global perspectives in retail banking blog

Branch notes from the field

Global Perspectives in Retail Banking.

Produced by the Deloitte Center for Banking Solutions

Deloitte Center for Banking Solutions

Global Perspectives in Retail BankingBranch Notes from the Field

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Table of Contents

First Look at London — Surprises In-Store .......................................................................................�

Self-Service Reigns in London ..........................................................................................................3

The Flowers and Trees of Amsterdam Branches ...............................................................................4

Madrid Day One: Many Branches, Few Hours ..................................................................................5

Madrid Day Two: Trust and Transparency .........................................................................................6

Sweepstakes and Outside Sales in Dubai .........................................................................................7

Australia’s Unusual Branch Species ..................................................................................................8

ForewordMany financial institutions, large and small, have renewed their focus on putting the “retail” back in retail banking. They are examining the structural factors that make retail banking work, including branch location, look and feel; the customer experience; and the skills of the branch sales force. Some banks are even going so far as to hire greeters and mobile sales specialists as staff professionals.

As part of our commitment to contribute to the body of knowledge about retail banking, the Deloitte Center for Banking Solutions periodically conducts international field research to see how banks worldwide differ in their retail strategies.

In 2007, Scott Burgess, head of Deloitte Consulting LLP’s banking practice and Chris Gill, a senior manager in the same practice, visited over 30 financial institutions in Europe, the Middle East and Australia. Their observations, contained in this report, were first published as a blog within the American Banker website and chronicle some of the innovative retail banking practices that can help differentiate the customer experience, draw more traffic to the branch, and strengthen customer loyalty.

In the coming months, the Center will introduce a series of forward-thinking articles aimed at “Reinventing Retail in Banking” and providing possible solutions to the challenges vexing the industry. The first report in the three-part series to be released this spring, entitled “Catalysts for Change: The Implications of Generation Y Consumers for Banks,” addresses the unique values and specific strategies for targeting Generation Y as a bank customer. For many institutions, this will involve a fundamental rethinking of their channel, marketing, and product strategies. Stay tuned for more, but for now we hope you find our latest study insightful, thought-provoking and valuable. Sincerely,

Don Ogilvie Independent Chairman Deloitte Center for Banking Solutions



How are banks around the world maximizing the value of bank branch networks, differentiating the customer experience, strengthening customer loyalty, and offering distinctive value propositions in their chosen markets?

A tour of banks and retailers in London, Amsterdam, Madrid, Dubai, Melbourne, and Sydney offers visitors a look at a variety of branching strategies.

In London, signs in the window of a branch of one of the world’s largest retail banks tout product offers identical to those consumers would find in Manhattan or Des Moines, such as fee-free transactions and extended banking hours. However, do these value propositions actually drive customer loyalty? Are they the best offers to differentiate a branch in the U.K.?

London’s ATMs clearly offer a much-higher degree of functionality than those found in the U.S., but a display read “out of service” can quickly translate in consumers’ minds to “no service” or “poor customer service.”

Even though London banks promote their extended hours, branches are closed on Sunday. However, most retail stores are open on Sunday and offer more than just merchandise. At one U.K. grocer, instead of tabloids and chocolate bars at the check-out stand, consumers will find brochures offering credit cards from a grocer-affiliated bank. The credit cards charge no interest and personal loan offers invite consumers to borrow £75,000 for less than £150 per month – an interest rate of only 6.9%.

Banks have had a presence in U.S. grocery stores for years, but not like this. Loan brochures from the grocer’s bank contain a few surprises, including an optional three-month repayment holiday, a credit “decision in minutes” and a “cheque in �4 hours.” Consumers can even get loan repayment insurance in case of sickness or unemployment.

As in the U.S., the credit card brochure offers a “money-off voucher” to enjoy in the store when consumers sign up, a teaser rate in balance transfers, and a stylish card.

It is doubtful that consumers will find tabloids and chocolates for sale in the lobby of U.K. banks when they reopen for business on Monday.

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First Look at London — Surprises In-Store



London offers consumers a broad range of retail banking experiences.

The Deloitte LLP team started off on its around-the-world tour of bank branches in London with a blast from the past – a stop at an old style private bank that has been serving wealthy clients since the late 1600’s. Upon entering the building, they meet the facilities manager, who tells them about the history of the bank and gives them a book documenting the official history of the institution. The branch itself is like something out of a Charles Dickens novel, with an imposing teller area adorned with marble, mahogany and lined with gold trim in addition to well groomed bank staff huddled over their computers in an area not accessible to customers. It feels more like a library than a bank branch.

A short taxi ride away, London also has bank branches firmly rooted in the �1st century, designed to minimize human contact and to get customers to use lower-cost channels.

At one 600-square-foot teller-less branch of one of the large building societies (similar to a savings bank), a bank representative greets all customers, answers their questions and shows them how to use the two advanced multi-function ATMs in the lobby. Customers feed their checks into the ATM, see an image of the check on the screen, and then get a copy of the check image printed on their receipt. However, customers wanting to open a new account have to wait in a cramped space in the back of the branch before meeting with the sole new account representative.

Taking this self-service concept much further is a newly renovated branch operated by one of the top three banks in the U.K. It has 15 self-service devices inside and outside the branch: on one wall are several cash-dispensing ATMs, two devices for scanning check deposits, and two devices for scanning cash deposits. On the opposite wall of the branch are two stations linked to the bank’s call center, two Internet stations allowing online banking transactions, and two touch-screen kiosks enabling customers to pay bills and transfer funds. A bank staff member roams the lobby of the branch, welcoming customers and showing them how to use the self-service equipment.

During the busy lunch period, it is not unusual to see twice as many people use the self-service devices as opposed to those that are conducting transactions in the small teller area, which

Self-Service Reigns in Londonconsists of two stations for retail customers and one for business customers. What is striking about this branch is not only the dominant self-service orientation, but also the lack of sales messaging in the high-traffic lobby of the branch. The sales area itself is tucked away in the back of the facility and seems deserted at times.

The retail experience changes radically when consumers visit any of London’s leading retail chains. One such store has a large flat-panel monitor 10 feet inside the entrance that displays the amount of time it takes to get through the check-out line. There are sensors located in the ceiling that monitor the number of customers in the store and adjust the estimated wait time in response to changes in customer traffic. Once the wait time reaches 80 seconds, the store opens another check-out station.

Wouldn’t this concept be great for branches with long teller lines? If customers saw it would take 15 minutes to make a deposit with a teller, perhaps they would consider using the ATM.

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The Flowers and Trees of Amsterdam BranchesThe Deloitte LLP team started their Amsterdam tour in the central city area walking around looking for branches to visit. What a challenge that turned out to be! The team had read about how the Dutch were active users of self-service channels, but still expected to see branches on every block like what was observed in London and large U.S. cities. It is even hard to find an ATM.

The Dutch have taken a different approach towards retail banking, integrating bank branches into their retail postal locations. Such branches consist of a small counter at the back of the building where people can get information on financial products and services and open new accounts. Surrounding the branch space are a number of merchandising displays with brochures on financial products. The only place where customers can perform transactions was at the ATM near the branch.

Much more interesting is a new branch recently opened by bank that has a reputation for being one of the more innovative banks in the Netherlands. Upon entering the building, consumers are welcomed by one of several greeters stationed in the lobby to answer questions and direct traffic.

The lobby also has a towering artificial tree with signs dangling from its branches promoting the bank’s loan specials. The tree is part of the bank’s spring promotion, called “Grow with Green.” The bank plans to change out the displays throughout the year. The lobby has a large self-service area that is in active use.

One of the devices in self-service area is an ATM with a bulk note acceptor for cash deposits. When asked if a customer could deposit a check at the ATM, the greeter replies that “Checks are old-fashioned. Only people in the U.S. and the U.K. still use checks.”

The self-service area also has a rolled-coin dispensing unit designed for small business customers. What a great way to service the needs of local merchants in a cost-effective manner. These high functioning ATMs eliminate the need for small

business customers to stand in the teller queue in the early mornings and late afternoons.

The most unusual aspect of this branch is the sensory experience it creates for customers. The scent of fresh flowers permeates the first floor, thanks to several olfactory machines located discreetly in the corners of the self-service area. And while some branches pipe in music, this one has the sound of birds chirping in the elevator, which is wallpapered to reflect a pastoral scene.

The second and third floors of the branch are dedicated to sales, with the top floor restricted to private banking and business customers.

In addition to the unique physical approach that this bank takes in its branches, it is the first in the Netherlands to offer its customers mobile banking services, including funds transfers between accounts. Through a relationship with a cellular provider, the bank offers a calling plan with no minimum contract length and customers can choose from a wide range of phone models, several of which are on display in the branch. It will be interesting to see how many customers sign up for service through the bank.

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Madrid Day One: Many Branches, Few HoursThere is no shortage of retail bank branches in Madrid. In the San Francisco de Sales neighborhood, for example, there are nine branches in a half block radius alone.

The Spaniards love their bank branches. In fact, branch density in Madrid is more than four times greater than it is in Chicago and New York. However, consumers better conduct their banking early in the day; after a late Spanish lunch, people would be hard-pressed to find a branch open.

Madrid’s branches are typically fairly small, averaging no more than 1,500 square feet, with only one or two teller windows in addition to three or four sales desks. The average branch in Madrid only has four full-time employees, which certainly helps keep branch costs down.

Getting into the branch can be challenging. Some branches have what is called a secured entry vestibule, otherwise known as a “man trap,” that prevents people from entering the branch with weapons. One of the Deloitte LLP consultants actually had a hard time getting into one branch in particular. After repeatedly taking things out of his pockets, he is finally able to get inside only after discovering that his eyeglasses are setting off the metal detector.

When Spanish consumers use their credit cards, they can receive a text message with the transaction details on their cell phone within a minute of making the payment. Apparently, a number of banks offer this service to alert customers about ATM or debit/credit transactions over a certain amount. Wouldn’t that be a nice service to have at home.

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Madrid Day Two: Trust and TransparencyIn Spain, it’s not unusual to hear people talk about not trusting their financial institutions. In fact, some Spaniards trust their local supermarket more than they do their bank.

Some of Spain’s savings banks are addressing this lack of trust by creating customer ”charters” outlining the bank’s customer service commitments. One bank in particular, whose motto is “If you’re not happy, we’re not happy,” has issued a commitment with 17 different points, each of which entails a financial penalty if the bank fails to meet the commitment. For example, commitment #9 states the bank will respond to formally submitted customer complaints within two business days. For each day of delay, the bank would reimburse the customer five euros, up to a maximum of 50 euros.

The bank issues an annual report on compliance with its customer commitments and its action plan to improve customer service against each of the 17 commitments. Last year, the bank paid out 1.� million euros to more than 5,600 customers for failing to meet specific commitments.

Another savings bank is taking an even more radical approach to increasing customer trust. This bank intends to share with its customers the profitability of each client’s relationship to the bank in an effort to increase transparency and strengthen customer trust. It will be interesting to see how their customers react when they receive this information, particularly those customers who generate the most profits to the institution.

This particular institution also is distinctive in the market with respect to its new branch design. The bank is looking to reposition its branches as ”canchas,” which, loosely translated, means ”playground,” or a place where customers can relax, surf the Internet, read the local newspaper, and enjoy a cup of coffee. Under this new model, the branch becomes a more social part of the local community. The lobby of the branch is an open space that can be used by customers for presentations or meetings. For example, one business customer, a photography store, held a seminar on digital cameras, while a nearby salon conducted a session for women on better use of cosmetics. More than 400 different activities have already been staged in the bank’s branches across Spain. Each branch has a budget for

these activities and is given freedom to experiment with different types of sessions. Customers are still getting accustomed to this new type of branch. The design is so unique compared to other branches in Madrid that some customers who enter the building ask, “Is this a bank?”

This branch also has some other features not widely seen elsewhere. The computers in the branch are equipped with webcams that enable customers to have face-to-face discussions with mortgage or investment specialists operating out of a centralized location. The bank is even considering using the technology to communicate with customers in their home or office and eliminate the need to come into the branch. In addition, branch sales representatives don’t have their own desks, but instead use one of the conference rooms in the branch when they need to meet with customers. Even the branch manager doesn’t have an office, although she has a small private workspace.

This bank is also notable for donating more than 40% of its pretax profits to charitable causes in the communities it serves. Equally noteworthy is the fact that the bank allows its retail and small business customers to decide how the profits they generate get distributed to specific charitable organizations (“You choose, you decide” is the bank’s motto). Using a touchscreen flat panel display in the branch linked to the Internet, customers can get information on more than 1,600 different charitable projects related to education, health, culture and other causes. They can also see how many customers contributed to each project and the value of their contributions.

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Sweepstakes and Outside Sales in Dubai Dubai is a land under construction. Just about every major intersection has a new skyscraper being built. In fact, six buildings with more than 100 stories (one twice the height of the Empire State Building) are currently in either the construction or planning stages.

Dubai’s banks are about as busy as the city’s construction sites. On any given business day, one large branch has at least �5 employees and an equal number of customers. What is particularly interesting is how the bank manages customer expectations with respect to the wait time to see a teller or a personal banker. Upon entering the branch, customers obtain a token from a dispensing device located near the entrance that assigns them a spot in line. Customers are then free to sit in the large waiting area, which has 30 or 40 chairs, to wait their turn. An LCD monitor hanging from the ceiling displays each customer’s place in the queue. Interestingly, the bank’s premium customers are bumped up in the queue ahead of mass-market customers.

This branch is more the exception than the norm. Some of the larger banks are focusing on optimizing their distribution networks and tailoring their branches to different segments or types of locations. On one end of the spectrum, some have built more automated branches, such as mini-branches located in shopping malls, which are smaller in size than U.S. supermarket branches. Others are building locations with space dedicated to their affluent or small business customers. One bank in particular has several branches with lounges and conference rooms that their premier or small business customers can reserve for meetings. On the other end of the spectrum, one of the large banks is planning to build a “financial mall” location where different lines of business (e.g., retail banking, brokerage, mortgage loans, car loans, etc.) will have their own storefronts in the same building, similar in concept to how retailers owned by the same company have stores in the same mall.

Dubai’s banks also seem to have a greater focus on customer segmentation than banks elsewhere. In particular, several have increased their focus on women due to the wealth that has been inherited by many female customers. One bank has a product package (with the tagline, “A style of banking that

celebrates your femininity,”) that offers women a free coupon book providing discounts at local retailers as well as lectures, events and educational seminars. This same institution also has a package called “New to the UAE,” which is targeted at foreign nationals arriving in Dubai. This package includes various products, including checking accounts, personal loans and insurance. With the increase in U.S. immigration, it seems obvious that U.S. banks could benefit from offering a similar package.

With respect to sales and marketing, two things in Dubai really stand out. The United Arab Emirates society is very promotion-oriented and sweepstakes contests are commonplace. At least two of the large banks have ongoing sweepstakes offering the chance to win up to 5 million dirhams (about $1.4 million) for customers opening savings accounts with as little as 1,000 dirhams (approximately $�75). Customers can get additional entries by depositing larger amounts into their new accounts. These sweepstakes, which are offered either monthly or quarterly, depending on the bank, apparently have been very effective in attracting new deposits. Banks in Dubai should consider themselves fortunate that the regulators allow these types of contests, since they are not allowed in the U.S.

The other interesting characteristic of retail banking in Dubai is the importance of outside sales forces. In one bank, only 10% of new accounts are generated from walk-in branch traffic. The remaining 90% comes from the efforts of outside sales reps who either focus on specific product categories, such as credit cards and car loans, or target human resource managers at local companies to obtain the banking business of employees (similar to “bank-at-work” programs that some U.S. banks offer).

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Australia’s Unusual Branch SpeciesAustralia is famous for its abundance of animals found nowhere else in the world, including the kangaroo, koala, platypus, emu, and wombat. It also is home to some unique concepts in branch banking.

In Sydney, for example, brightly colored Volkswagen Beetles sport the logo of a major bank. The vehicles are driven by mobile sales specialists, who visit consumers in their homes to pitch mortgages, car loans and other personal secured loans. Several banks do this, each featuring a distinctive color scheme on its traveling billboard. It’s their way of competing against direct marketers of financial services that are making inroads in the Australian market.

Another novel approach is the “Bank@Post” program. More than 70 financial institutions have collaborated with Australia Post, the national postal system, to provide their customers with transaction services. Bank clients can conduct personal or business financial transactions, including deposits and withdrawals, account balance inquiries and credit card payments, at all 800 system-operated facilities. Bank@Post also is available at Australia Post’s 3,000-plus agent locations across the country in retail outlets, such as pharmacies, dry cleaners, news agents, and even pubs. Many of these agents serve small towns or rural areas that lack other banking options.

While five major banks dominate the Australian banking scene, the story is very different in the vast reaches of the sparsely populated interior. Branch rationalization and consolidation over the years have left many small towns with no banking facilities.

One Australian bank’s “community bank” model focuses on providing branch access in underserved communities. The bank works with communities seeking local banking services to establish a branch operation, overseen by a board of directors with members from the community. The bank allows the “community bank” to use its name and identity system, and provides the back office infrastructure and establishes appropriate credit standards. In turn, the community runs the front office, including staffing, sales and marketing. Profits are divided equally by the parties, and the “community bank” typically reinvests its share in projects that benefit the entire community.

A more traditional approach to franchising is used by another major bank to extend its branch network into new markets. Rather than incur the expense of building a branch from scratch, the bank works with franchisees who invest their own capital to establish and operate a branch. The bank charges a franchise fee for the use of its brand and back-office support, and the franchisee retains any profits generated by the branch.

These franchising arrangements appear to be working well for the Australian banks, but regulatory constraints may limit the usefulness of this concept in the U.S.


Global Perspectives in Branch BankingBranch Notes from All Over

The Road Ahead

The purpose of this study was to present new ideas and to stimulate thought concerning possible options for responding to the powerful market forces that are assailing financial institutions today. This is the first in a series of research pieces that we will be producing over the next few months that analyze in more detail the changing role of branch banking and the initiatives that banks are utilizing to bring this about. We will also be visiting other countries to add to our case studies of innovative approaches banks are utilizing to target customers more effectively.

As evidenced by the multitude of examples we found, banks are becoming more in-tune with their customers and increasingly creative in how they go about meeting their needs. While the effectiveness of some of these techniques has yet to be proven, the collective implications of them are profound. Financial institutions, particularly in the U.S., must transform their branch networks. This means going beyond incremental improvements to develop a unique, differentiating and compelling value proposition. This will take time, investment, and most of all, a willingness to set aside preconceived notions of what a traditional bank can and cannot do for its customers. The branch networks that develop a truly customer-centric orientation by reinventing retail in banking will likely be the ones that ring up the most revenue in the long term.

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Global Perspectives in Branch BankingBranch Notes from All Over

Authors

Scott BurgessPrincipal Deloitte Consulting LLP+1 703 �51 [email protected]

Chris Gill

Senior ManagerDeloitte Consulting LLP+1 704 887 [email protected]

David CoxDirector of ResearchDeloitte Services LP+1 �1� 436 [email protected]

Industry Leadership

Jim Reichbach Vice ChairmanU.S. Financial Services Deloitte & Touche USA LLP+1 �1� 436 [email protected]


Don OgilvieIndependent ChairmanDeloitte Center for Banking [email protected]

Laura BreslawExecutive DirectorDeloitte Center for Banking SolutionsTwo World Financial CenterNew York, NY 10�81+1 �1� 436 50�[email protected]

About the Center

The Deloitte Center for Banking Solutions provides insight and strategies to solve complex issues that affect the competitiveness of banks operating in the United States. These issues are often not resolved in day-to-day commercial transactions. They require multi-dimensional solutions from a combination of business disciplines to provide actionable strategies that will dramatically alter business performance. The Center focuses on three core themes: public policy, operational excellence, and growth.

To learn more about the Deloitte Center for Banking Solutions, its projects and events, please visit www.deloitte.com/us/bankingsolutions. To receive publications produced by the Center, click on “Complimentary Subscriptions.”

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This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

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Center for Banking SolutionsAbout the Center

The Deloitte Center for Banking Solutions provides insight and strategies to solve complex issues that affect the competitiveness of banks operating in the United States. These issues are often not resolved in day-to-day commercial transactions. They require multi-dimensional solutions from a combination of business disciplines to provide actionable strategies that will dramatically alter business performance. The Center focuses on three core themes: public policy, operational excellence, and growth.

To learn more about the Deloitte Center for Banking Solutions, its projects and events, please visit www.deloitte.com/us/banking solutions. Copyright © �008 Deloitte Development LLC. All rights reserved.

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