Wednesday 11 October 2006Wednesday 11 October 2006

3rd BANKSETA International Conference

3rd BANKSETA International Conference

Retail Renaissance: Retail Renaissance:

Bonding with CustomersBonding with Customers

Retail Renaissance: Retail Renaissance:

Bonding with CustomersBonding with Customers

Retail Renaissance: Bonding with CustomersRetail Renaissance: Bonding with CustomersRetail Renaissance: Bonding with CustomersRetail Renaissance: Bonding with Customers

• Retail banking is back in favour, with banks expanding their retail franchises. Banks reduce costs while at the same time providing great customer service by re-engineering the way we do business.

• Legislation has been introduced to protect the consumer and to address the needs of specific markets such as rural communities, retailers and cell phone customer bases that have previously been excluded. Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control."

• To what extent will these variables in the banking environment lead to product innovations?

• Retail banking is back in favour, with banks expanding their retail franchises. Banks reduce costs while at the same time providing great customer service by re-engineering the way we do business.

• Legislation has been introduced to protect the consumer and to address the needs of specific markets such as rural communities, retailers and cell phone customer bases that have previously been excluded. Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control."

• To what extent will these variables in the banking environment lead to product innovations?

BackdropBackdrop

• Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control." Resonance - The Money Report compiled by Illuminology, an independent research consultancy

• ‘Investors are no longer prepared to unquestioningly accept advice of financial experts - they want to take control of their financial destiny”

• Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control." Resonance - The Money Report compiled by Illuminology, an independent research consultancy

• ‘Investors are no longer prepared to unquestioningly accept advice of financial experts - they want to take control of their financial destiny”

Proposed ApproachProposed Approach

ShiftShift• Consider that shiftConsider that shift

• Evaluate where the banks are nowEvaluate where the banks are now

• See if there's a gap between that and See if there's a gap between that and where they should be (opportunity)where they should be (opportunity)

ShiftShift• Consider that shiftConsider that shift

• Evaluate where the banks are nowEvaluate where the banks are now

• See if there's a gap between that and See if there's a gap between that and where they should be (opportunity)where they should be (opportunity)

Where the banks were Where the banks were

In 2000 the environment was quite different • Financial institutions not yet fully on the

government radar screen- self-regulation• 80-20 rule i.e. on assumption that 20% of clients were

responsible for 80% of sales volume and conversely that 20% of the clients were responsible for 80% of the hassle, one didn't bother with low revenue/high maintenance clients.

In 2000 the environment was quite different • Financial institutions not yet fully on the

government radar screen- self-regulation• 80-20 rule i.e. on assumption that 20% of clients were

responsible for 80% of sales volume and conversely that 20% of the clients were responsible for 80% of the hassle, one didn't bother with low revenue/high maintenance clients.

Where the banks wereWhere the banks were

• Complaints are often viewed as a nuisance rather than an opportunity

Annual Report 2000, Brian Hartzer, MD ANZ Bank Australia

• Manner of banks’ approach: • Senior bankers: “ What do wrong?”• Personal attack on complainant • Spin out a complaint out for as long as possible • Resist any admission of liability.• Fobbed off by the CEOs

• Complaints are often viewed as a nuisance rather than an opportunity

Annual Report 2000, Brian Hartzer, MD ANZ Bank Australia

• Manner of banks’ approach: • Senior bankers: “ What do wrong?”• Personal attack on complainant • Spin out a complaint out for as long as possible • Resist any admission of liability.• Fobbed off by the CEOs

Headlines you don’t often seeHeadlines you don’t often see

• “Consumers strike fear into heart of business”

• April 18 2001

• British business leaders are more frightened of the Consumers' Association and the environmental group Greenpeace than they are of ministers and trade unionists.

• “Consumers strike fear into heart of business”

• April 18 2001

• British business leaders are more frightened of the Consumers' Association and the environmental group Greenpeace than they are of ministers and trade unionists.

The quantum leap The quantum leap

• King Report – Corporate Governance• Departure of the old guard • The new order willing to apply progressive

business school thinking to banking • Attitude towards customers: - value of retaining customers - understanding acquisition costs

• King Report – Corporate Governance• Departure of the old guard • The new order willing to apply progressive

business school thinking to banking • Attitude towards customers: - value of retaining customers - understanding acquisition costs

The quantum leapThe quantum leap

Realization that• Banking has become a commodity, people more willing to switch • Most people are already serviced• Although consolidation, new entrants• Reputation important in customer's

decision to try the business for the first time & continued commitment to doing business

Realization that• Banking has become a commodity, people more willing to switch • Most people are already serviced• Although consolidation, new entrants• Reputation important in customer's

decision to try the business for the first time & continued commitment to doing business

The quantum leapThe quantum leap

Markinor Survey 2005Total

%

Considering other offers 58

Will Continue to use bank 54

Searching for alternative 51

Recommend bank 43

Truly loyal clients are more likely to spend additional funds, Truly loyal clients are more likely to spend additional funds,

resist competitive offers and recommend the banks’ services resist competitive offers and recommend the banks’ services

= significant financial gains and long-term stability= significant financial gains and long-term stability

Truly loyal clients are more likely to spend additional funds, Truly loyal clients are more likely to spend additional funds,

resist competitive offers and recommend the banks’ services resist competitive offers and recommend the banks’ services

= significant financial gains and long-term stability= significant financial gains and long-term stability

In the spotlight In the spotlight

• The government has introduced new legislation such as FAIS, FSOS and National Credit Act

• The Consumer Protection Act is in the pipeline

• The government has introduced new legislation such as FAIS, FSOS and National Credit Act

• The Consumer Protection Act is in the pipeline

International consumer rights International consumer rights

• The right to Information• The right to Consumer Education • The right to Redress -fair settlement of just claims, including

compensation for misrepresentation, or shabby goods or services. Need to:

– Set up fair, inexpensive and accessible avenues for redress

– Resolve disputes in a fair, efficient and informal manner

• The right to Information• The right to Consumer Education • The right to Redress -fair settlement of just claims, including

compensation for misrepresentation, or shabby goods or services. Need to:

– Set up fair, inexpensive and accessible avenues for redress

– Resolve disputes in a fair, efficient and informal manner

Redress- improvements Redress- improvements

• Complainants informed of right to complain

• Centralised complaint handling mechanisms

• Internal ombudsmen

• Banks settle earlier

• 2000, 14% of cases resolved in step 2

2005, 50% of cases resolved in step 2

• On average close file within 67 days

• Most close ≤ 4 months

• Complainants informed of right to complain

• Centralised complaint handling mechanisms

• Internal ombudsmen

• Banks settle earlier

• 2000, 14% of cases resolved in step 2

2005, 50% of cases resolved in step 2

• On average close file within 67 days

• Most close ≤ 4 months

The Money Report • Many consumers feel they are being treated like

criminals by banks..… When dealing with banks, consumers are required to negotiate a maze of invisible, misunderstood and arbitrary rules and regulations.

• For many consumers, a bank is unfriendly and intimidating - and they feel enormously resentful about the rudeness and indifference shown to them by abrupt and busy staff.

The Money Report • Many consumers feel they are being treated like

criminals by banks..… When dealing with banks, consumers are required to negotiate a maze of invisible, misunderstood and arbitrary rules and regulations.

• For many consumers, a bank is unfriendly and intimidating - and they feel enormously resentful about the rudeness and indifference shown to them by abrupt and busy staff.

The Money Report The Money Report

While making a fuss about poor service isWhile making a fuss about poor service is

not a South African characteristic, thenot a South African characteristic, the

normally accepting consumer will normally accepting consumer will

increasingly select a bank on the basis ofincreasingly select a bank on the basis of

the quality of customer servicethe quality of customer service

http://www.btimes.co.za/97/1116/btmoney/btmoney.htmhttp://www.btimes.co.za/97/1116/btmoney/btmoney.htm

While making a fuss about poor service isWhile making a fuss about poor service is

not a South African characteristic, thenot a South African characteristic, the

normally accepting consumer will normally accepting consumer will

increasingly select a bank on the basis ofincreasingly select a bank on the basis of

the quality of customer servicethe quality of customer service

http://www.btimes.co.za/97/1116/btmoney/btmoney.htmhttp://www.btimes.co.za/97/1116/btmoney/btmoney.htm

• Customers themselves will tell you where the gaps are

• Vast sums of money spent on surveys

• Even more important source of information- customer complaints

• Only one in 20 people who experience a problem complaint

• Each complaint representative of a number of other similar instances of a problem

• Customers themselves will tell you where the gaps are

• Vast sums of money spent on surveys

• Even more important source of information- customer complaints

• Only one in 20 people who experience a problem complaint

• Each complaint representative of a number of other similar instances of a problem

2

7

9

11

23

24

25

29

34

46

Victim of crime

Electronic systems not working

Credit lending (bounced cheques,

loans not approved, overdraft

Product offering

Other (single mentions)

Attitude of staff/way you were treated

Waiting time or delays

Pricing, charges of fees

Errors, mistakes or admin problems

Communication or lack of

communication from bank

Total

Customer feedbackCustomer feedback

Those people who complain are often Those people who complain are often motivated by a genuine desire to restore motivated by a genuine desire to restore and continue the relationship with the and continue the relationship with the bank or a desire to ensure that changes bank or a desire to ensure that changes are brought about that will save otherare brought about that will save othercustomers from having to experience what customers from having to experience what the customer complaining went throughthe customer complaining went through

Those people who complain are often Those people who complain are often motivated by a genuine desire to restore motivated by a genuine desire to restore and continue the relationship with the and continue the relationship with the bank or a desire to ensure that changes bank or a desire to ensure that changes are brought about that will save otherare brought about that will save othercustomers from having to experience what customers from having to experience what the customer complaining went throughthe customer complaining went through

Markinor surveyMarkinor survey

• More feedback is needed/

get back to the customer, follow-up 14%

• Put customers in touch with the correct people,

have only one contact person 9%

• Have better trained staff 9%

• Better problem solving 8%

• More feedback is needed/

get back to the customer, follow-up 14%

• Put customers in touch with the correct people,

have only one contact person 9%

• Have better trained staff 9%

• Better problem solving 8%

Feedback from complaintsFeedback from complaints

• Customer complaints = pick up problems with service delivery that other mechanisms miss

• E.g. bank picked up a systems problem re under recovery of mortgage insurance premiums (problem around for years)

• Extend period of the loan for year or more• Inquiry desk merely put through correction for

that particular account without alerting anyone to major systemic problem

• R 200 million to make the problem go away.

• Customer complaints = pick up problems with service delivery that other mechanisms miss

• E.g. bank picked up a systems problem re under recovery of mortgage insurance premiums (problem around for years)

• Extend period of the loan for year or more• Inquiry desk merely put through correction for

that particular account without alerting anyone to major systemic problem

• R 200 million to make the problem go away.

Customer’s expectationsCustomer’s expectations

• To be heard/ listened to

• To have things explained to them in simple terms

• To be treated fairly and honestly

• For the bank to own up/confront the issue, if it makes a mistake

• Not to be sent from pillar to post/messed around

• To be heard/ listened to

• To have things explained to them in simple terms

• To be treated fairly and honestly

• For the bank to own up/confront the issue, if it makes a mistake

• Not to be sent from pillar to post/messed around

The payoffThe payoff

"A retail bank with 10 million customers

could gain £ 65,000,000 per annum by

improving the fairness of its complaints

-handling." Fairness in Complaint Handling

( Ernst and Young , London)

In local terms that translates as

R 780 000 000.

"A retail bank with 10 million customers

could gain £ 65,000,000 per annum by

improving the fairness of its complaints

-handling." Fairness in Complaint Handling

( Ernst and Young , London)

In local terms that translates as

R 780 000 000.

3rd BANKSETA International Conference

3rd BANKSETA International Conference

Thank you Thank you