,000 – 256,000 (2005) new immigrants annually.

Canada has about 10 million “bankable” households.  Of those, churn runs about 10 – 15%.  This would be people moving, dissatisfied with their bank or accepting an offer from another bank.  That churn accounts for 1 million - 1.5 million new bank sales annually.

The new immigrants of which 60% are economic immigrants, i.e. skilled and or business class, represent a pool of guaranteed new customers for someone.  They are new so they have to open a bank account somewhere.

256 / 1,000 (assuming 10%)  represents a 26% increase in the size of the marketing audience.  But if your marketing tactics are designed to attract people in the 1,000 category, i.e. traditional locals, then by design your marketing is missing 20% of the market.  In fact its worse than that, because the 1,000 comprises existing residents many of whom are recent immigrants (2 million immigrants between 1996 and 2005).  Therefore traditional marketing will be missing 20 – ?? (50% perhaps) of the market.

The more I think about this, the opportunity here is very significant.

 This is a tough problem to have.  Lots of cash, and seemingly buoyant customer economics suggesting more profit growth. 

“Yet here we are in 2006 and the banks look stronger than ever, — ageing Baby Boomers and a lot of enthusiastic immigrants.

“There’s a good steady wind in the sails of the industry,” says Robert Pearce, president and chief executive of personal and commercial clients at Bank of Montreal. That steady wind will only get stronger with favourable demographics, he adds.”

Source: “Canadian Banks & Insurance – Mozilla Firefox”

The baby boomer wealth transfer has been long predicted for the last 20 years, and now its coming through big time.  Bank are in a great position to take advantage.

Its good timing to review some of the core activities that have been covered here recently.  This is precisely the time to invest in strategies for the future, that fit with the reality that is upon us, yet its not clear Banks’ are doing so. 

Some obvious activities:

1. automate lending activities:  the demographic shifts require less need for lending, and combined with the commoditisation of mortgages, indicate cost elimination in this sector is essential. (nice tie in to yesterdays debate, which began here and continued here with James)
2. automate all branch transactions for self service. Examples are passbooks, statements, cheque images, complete bill payment capability including bill presentment, interactive financial messages (account alerts), CRM fully integrating online and branch, online and ATM sales referrals, online account opening.
3. re-engineer the call centre. Answering the phone is a waste of time for 90% of todays calls, and all we do is irritate customers.  Call centres should be focussed on sales, and levering  click to talk and here.
4. re-engineer branch design.  Future branches don’t need vaults, and tellers.  But that’s not an overnight shift. 

What is not in the list >>>  more branches.  We don’t need that, at least not yet.   We may require more ‘feet on the street’ but lets understand branch design, and capabilities of current physical networks first.

tags: bank+strategy, online+banking, branch, call+centre, re-engineer, bpm