Closing branches might be the right thing to do as long as you know what the impact of that closure will be on other channels. The wherewithal to build the right capacity in other channels, your relationship with the customer, potential future income and knowledge, just of how you will actually capture the cost savings. One of the only ways of ensuring this is by making sure you can actually integrate data from the many channels now available and the new ones that will develop. .This will require the FSP to have a CRM solution based on an SDW, that manages to hold "one view of the customer" (this is in line with "one version of the truth") that is trusted across the whole of that FSP.
Also Read: Excerpts from The Loyalty Effect
Another way of looking at customers can be from the standpoint of channel usage. In TSB before it merged with Lloyds Bank, data was sourced from both their SDWs then used to segment the customer base by service channel usage. Customers were allocated to segments on their usage of the following channels:
- ATM's
- Automated (Direct Debits/Standing Orders)
- Cards (credit and debit)
- Telephone
The information derived was used as a statistic for monitoring growth in channel usage and included in finance models evaluating requirements for new channel delivery methods.
There are many products and services on offer in electronic form, and some of the most advanced offerings are available in Europe:
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Current Account |
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Equities |
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In many cases, electronic services are informational in content or repetitive inactivation. The more complex transactions still it seems requires human intervention. Yes, some forms of insurance can be sold across the web and via a call center but the more complex or sensitive types of insurance demand face to face interaction. Investing seems to be another option than electronics can make easy, but often this is for the seasoned investor rather than those individuals that covet advice and desire some education.
Also Read: Competing on Affiliation
Through understanding the customer’s behaviors, banks have been able to better price products and create numerous new ways to treat different perceived customer needs and values. "If you understand how customers behave, and how they prefer to interact with you, you can redesign core product offerings" (Bobby Mehta Vice President Boston Consulting Group). Banks could now spot customers that were likely to defect and attempt to create customer retention programs. The whole basis of managing channels to their best advantage now hinges on the use of information. The more effective banks today use an SDW based customer-focused solution. I don’t say they use a CRM solution, as there are many views about just what CRM is. If it means the holistic approach of getting to a one-to-one relationship, then it has not been achieved yet. FSP’s are on the journey to CRM. Many vendors sell sales automation and call-center integration as if that is all there is to CRM. It just ain’t so!
If you want to move to a CRM approach to creating value, then consider channels as equal in their importance to the customer. Delivery channels must be viewed in terms of appropriateness to the task that the customer wants to perform. Therefore their value rests with the situation that faces the customer, and that creates the need to use a particular channel at a specific time. By understanding customer usage of channels and building models that reflect customer's propensities, actions and needs an FSP can start to build the appropriate infrastructure to support their customers' changing needs and the FSP’s economic needs. The situation creates the opportunity to use a channel, and the customer will choose the most appropriate or the one that is most attractive in terms of the value exchange between the two parties.
Given that, depending on the situation, the customer will choose what channel is the most appropriate for them. However, many of the channels are relatively new and are gradually growing in their use. The internet could be characterized as being a domain dominated by professional Males between the ages of 25-50 years old. Only recently has this domination of the Web begun to change. However, the concept of web usage follows what the economist Brian Arthur calls "Increasing returns." Simply put by Kevin Kelly in his book The New Rules for a New Economy; increasing returns are a tendency for that which is ahead to get further ahead; for that which loses an advantage to lose further advantage. This may sound to be just another obvious truth, but the growth of the new networks is changing the way we are living and will live.
However, there is still room for thin branches, non-traditional branches, supermarket branches, and kiosk branches n this bright new future. "While Internet sales may be effective for a certain segment of the population, not everyone wants to do business that way. Some want to be in touch with their insurance advisor," says Jimmy Hagood, a senior insurance advisor with Wachovia. "So, while we're on the cutting edge of the industry, we are also going back to the proven way of helping customers develop long-term relationships," he adds. So while the FSPs move in cyberspace, they realize that people still need people. Customer service is more than merely the efficient handling of a transaction; it often needs that human touch which even means face-to-face meetings!
It does not matter what channel you use; you still need to identify the customer is really who they say they are. Some have begun using a smart card with photos of the individual superimposed on the card. Visa has gone further by also having the customer's fingerprint on the chip so that a reader can verify the identity of the holder. This is an attempt to really identify individuals as such. Coupling this information with an SDW based CRM solution makes sense. Yet there several technologies that must be considered.
New technologies such as biometrics seem to hold out great promise for both the old branch and the Internet. Customers want to be treated as individuals, yet their only means to date has been the smart card or personal recognition in the branch. Although there are means such as photographs on the card to really identify you as you. It is still possible to commit fraud, as the plastic card currently is not sufficient personal proof of individuality. Biometrics has recently shown us that you can at last genuinely treat individuals as such. Now, there are three types of biometric devices on offer: scanning the iris, fingerprints, and the face. The first FSP to implement iris recognition technology was Bank United in Houston, Texas in 1966. Over the last 30 plus years, there have been many experiments with this technology, but no overwhelming take up. The fingerprint recognition systems are being offered by several computer vendors as a means of identifying computer users rather than for proof of an individual's rights to personal financial transactions across the net or in a branch. As described above, others are combining smart cards with photos and the fingerprint data held on the smart card chip. This technology is seen by many, however as physically intrusive as is iris recognition. The currents favorite to sweep the market as a means of really identifying individuals without intrusion are facial biometric systems. Using neural networks, these systems and the database it checks against can hold multiple images of the subject to enable correct identification over time.
Facial biometric recognition can be used over the Internet for home banking and individual purchases. However, with no standards for Internet usage, it may take some time for it to become an accepted part of doing business. FSP branches seem to be the ideal venues right now for facial biometrics as do kiosks and ATM’s. Currently, for security purposes, many FSP have installed cameras in their branches. The addition of another will not prove too intrusive and will enable for the first time since there were real "personal bankers" for the staff of the FSP to recognize the customer as a real individual. This carries over to how the customer can now be treated in the branch, at the ATM or over the videophone from the kiosk. Information relating to the customer that is stored for this purpose is brought into use. It could be an opportunity for a sale, to provide information or just to reaffirm the relationship.
The information to support the branch and other channels comes from an SDW based CRM, a futuristic vision that sees the channels as a unified whole rather than separate islands or semi-integrated ( like branch and telephone-banking) parts held together by string and ceiling wax. By bringing all the data from the different channels together and making it available in a suitable form to the different customer interfaces, both humans and systems the FSP can effectively support customers across those channels as individuals. By further analyzing the data by first turning into actionable information, then by modeling into knowledge that enables individual customers to be treated in different ways.
The branch is not dead; it is changing into just another channel. Technology that enables customers to use different channels allows innovative FSPs to create a new face to face experiences in old and modern settings. Everything is based on the idea, however of using customer information in support of a customer relationship vision.
Michael Meltzer
Quote
"The future of Financial Services lies with companies that have the capability of creating mass-market products and services tailored to each individual customer’s need and which can be delivered anywhere and everywhere the customer is."
—Tom Peterson
Former Vice-Chairman,
Bank of America
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