Rethinking Retail Banking

 By Justine Castellon

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The lifeblood of the banking industry is retail, and it’s no surprise that some of the best innovation and strategic focus take place at the magical place where actual consumers meet actual banks. Retail banking to those who are not well-versed to banking and finance is a typical mass-market banking which aims to be the one-stop shop for as many financial services as possible for the retail customers.

Executive retail banker Dwight Lawrence T. Leyco explains retail banking as banking that provides direct services to consumers. “This includes savings and checking accounts, mortgages, personal loans, debit/credit cards and investment products,” he says.

Leyco, the first vice president of Sterlingbank of Asia, further explains that retail banks, however, try to make themselves into a one-stop shop for banking customers. This increases customer retention and loyalty, ensuring that the bank has a steady supply of customers. Expanding banking services also provides more opportunities for the bank to turn a profit.

“We witnessed the emergence of retail banking in the global front in the banking business in the last couple of years. This section expanded to other services apart of personal banking,” said Leyco, who often shares his insights and best practices for retail banking. He added that various retail banks have even made a push into investment services such as wealth management, brokerage accounts, private banking and retirement planning. These services are intertwining with core retail-banking accounts like cash management to allow for easier transfers and maintenance.

As retail banking pose in the spotlight, it captured the center stage in the strategic focus of any banking business. During the interviews, Leyco shares his direction in going forward, and outlines how retail banking should use not only innovation in technology, rather, the more fundamental factor—the organizational innovation—and the old-school ways of banking to provide a better banking experience for retail customers.

Keeping pace with tech change

“In recent years, the financial services industry has been characterized by increased global competition, the transition from paper-based to electronic products,” says Leyco.

The relentless trek of technology has allowed banks to extend the scope of their activities and increase their operational efficiency and automating critical functions such as credit checking and loan approvals.

Furthermore, the rapid growth of electronic payments has prompted the adoption of new technologies that store and transfer critical information in real time.  Leyco explains further that due to the rapid technological progress, the changing behavior of customers and target customers has become a critical consideration for banks.

“As the cost of personal computers becomes affordable and the arrival of alternative mobile gadgets, customers are increasingly interacting with banks in a virtual world, as well as through traditional channels such as branch visits. As a result, banks that fail to innovate and compete effectively across all channels may risk losing market share to a new generation of tech-savvy competitors,” he says.

Institutions increasingly use technology as well in customer segmentation to tailor services to the needs of specific customer groups. By keeping pace with technology change, banks increase their back-office efficiency, improve customer satisfaction and, at the same time, facilitate in controlling the cost of operations. Specifically, banks are moving toward consolidated architectures to manage transactions globally.

“This helps banks achieve a single view of the customer, create further efficiencies and support initiatives that significantly enhance the customer experience,” he says.

Developing, marketing winning products

Customers are always on the lookout for products that are suitable for their lifestyles. “It is best for the bank to offer a range of solution-driven and cost-effective products and services that cater to the different needs of individual clients,” Leyco says. “But you have to take into consideration that product slogans are not merely a lip service but a personal touch and a practice that is very much a part of every transaction your client make with the bank.”

Likewise, banks explore the use of new technology to appeal to a rapidly aging population, tailor services for younger customers and deliver personalized offers to individuals.

“Serving customers of all ages, from increasingly diverse backgrounds, with different levels of physical ability, banks must remain culturally and socially relevant in delivering the products to maintain their competitive advantage. One key to achieving this will be more sophisticated customer segmentation and the delivery of personalized services to customers,” he explains.

While most retail businesses such as supermarkets and drugstores have long targeted deals to individual customers using loyalty schemes, a large number of banks have yet to implement effective CRM strategies.

“As well as targeting products and services to customers more effectively, banks must prepare themselves for the commoditization of basic financial services. With lifestyles and brands prominent in the minds of consumers, the retail-banking market is open to accommodate different channel of distribution,” he says.

Leyco further explains that nowadays most banks expanded its channels through their ATM facilities everywhere, giving account holders faster, more convenient access to their funds, 24 hours a day. There is also the flexibility of bundling the checkbooks and debit cards—that can be used in payments to different merchants—in ordinary saving accounts for handiness in managing customers’ finances. A number of retail banks have already opened its door to phone-in and mobile services with complete call-center solution to support the back-end, while ensuring that front-end offerings, and marketing communications, are targeted effectively to specific customer groups.

Remaining socially relevant

Remaining socially relevant, while it is already cliché, will still push the bank in the next level.  “Customers would still love to be part of something big, and sharing the same principle to the brand they’re dealing with,” Leyco says.

Giving something back to the shared cause with the customers will further bolster the relationship building. “It is a way to connect deeper to your customers. Always remember that the world revolves around connections…and bankers love connections because it brings them business by word of mouth and it saves on their advertising budget,” he explains.

Consumers love connections because you will always trust an acquaintance’s opinions more than a total stranger’s. “This isn’t about dole out projects that you can leave behind after handling the check for donation, rather, a sustainable cause that is related to banking business such as awareness for financial literacy,” he notes.

Your relationship with your customer is very important. Therefore, provide all the advice and guidance they may need throughout the varying financial cycles of their life. This includes planning their savings, buying a vehicle or their first home, starting up a business, financing overseas trips, etc.

Get the basics right in the branches

Despite the technological advances, one of the most critical factors that determine the success of a winning bank is flexibility in its branch organization and improving the customer experience by instilling a culture of operational excellence.

“The secret to successful branch management is to get the basics consistently right: customer should be welcomed, appointment systems and sales processes must be sleek and very well organized, and render service must be fast and fluid,” says Leyco.

Moreover, he stresses that customer branding should be consistent. Regional and geographical differences should be taken into consideration, but they must coordinate with each other to ensure that every need of the consumer is met uniformly.

“The customers should be able to distinguish the bank’s personal touch—a good example is Sterlingbank of Asia’s signature coffee nook which serves overflowing gourmet coffee for customers,” he cites.

Improving the customer experience lies in making it a simpler and less frustrating process by minimizing the number of handoffs and bounce-backs. Staff should be trained to deal with all general inquiries and knowledge about the products and services.

“Dedicated specialists with training in key product areas should also be available. In addition, relationship managers should have access to customer records with details of prior calls; and a system should be implemented so that customers are not required to repeat their information,” Leyco says.

Getting close to customers and maintaining engaging relationships is essential in retail banking, but how do you do it? “Customer relationship management system becomes mandatory to enhance acquisition and retention while providing service, value and trust,” he says.

For hundreds of years, banks have been trusted with our most valuable possessions; however, customers are now skeptical about their bank’s integrity. Therefore trust to the bank cannot be compromise.

“There is a strong link between trust and face-to-face service delivery—the way you play on the front-end will determine whether you win the customers’ trust and confidence…or not,” he says.

Ultimately, respect for customers and excellent service levels are key differentiators as people choose which institution to bank with.

Maximizing the opportunities of emerging retail economies requires banks to tailor-fit its strategies and adapts with the changes in the corporate environment.  While no one can accurately predict the future, accurately, innovation continues to offer great potential for developing the financial services industry. This will support the convergence of banks and their networking infrastructures globally, increasing automation, reducing transaction costs, and helping to fight fraud. In addition, employees will collaborate seamlessly across the globe, reducing the cultural and language barriers that currently exist, and increasing overall productivity.

However, going back to basics such as extending great customer service from the front-end is a permanent road map to the future of retail banking.

Likewise, the retail banker of the future must plan for new customer profiles, must “catch up” with the emerging customer set and at a speed equal to that of the youngest, most active customers as much as tracing the evolution of bank technology and the parallel changes in customer behavior to arrive at the bank of the future.

“And while many of the core technologies are already in extensive use, the challenge for the future banker is to devise a coherent, unified strategy and delivery infrastructure supported by a qualified, motivated management team,” Leyco says.

(published at Business Mirror – october 10,2010)

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