Five Observations from BAI Retail Delivery 2011

Posted October 21, 2011   I   by Gary Stein

1. Using Fame and Fortune to Make a Difference – Former President Bill Clinton provided an inspiring kick-off as he described how he and his foundation are taking aim at economic and environmental issues all across the world. Clinton discussed how global wealth inequalities, political and marketplace instabilities, and depletion of natural resources have all accelerated over recent decades, driving many of problems that his foundation works to solve. He concluded by challenging the audience to shake traditional paradigms and make a societal difference, and that by doing so, we would also help to ensure the future of the U.S.
2. An All-In Value Proposition – Frank by OCBC is a fresh venture aimed at Millennials and created by a staid, old Singaporean bank. The venture demonstrates radical new thinking about branch design, products, pricing, and marketing, all geared toward the 18-28 year old segment and based upon extensive research of non-bank retailers that target these consumers. Key elements include the 130 artsy card design options offered to customers (only one of which is available for no extra cost), as featured earlier this year on FinancialBrand.com see full article here).  Cardboard images of the plastic designs line the Frank branch walls to give visitors an Apple-like opportunity to browse, touch, feel, and connect with the bank’s merchandise. The company also offers Groupon-like merchant-based rewards programs that offer increased discounts when customers shop or dine together and all pay with their Frank debit card. We like the thoughtfulness that OCBC put into developing this value proposition and can’t wait to see if they are as successful in retaining these customers once they reach their 30’s as they have been at acquiring them in their 20’s.Branch Development Group promoted a pre-fabricated, full-function branch build-out that significantly lowers new branch deployment costs from millions to a few hundred thousand dollars with less sacrifice of visibility or function than an in-store design typically demands.
3. Aspirational Banking – Columbia’s Helm Bank made waves with branches that target and appeal to all five senses. The designs include proprietary sounds, smells, and tastes (flavored waters and candy) as well as visually stimulating architecture that features a variety of textures. Press about the new prototype has generated enough buzz to enable Helm to generate market awareness and share gains without incremental marketing spending. Perhaps most intriguing, though, is the distinction and placement of the customer and non-customer service areas. Non-customers make up as much as 70% of the bank’s branch traffic, and check cashers and other branch users that do not maintain an account with Helm must wade past the lush customer lounge and service zones to a more traditional, post office-like queue at the back of the store. Fast tempo music piped into the non-customer zone helps to convey a sense of urgency that contrasts the slower, more soothing tunes in the customer area. Altogether, Helm’s new designs should help to elicit a sense of privilege and an emotional bond with customers, create desire among non-customers, and result ultimately in increased customer loyalty and new relationship growth.
4. Lower-Cost Branch Banking – Video teller exhibits provided glimpses of technologies banks can use to extend service to customers with substantially lower staff expense. We expect in-store network managers, in particular, to take a hard look at these kiosk’s capabilities and how they can transform in-store staff responsibilities from transactional processing to sales and service. In addition, architectural firm
5. The Loyalty-Profitability Conundrum – The 80-20 rule that has historically governed retail banking profitability suggests that the vast majority of consumer relationships are unprofitable, but increasing wallet share within this segment should drive substantially higher profits. New research by FIS suggests that banks might struggle to turn a profit on over 60% of consumers, whether they get the entire deposit wallet or not. In addition, while 44% of customers report loyalty to their financial provider, fewer than half of these loyal customers are likely profitable today. There is some good news, however. Two-thirds of unprofitable deposit customers require credit services and may ultimately be converted into profitable relationships.