Retail Banker International, looks at the marked shift in
the way retail banks distribute products and services. Self-service
channels such as ATMs and the Internet grow ever more
fundamental.
Distribution of financial products and services by retail banks
across the world is continuing to shift away from the branch and
onto direct channels such as ATMs and the Internet.
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This has not meant the branch is losing
its appeal: far from it. Banking groups are investing in and
growing their branches and physical distribution networks in
significant ways, including in many emergent economies where
exploitation of cheaper channels such as the Internet are making
more financial sense.
Recent branch investment programmes
announced include billion-dollar initiatives by Lloyds TSB and
Barclays in the UK, for instance, while State Bank of India has
said it wants to open 2,000 more in 2009 to serve its customers
better.
Make no mistake: the branch remains
crucial to consumer banking and banks are continuing to invest in
all aspects of them, from design and formats to information
technology and better sales tools.
Indeed, due to the major market mergers
and acquisitions that have happened around the world in 2008 in the
wake of the financial crisis, a new breed of ‘superbanks’ has
formed with vast, sometimes cross-border branch networks: Crédit
Agricole now has 11,095, for instance, Santander boasts nearly
14,000, BBVA has almost 8,000, HSBC some 10,100 and the new Wells
Fargo/Wachovia US giant, 7,000. The really big branch networks
remain in second-tier economies – Sberbank in Russia has 20,000
branches, ICBC in China around 16,000, for instance – and banks are
undergoing huge projects aimed at transforming these networks on
single platforms.
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By GlobalDataBut it is online and other direct channels
that growth in customer usage – and investment by retail banks – is
growing faster. JPMorgan Chase, which under the Chase brand now
operates the third-largest US retail banking franchise, has grown
its US branch network by a CAGR of 9 percent in the three years
2005 to 2007. It grew its ATM suite by a CAGR of 12 percent and saw
its ‘active’ online customer base increase by a CAGR of 18 percent
(from 4.2 million in 2005 to 6 million by the end of 2007).
It’s a similar story for nearly all banks
in mature economies, many of which report that more than 50 percent
of customer interactions now take place outside the branch.
UniCredit, for instance, operating in the
very branch-friendly Italian market, recently published figures
that showed 86 percent of withdrawals in 2007 were via direct
channels (up from 83 percent in 2006), as were 84 percent of tax
payments (up from 19 percent), and 72 percent of money transfers
(59 percent in 2006).
Again, developing markets are accentuating
Turkish banks such as GarantiBank and Isbank are showing themselves
to be aggressive adopters of multi-channel transformation
strategies, investing in branch networks while at the same time
incentivising customers to migrate onto direct channels. Isbank
says that while the Internet made up 16 percent of direct
distribution in 2004, it now accounts for 27 percent.
Over the same time period, the
branch:non-branch distribution split has changed from 52:48 to
41:59 – underscoring how important ATMs, the Internet and,
latterly, mobile phones have become.
Retail banking has been transformed over
the past five years, and distribution has been at the centre of
this transformation. New concepts in customer service and
technological innovations such as Web 2.0 is starting to take these
even these revolutionary aspects of the industry to new places and
new highs.
Banks like Bank of America, Wells Fargo,
Rabobank and Royal Bank of Canada are making sure they are abreast
of these ‘brave new world’ developments: Rabobank offers product
reviews, podcasts, vidcasts, blogs, forums, viral competitions and
so on online, and says it is working very well for it in markets
such as Australia and New Zealand.
Markets are changing, and so is retail
banking. Customer-friendly, technology-rich and marketing-savvy,
these are the traits of the leading players. And multi-channel
excellence – touching customers whenever, wherever, however.
