The Bankwatch

 Interesting survey noted here at Finextra, completed by McKinsey.  It indicates web services, and internal p2p, collective intelligence activities are preferred over wikis’ blogs and podcast’s. 

More than 75 percent of the executives said they plan to maintain or increase their investments in technology trends that encourage user collaboration such as: peer-to-peer networks, which allow for efficient file sharing; social networking; and Web services, which make it easier for different systems to communicate with one another automatically.

Source: Execs prefer Web services, P2P to mashups, wikis and blogs | News.blog | CNET News.com

Of particular interest to this blog, is that both North America, and Financial Services lag the general groups. 

Just to be clear, what they refer to as Web 2.0 is defined in the report, and it provides a useful list.

Relevance to Bankwatch:

Online Banking has the side effect of eliminates the personal interaction between Banks employees and customers, that used to occur in branches.  Yet Banks have focussed on branches as the key to retaining that contact, referring to ‘bricks and clicks’.  Little technology effort has been devoted to implementing ‘bricks and clicks’, aside from CRM, with mixed results at best. 

Web 2.0 technologies provide some hope to regain a degree of customer contact, and recognise the new drivers of customer loyalty, yet Banks, generally, choose to disregard the opportunity, citing, security or brand concerns as an excuse.

 TNS have been consistently measuring since 1994.  While their numbers always look low to me, they are relevant for trend watching.

60% of Canadians online, have signed up for online banking, and 37% use online banking in the past month.  53% visited a branch, and that’s the lowest number ever as the trend goes down.

The traditional bank branch continues to lose ground in Canada as consumers conduct more day-to-day transactions at self-service banking machines (ABMs) and over the Internet, according to an annual tracking study by TNS Canadian Facts, a Toronto-based marketing research firm.

Source: Finextra: Canadian bank branches losing ground to online channels

But they make the final point about preferences that I believe is too general, and doesn’t reflect all segments.  In addition, I believe this last point is as much the failure of Banks to properly implement online services in a trusted and meaningful way that would exceed the Branch experience.

“Canadians continue to prefer to go their branch to make RSP contributions and to acquire financial products, such as new accounts and mortgages, than to do so by phone or online,” she states.

From FinServ ….  Barclays are bringing in fresh non Bank, and people with less traditional bank background, to rejuvenate their branch network. 

…..  hired Helen Dodd from Tesco

Source: FinServ Blog : Barclays — Serious about Retail Banking

I think this article from the Calgary Herald, misses the point, and demonstrates a lack of research.  

RBC’s plans contrast with those of U.S. retail giant Washington Mutual Inc., which said last month that it is de-emphasizing branches to focus on the Internet.

WaMu plans to close 63 branches in Atlanta and Chicago, for example, in favor of driving customers to cyberspace to open and manage accounts.

Source: BankNet 360 - TOP STORY: Oh Canada! RBC Plans Major Expansion

WAMU’s decision to scale back in Chicago follows a frenetic expansion plan only to realise the local market is hyper competitive.  Contrast that with Canada, where following cancellation of proposed Bank mergers, all the Banks went into deep branch closures.  With that behind them the opportunity in Canada is wide open to move into markets that are actually under represented by Bank branches.

PS:  The plan to expand its branch network by 100 or more offices between now and 2010, is not a major expansion.  That’s 25 branches a year, on a base of over 1,000.

In a reversal of recent trends, building branches is becoming popular, in order to attract market share and deposits. 

Royal Bank, the country’s largest bank by assets, may build as many as 112 branches in the next four years, Chief Operating Officer Barbara Stymiest said today at a CIBC World Markets investor conference in Montreal. Scotiabank, the third-biggest bank, plans to open 30 branches next year, Chief Executive Officer Richard Waugh said at the same conference.

Canadian Imperial Bank of Commerce, the fifth-largest bank, said last month that it plans to open or expand 70 branches in the next five years.

Source: Canadian Banks & Insurance

112 branches will cost $1.7 Bn, and add $170 million in annual expenses.  The increase represents a 10% increase in branches, so that suggests that the other 90% of branches have to support the 10% over the 5 years it takes for them to develop profitability.

I keep going back to the “23 branches in 3 months (using Internet)” story and the “Bank for every block (and empty)” story whenever I see this return to branch building.

High street retailers are losing ground to online sales, and this is clear now.  It doesn’t matter whether you are looking at clothes or entertainment (movies and music), the picture is the same.

But the key question is whether these initiatives will be enough to stem the decline in their traditional businesses. It will clearly be a struggle. Last week’s trading statement from HMV, which also owns Waterstone’s, showed that sales were down 3.7 per cent over the last 12 months. Others are suffering too: while Next could boast a 15.3 per cent rise in sales of its Directory mail order business - almost half of which now come via the Internet - that was not enough to compensate for the 7.5 per cent decline in sales at its high street stores, some of which were doubtless disappearing online.

Source: The Observer | Business | Internet’s new wave threatens to wash the high street away

However, I think the headline is misrepresentative of both the problem, and the solution.  This is not one of those straight line trends that ends in zero high street shops, and 100% online sales.  No-one in their right mind would suggest that.  Cool people just have too much enjoyment looking cool while shopping and trying things on (music or clothes).

The key is balance. What is the right balance between high street and online.  Now this is the problem that retailers and banks share.  Its not a situation that has an endgame either.  It will be iterative and hard to get right.  Welcome to the new world of shopping!

Relevance to Banking:

The conundrum that faces us in finding the right balance of bank branches alongside our online and call centre offerings, is a problem shared by all retailers.

 Just when we thought things were going well, this story comes along.  Its clear the road of change is rocky, when the change is business model level change.

Emile Sanchez, MD, BT Global Services finance industry solutions, says the future for retail bank branches clearly lies in turning employees from tellers into profitable sellers, but technology needs to be at the heart of this strategy.

“For employees to provide the level of expertise and customer support needed to make high value services sales, the best technology is going to be vital for both interacting with customers and providing an efficient way to re-train staff,” says Sanchez.

Source: Finextra: UK banks look to expand branch networks

This is such a vendor view of the world.  I hate to pick on this one, but if you are willing to go live with a press release, expect the debate.

The issue is not as simple as transforming employees.  That would assume each employee has a brain switch on their back, that we can simply flick and transform the person from a transactional employee into a sales employee.

Anyhow the other element in this press release is the move to increase numbers of branches.

EIU says between 1995 and 2003, banks in the UK closed nearly one quarter (22%) of their branches. But now nearly half of the 190 banking executives interviewed for the survey say their firms intend to increase the number of branches in the next three years, with one in five saying investment will increase in this area by more than 20%.

Relevance to Bankwatch:

Banks have to understand that technology change will not change employee behaviour.  Its fundamental first understand the business process(es) that you require, and that will then drive appropriate change in people, process and technology.  Change must be driven along all axes.

This is pretty far out stuff.  IBM have built a $250 million Bank of the future in Singapore to illustrate the technological future for Banks. 

The facility includes a surveillance system that monitors how much time customers spend in different sections of the branch and to what extent they are viewing product displays, biometric authentication devices that recognize users through the veins in their fingers, and automated teller machines that take deposits and recycle the cash for dispensing.

Source: BankNet 360 - Big Blue Creates ‘Bank of the Future

No pictures yet, and I am really curious to see the details.  I located some more on the announcement, but no real details yet.

http://www.antara.co.id/en/seenws/?id=20537

Also some additional reading on the topic that showed up in my search.

http://www-03.ibm.com/industries/financialservices…

http://rbd.doingbusiness.ro/ibm_sept06.htm

http://news.webindia123.com/news/articles/Business…

http://whitepaper.banktech.com/cmpbanktech/search/…

Technorati tags: bank+of+the+future, banking+strategy

I am intrigued by the differences in consumer acceptance on each side of the Atlantic.  To what extent are those differences grounded in culture, or security methods or some other factor?

# 7 September 2006

Online banking is gaining in popularity in both the US and the UK, although visiting a branch is still the preferred option for many, the latest research suggests.

According to a survey carried out by UK-based Lloyds TSB, over half (54 per cent) of British banking customers prefer banking online to visiting a branch, with the desire for privacy and discretion concerning banking issues cited as the most important reason. In the US, however, the picture is slightly different, with research from the American Bankers Association showing that only 26 per cent of customers banked online as their first choice, Associated Press reports.

Despite this being an increase on previous figures, visiting a branch was found to be still the most popular way to bank in the US, with nearly a third (32 per cent) ranking it as their preferred banking method. The increasing use of online banking services looks set to continue, however, with the research showing that younger generations are happier with Internet banking than older people.

Source: Bobsguide - Increase in online banking popularity

tags: online+banking, security, branch

 More on WaMu, specifically Chicago.  They expanded in Chicago only 3 years ago.

Washington Mutual Inc., which moved aggressively into the Chicago market in recent years, is now closing branches in the area. The Seattle-based bank plans to close 28 of its 172 Chicago-area branches, mainly in Lake and McHenry Counties as well as in other outlying suburbs. An estimated 168 jobs could be affected by the closures.

WaMu’s deposit market share in the Chicago area is 0.3 percent, the same as Rockford-based Amcore Bank, which has only about two dozen Chicago-area branches, and Elgin-based EFS Bank, which has about 10.

The retrenchment in the Chicago area is part of a broader consolidation under way by the company, which is in the process of closing 80 poor-performing stores nationwide.

Source: Washington Mutual steps back | Chicago Tribune

tags: wamu