The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Branchless’ Category

We will not hear about bricks and clicks after this recession

Deloitte pick up on an interesting characteristic of banks here. Cost cutting occurs during downturns, but its spend spend spend when things are looking good.

Banks rarely get to the point of incremental efficiencies that they note here. Citi are a classic example as noted in the FT this morning.

This fits with the view that this change we are undergoing is not just another blip before we return to business as usual. There is no business as usual coming. The future is smaller, framed in different business models, contains a greater mix of small business, and smaller companies and with retail consumers working harder, longer and for less money.

All this points to realignment of the banks’ models to be more efficient, more effective in customer interaction, and more automated, with much greater reliance on online banking and mobile banking, with less on branch banking.

This time we will not hear about ‘bricks and clicks’ as we did in 2002.

Improving Efficiency: The New High Ground for Banks | Deloitte

The turmoil in the financial markets, coupled with the economic downturn, is fundamentally altering the financial services environment. In this new world, improving operating efficiency has become a competitive necessity. But while financial firms have typically moved quickly to reduce costs when the business cycle is contracting, far too often these efforts have been quickly forgotten when business picks back up.
In this report, we present research conducted by the Deloitte Center for Banking Solutions demonstrating the critical importance of operating efficiency to the fortunes of financial firms. Among the findings is that building efficient operations is not enough — steady, continuous improvement in operating efficiency are required. In fact, banks that have achieved continuous improvements in efficiency have also generally experienced far greater gains in their share prices.

Written by Colin Henderson

May 22, 2009 at 10:59

Where are the bank visionaries when we need them?

As we watch for bank stress test results in the US and other countries efforts to deal with Banks’ asset valuation and capital levels, its useful to keep a track on the economic back drop, and assess the bank’s efforts to address their real problem, which is over-valued assets.

The US stress tests specifically address the impact on banks under certain sets of future assumptions for economic growth and stability.

Spring forecasts 2009-2010 | European commission

The Commission forecasts a sharp contraction of the EU economy by 4% in 2009 (relative to a positive growth of 0.8% in 2008). Almost all EU countries are severely hit by the worsening of the financial crisis, the sharp global downturn and ongoing housing market corrections in some economies. However, with the impact of fiscal and monetary stimulus measures kicking in, growth is expected to regain some momentum in the course of 2010 (annual growth forecast for 2010 stands at -0.1%). Figures are essentially the same for the euro area as for the EU as a whole. These figures represent a significant downward revision compared to the autumn forecast and the interim forecast of January 2009.

spring-forecast-2009-publication15048_en [pdf]

So far the news is not good.  We have US, Japan, and now EU all noting significant downward adjustments to their forecast for 2009.  Magically, they all seem to agree 2010 will be just fine.  2010 aside, the consensus for the big three are 2009 GDP drops in the 4 % – 6+ % range.

Here is an extract of the baseline forecasts used by the Stress tests, contained in their methodology document for SCAP (Supervisory Capital Assessment Progam).

SCAP Economic Assumptions

The short view is that the assumptions for GDP growth in 2009 are approximately 1/3 of the latest forecasts.  Put another way 2009 is going to be 3 times worse than the forecast used in SCAP.   This is only May, so one can only assume that on a probability scale the opportunity for additional downward revisions are as possible as any other prediction at this stage.

The debate amongst BofA, Citi and the government on whether they ought to raise $5Bn in capital is ridiculous, and counterproductive.  As the economic forecasts show, the amounts required are not going to be debated in the $1 Bn range – this needs vision that produces 10’s or 100’s of billion in improvement such that the organisation can leap ahead of the economic crisis and look out 10 years, not 1 month, which seems to me to be the current landscape for banks.

Incidentally, to place $5Bn in perspective, Merrill Lynch paid out $3.6 bn in bonuses at the end of 2008.  Geithner should not even take a phone call from any bank who wishes to discuss anything thats less than $20 bn.  A debate over $5bn is ludicrous.

All this to say, that banks are stuck in a classic rat hole and surrounded.  Which bank and which leader will step up with vision for the future that carries banks on beyond 2011?

Relevance to Bankwatch:

Banks need to take a leaf out of Sergio Marchionne, Fiat chief executive’s book.  He is in Germany this morning proposing a deal that will take advantage of the current climate, and look to take advantage of infrastructure provided by Vauxhall, Chrysler, Opel and Fiat to structure an effective platform around car types that consumers actually want and need, ie smaller, cheaper and more efficient.  Already he is getting positive reaction to his plan, and these meetings only took place today (Monday).

He hopes to complete the transaction by the end of May, and list shares of the new company, tentatively called Fiat/Opel, by the end of the summer.

Mr Marchionne said Fiat and Opel would reap synergies of €1bn a year by merging their small B and midsize C segment car platforms, and absorbing Fiat’s ultra-small A platform and Opel’s upper-middle D platform.

Note the timing – he is going to do this in one month. This new conglomorate will involve hard decisions and layoffs.  This is the hard reality of the adjustment required for the new economy.  Getting through the crisis is not a return to 2007.  It is a fundamental shift to a smaller and different economy.

Where are the bank visionaries now?  Are they becoming so bogged down worrying about beaurocratic discussions with their new government masters and defending bonuses and perks that they have lost sight of the real goal?

Written by Colin Henderson

May 4, 2009 at 09:09

What does recovery mean for Banks?

Banks are at the centre of the economy.  Business and consumers conduct their day to day business using money and they do this through banks.  Stating the obvious you may say?  This is why I study the economy so closely and try to understand how it will look in the future, because that has a direct relation to how banks will look in that future.

We are in a crisis of debt.  It is a debt crisis because consumers and businesses are over-leveraged.  Their debt is too high relative to todays asset values.  Asset values have decreased by 25 – 60% in the West, whereas debt has reduced only minimally.

So what do we see around us that offer substantive clues to our near term future for banks?

  • US economy reducing at annual rate of 6.1% – this has to be contrasted to growth rates of 2 – 3% pre crisis, so thats an almost 10% shift being experieinced
  • Lithuania today seeing a 12% reduction in its economy
  • Germany seeing 5% – 6% and talk of rioting on the streets, which of course will do no good except create panic
  • Citibank and Bank of America today finally wisening up to the reality that they cannot grow out of their leveraged position – they must contract out of it by selling stuff
  • corporate jets becoming an embarrassment rather than a status symbol
  • Allens & Overy (lawyers in the City) introducing a ‘cull’ of 10%
  • 80 – 100% growth in managerial and professional unemployment (UK)
  • General Motors in Canada cutting dealerships from 794 down to 400 – 400 within one year

These headlines are all point in one direction.  Less is the new reality.  No-one knows precisely where the new balance will level off, but it is certainly going to be at a level less thn we saw at the peak in 2007.

A smaller economic base results in less of many other things that probably still have to happen;  less restaurants, real estate agents, accountants, grocery stores, plumbers, construction workers, and of course bankers and banks.

Relevance to Bankwatch:

Operating in this new environement will require new thinking and recognition of new opportunities.  This will be the time (for banks) to not just accept internet but to insist on internet as a core component of the business to drive efficiencies.  It will require fresh looks at old ideas that were squandered away and hidden by the excesses of the good times, eg:

  • # of branches required?
  • style of branches required- which services will be offerred?
  • what is the the role of tellers in the new operating model?
  • is it time to eliminate cheques ?
  • is it time to bring commercial banking into the and up to the same degree of automation as consumer banking?
  • Why is business banking still being done by cheques and deposit books?
  • What is the role of Head Office?  How many are required to invent bank accounts, mortgages and loans?

In a smaller and more efficient world, new competitors will be prodding away at banks’ business model.  I watched many of the presentations yesterday at FinovateStartup09 and was struck by how they all in some way chipped away a part of banking from banks.  Whether it is Tempo and their de-coupled debit card, or Wesabe and Micronotes pro-actively helping consumers spend wisely, or Prosper and Lending Club introducing “Securitization 2.0′ (online secondary markets with clear line of sight between debtor and creditor),  the coming of Web 3.0 is imminent and in a form that banks may not expect nor be prepared for unless they act now.

RBC speak about convergence for EBPP and statements

The commentary here from Colin McKay, vice-president of e-business architecture RBC in this video interview, is refreshing to hear from a Bank.

RBC discusses client reporting and customer statements | IT World Canada

Some notes from the interview, then commentary and discussion:

  • Old process had product and IT groups generating 18 separate statements in different formats but most ending up in print
  • each statement feed was formatted specific to the output, eg, print or web
  • each of the 18 had their own processes
  • all 18 feeds have been directed to a common store, and stored as raw data
  • the 18 raw data feeds from the core systems, are now amalgamated into a “Common Composition Engine” (CCE)
  • CCE can output in any format to print, web
  • most customers do not read statements, so the current practise of storing all in PDF format is wasteful and inefficient
  • CCE will eventually be offerred on demand, and on request, this could be PDF on demand, or web on demand
  • the Customer Preference Engine will allow customers to aggregate the data of their choice, including marketing messages,and product messages into a customised statement in the format of their choice
  • uses Telephone companies as an example of information display versus statement format.  The notion of a statement is being challenged by the web experience, and is redundant for many customers
  • He speaks of Electronic Bill Payment and Presentment (EBPP) and social networks.  “people go into town and do multiple things, vist grocery store, hardware store, and the bank;  there is a desire to conduct multiple business transactions at social networks in the same way;  what we are seeing is a convergence”

Relevance to Bankwatch:

Great interview but that last point needs some discussion.  But first with regard to the problems of multiple products and statements, the solution to the problems all banks face is clear, and he articulates it well.  The notion of on demand and in the format and design by the customer makes sense.

The notion of a social network as being analogous to “going into town to conduct business” requires some thought though.  In the real world we have Wal-Mart with photo, bank, restaurant as well as their core service of merchandise.  We have malls, with a variety of stores and banks.  We have Main St with a variety of stores and banks.  Finally we have other cities and countries that we can visit to conduct transactions.  The nice thing about the web is that it can be all or any of those.   It seems to me if we use this analogy, that the town is the web, and the concept of malls, stores, banks, and big box stores are all sites within the web, exemplified as different types of aggregation or not.  An we can get to that web using laptops, PC’s or mobile.

Customers will gravitate to the methodology of their choice, but they will require help to visualise how that future might look.  There is scant evidence that Facebook is viewed by users as that place for convergence and aggregation, or the place where they go into town to “conduct business transactions”.

In fact the evidence suggests that people are avoiding those things that get in the way of their social interaction at Facebook.  My own observation is that the jury remains out as to a desire for people to aggregate financial information anywahere except with their FI.  I know this contradicts the general movements of convergence and aggregation on the web, but so far financial services have not been pulled that way by people, which is probably dirven by privacy, security, and identity theft concerns.

Having said that it is possible if RBC display how that might work in a safe secure and convenient and non-intusive manner, that customers will accept receiving their bills and reminders inside their Social Network environment, alongside their social conversations (but obviously hidden from the view of others).  Or is this more of a channel need?  Aggregation at the device level, ie PC, mobile?  In any event its a great conversation and the rioght conversation that RBC are promoting here.

Thoughts?  Do you want to receive your statements, bills and notifications elsewhere than say at the bank site, and in your email?  If so where and how?

Written by Colin Henderson

April 15, 2009 at 11:06

Branch redesign – saviour or anchor?

The always insightful Paul Penrose picks up on a terrific theme here that should as they say have legs.  Out of crisis normally comes innovation usually driven by forced choice than desire.  Banks are being squeezed in many ways, and one major one is resorting to reliance on regular retail and commercial banking as their core business (imagine that!)

The bank branch – weakest link or saving grace? | Finextra – Paul Penrose

Sean Park’s Sixth Paradigm blog refers to a recent editorial piece in the FT bemoaning the poor standards of customer service in high street bank branches.

Sean is currently setting up an investment venture called Nauiokas Park to invest in start-ups with the potential to bring innovative, disruptive approaches to bear on traditional business lines.

With that in mind Paul points out Sean Park and his investment venture focussed on innovative disruption in traditional business lines. 

The catalyst was this dour piece in the FT that while it may not all apply to every bank, no bank cannot see some part of itself here. 

Some classic quotes from this:

  • Public services at their best now outperform the banks – so government ownership could actually improve bank performance.
  • Banks use the internet as little as possible to avoid fraud; instead they use the post, in which letters are lost or stolen, and the telephone, which is overloaded and often fails to give results after interminable waiting times.
  • Banks claim to have cut costs by taking operations out of their branches into customer services, but the level of service has been cut even more. Banks are like hospitals. The more you cut nursing staff to save money, the less service you can give patients.
  • Banks have made it almost impossible to use branches. With great difficulty I discovered the name and telephone number of my branch manager, only to find that a letter I wrote to her had been intercepted by "customer services", who passed it to her a couple of weeks after deciding that they could not deal with it – nor could she, incidentally
  • The new British model of state-run banking might save banking jobs as well as banks themselves if it gave new scope to branches. Another possible model is one in which current accounts get a decent interest reward and banks are allowed to charge for services. "Free banking" has turned out to be ruinously expensive for many customers.

Anyhow, Sean goes on apparently to be setting up “a place where ideas and capital meet;  a space at the intersection of financial services, markets and technology.”

Relevance to Bankwatch:

The door is wide open for innovative design and shifts in financial services.  Clearly there are gaps in the current service model, some banks more than others, but all banks nonetheless.  Working harder at the current model sounds like Einstein’s definition of insanity. [Insanity: doing the same thing over and over again and expecting different results. Albert Einstein]

What of the design of the branch and the branch customer service model.  This puts me in mind of a piece done by Online Banking Report, 2 1/2 years ago entitled  “The Demise of the Branch” which took the view that the value in the branch is being eroded, and the long view suggests that alternative strategies are required if banks do not wish to be left in a few years time with a costly anchor around their balance sheets.

Written by Colin Henderson

November 11, 2008 at 00:22

Direct Banks exhibit 20% market penetration

This is a fascinating statistic, especially when we see that the income levels of the participants are 50% higher than the average.

Net Banks Gain One in Five Internet Households – 02.01.2008 – Bank Technology News Article

The survey of 1,032 Internet households found the average age of an direct-banking user is 47.8, with an average income of $99,200 a year – compared to the average online banking user who is 52.1 and earns $60,300 annually

Written by Colin Henderson

February 6, 2008 at 12:38

The Bank of the Future | some thoughts on the world of cross-channel sales and marketing

 Just prior to the recent NetFinance conference I was lucky enough to be asked by Dan at eStara to answer a few questions, which were posted on their blog.  Its been a couple of weeks now, and thought I would place them here too. 

Meantime please check out eStara and their blog.  They do a good job at covering many aspects of multichannel development, and not getting caught up in promoting their own products, which incidentally are good, as I can attest from personal experience. 

Anyhow here is the email interview we did, and I relate this to my earlier post on Bank of the Future.

This week, hundreds of financial services executives from all over the world will gather in Phoenix for the 6th Annual Net.Finance Conference to discuss issues pertaining to the marketing and sale of financial products and services. One of the speakers at this year’s event will be Colin Henderson of The Bank Watch blog. Colin, who was formerly director of channel optimization at Bank of Montreal, will be presenting at this year’s conference on Web 2.0, and how banks can incorporate new media and technology to enhance their customer interactions. Recently, we asked Colin a few questions about what banks will be like in the future:

eStara: In your blog, The Bank Watch, you state that the channel efforts of banks ought to be focused on Internet, and then levered across other channels. Explain why you feel this way, and how banks are handling this transition to the Web lifestyle?

CH: This is way to start thinking about things differently, to catch up with customers, yet still maintain old loyalties. Listen, I know that Banking is all about risk aversion. Its about keeping multiple stakeholders happy, both inside and outside the Bank. Generational change is not new, but the rapid rise of internet, means this generational shift that we are going through is new. Telephones took 38 years to reach 10 million mass market customers, cable TV 25 years … www took less than 5. When we overlay that pace of change with GenX/Y/M folks you have an instantly trained generation. That’s a first. Their expectations are not like previous generations (including me). So we have to learn from them, listen to them and be ready for them. By 2011, the net generation will comprise 50% of the working population – that’s only 2 years away in planning/implementation, and execution time.

So, back to the question … by building for internet now, and adapting as required for others, we are aligning the organization for customer expectations.

eStara: How do you feel banks are integrating the online customer experience with their call centers and branches?

CH: With Call centres, I think pretty well. Most are still wrestling with organisation, do you put email people with telephone people, with click to talk people etc, but that’s a healthy discussion. Branches are different .. they are generally still in 1985. Part of this is regulation, and concerns for privacy and confidentiality. The irony is that customers and branch staff are corresponding about banking using email, whether its allowed by Bank rules or not.

eStara: From a customer service and support perspective, how do you think the banks of the future will meet the needs of consumers?

CH: I will take that as ‘should’ meet the needs, because frankly some will and some won’t and will suffer accordingly. Broadly, banks’ will do a better job at being there all the time, as required for their customers. I recall once, an old visionary Banker talking about the ideal future Bank. He said its like a genie in a bottle, your own personal genie. Banking is boring and being in the bottle most of the time is just fine. But at that moment, in a shop, purchasing online, after a phone call – whatever the catalyst, if you need your Bank, you need them right now. It goes from not even on your mind, to instant need. So the good banks will be there, via wireless, online, phone to a certain extent, to provide an answer. Some say this is too expensive, but to me that’s an execution issue.

eStara: You’ve worked in banking in the U.K., Canada and the U.S. Are there any unique challenges in each country? What are some of the shared challenges?

CH: North America is very conservative, conventional. I attended a conference in Geneva in February, and I have to say the interest level in new ways of doing things, including particularly financial services is very high. Its a space I am watching closely.

As a final note, I wanted to mention Web 2.0 and blogs, and before everyone’s eyes glaze over – there are new opportunities there now for Banks to experiment, at low cost, with alternative methods of engaging customers, and consumers. The immediate reaction is often, “It’s too high risk and what about our brand image?”

But that train has left the station … people are already talking about your Bank online. If you do a Google blog search on your Bank, its remarkable … I did one just as I was typing this, and took something at random, on page 10 of the search. It was ‘Dave’ writing about the families of deceased soldiers in Afghanistan losing life insurance, because a war clause invalidated mortgage insurance:

Here is a snippet (Feb 2007):

…she was initially told she would likely not be able to collect on her mortgage insurance because of a war exclusion clause.

She pursued the issue with officials at the Bank XYZ, who issued the policy near her home at New Brunswick’s Canadian Forces Base Gagetown, and was told they’d look into it.

While awaiting an answer, Customer, who has two children under the age of 15, was forced to continue paying her mortgage. Four months later, she says the bank revealed it had no such exclusion clause and would begin payments.

My point is not the specifics here, horrific as they are. The point is that these discussions are occurring online. There were three comments on that blog post, but none from the Bank in question … what a fantastic opportunity, to right a wrong … missed, gone forever. That customer could have been the most loyal customer advocate for that Bank…now how many people will she tell the opposite? Meantime the customer communications group believe that the televised story earlier that week, is over, and phew!, we managed our way through that will minimal press

Source: Thought Leader Q&A: Colin Henderson, The Bank Watch, on The Bank of the Future – Multichannel Musings – Insight into the world of cross-channel sales and marketing


What you are reading about mostly, at Bankwatch

Here are the stats for the last 30 days ranked by page views for individual posts.  These stats are based on clicks to an individual post.  It won’t count those who read something on the main page.  So its directional only.

Wesabe is the clear winner by several lengths.  Other observations:

  • future oriented works for most
  • Second Life/ virtual is popular – something new and original
  • Banks without branches intrigues
2007-02-15 to Today 
Title                                                                                                Views

Wesabe leads the way in all financial services  235  More stats

How to web 2.0 your bank  163  More stats

Banks in Second Life – worth a look  105  More stats

Cashedge OAO is the tool of choice for h  85  More stats

Web 2.0 companies, versus poor old Banks  79  More stats

“Techcrunch » Blog Archive &r  70  More stats

Hostile takeover attempt in Credit Union  63  More stats

Online only Banks (branchless Banks)  59  More stats

Building the Bank of the future: you can  56  More stats

ING introduces OurVirtualHolland within     55  More stats

Wesabe – brief review of their ‘goals’ a  53  More stats

Wells Fargo enters MySpace  50  More stats

DirectHuntington – but opportunity to ex  46  More stats

Conchango suggests brand damage is Bank’  43  More stats

The end of the cash era |  41  More stats

Rethink from Unspace  36  More stats

Bankwatch predictions – Banking 2007  34  More stats

How much does it cost to build the best   33  More stats

Credit Cards are not customer focussed  25  More stats

QR codes – we have lots to learn  22  More stats

Banks’ brands fail against Landor breaka  22  More stats

Prosper Membership Leaps to 200,000 and   21  More stats

Finextra: Lloyds TSB launches debit card  19  More stats

Saxo Bank enters Second Life  19  More stats

Evolution of the web out to 2029  17  More stats


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Written by Colin Henderson

March 16, 2007 at 19:52

Banks in Second Life – worth a look

Its still pretty basic stuff but after following Reuters into SL today, I rooted around and found some Bank stuff.  I couldn’t find Wells who are supposed to be there, but I’d blame my SL search capability for that.

The Reuters site was cool.  IBM have a basic careers location, that links out to their web site.


I’ll follow this and post more.


Written by Colin Henderson

February 20, 2007 at 22:00

"TNS Canadian Facts" – online banking and ATM stats 2006

 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.


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Written by Colin Henderson

February 13, 2007 at 19:21

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