Diebold Consulting Branch Transformation Florida Bankers Convention 2012

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Branch transformation strategies to improve branch efficiency, lower costs and improve the customer experience. Contact me at chris.gill@diebold.com for more information.

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Diebold Consulting Branch Transformation Florida Bankers Convention 2012

  1. 1. Florida Bankers Association 2012 Annual Meeting June 10 -13, 2012Branch Transformation: Strategies to Position Your Branch Network for the Future Chris Gill, Senior Director Diebold Consulting chris.gill@diebold.com 704-651-6167 1
  2. 2. Today’s Discussion  Customer Channel Usage Behavior  Channel Capabilities of the Future  Future Role of the Branch2
  3. 3. Customer Channel Usage Behavior3
  4. 4. Self-Service Transactions Continue to Grow U.S. Self-Service Banking Transactions 2009 - 2013 90 80 CAGR = 10.6% 14.0 70 9.4 5.6 3.0 60 1.2 33.3 35.0 50 30.0 26.8 23.3 40 30 17.0 17.8 18.5 19.3 19.8 20 10 14.6 14.7 14.8 15.0 15.1 0 2009 2010 2011 2012 2013 ATM (CAGR = 0.8%) Call Center (CAGR = 3.9%) Online (CAGR = 20.1%) Mobile (CAGR = 84.8%) Source: TowerGroup4
  5. 5. Branch Transactions Expected to Decline U.S. Branch Transactions 2010 - 2014 Transactions (Billions) Source: TowerGroup5
  6. 6. Online Banking Preferred for Routine TransactionsQuestion: How do you prefer to conduct the following banking activities? Transfer Funds Balance Inquiry Pay Bills Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally6
  7. 7. Branch Still Preferred for Deposits Question: How do you prefer to conduct the following banking activities? Cash Withdrawal Deposit Checks / Cash Note: Percentages may not round to 100% as lower incidence categories are omitted from the chart Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally7
  8. 8. Consumers Want Personal Contact to Resolve ProblemsQuestion: How do you prefer to conduct the following banking activities? Resolve a Problem Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally8
  9. 9. Consumers Prefer the Branch For New Account OpeningQuestion: How do you prefer to conduct the following banking activities? Get Product Information Open a Deposit Account Apply for a Loan Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally9
  10. 10. Physical Locations Still Important in New FI Selection Question: How important is the number and location of branches and ATMs in choosing a new bank? Percentage of respondents indicating “Very Important” or “Important” Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally10
  11. 11. Varying Levels of Interest in Mobile Functionality Question: How likely would you be to use the following mobile banking functions? Percent ‘Likely Mobile Functionality or Very Likely Basic Receive text alerts on balances 22.6% Check account balances and recent transaction activity 33.3% Intermediate Transfer money between accounts 28.9% Text message customer service about a problem 20.6% Make a Bill Payment 28.6% Advanced Scan a check for deposit with camera 17.2% Use phone to pay for a purchase 17.1% Transfer money with another person 17.3% Source: Forrester/Diebold research, 4th Quarter 2011; sample size = 5,369 respondents nationally11
  12. 12. Channel Capabilities of the Future12
  13. 13. Mobile Will Become As Ubiquitous As Your Driver’s License Mobile Wallet Geo- Mobile Tagging Shopping Authentica- NFC tion Payments sad QR Codes Apps Remote Paperless Deposit Receipts Capture13
  14. 14. Personal Finance Management (PFM) Software  PFM will: – Evolve into a central one-stop shop rather than a stand- alone tab in online banking – Include simplified interfaces (iPad influence) – Allow bankers and customers to interactively collaborate on a customer’s finances  ‘Stickiness’ of PFM is very high; makes it more difficult to switch banks Source: Javelin Strategy & Research14
  15. 15. Advances in Authentication  Biometric readers  Mobile authentication  Voice authentication  Facial recognition  Two factor authentication15
  16. 16. Better Customer Interfaces  New and better interfaces – In conjunction with better channel integration, technological advances will enhance and simplify user interfaces (computing without a mouse?) – iPad-like screens at the ATM – Microsoft Surface16
  17. 17. Multichannel Integration  Customers are demanding a seamless and consistent experience across channels  Channels will be better connected to each other – For example: if a customer starts an application online, they could complete it in a branch  Convergence of mobile, online and PFM Consumer Accounts Branch Banking Mobile Banking Online Banking Investments Retirement Credit Card Mortgage Checking Savings Loans Customer17
  18. 18. How Should Banks Prepare?  “No man is an island” – Banks should develop an integrated channel strategy that maximizes the strengths of each channel  Agility – TowerGroup notes that in an uncertain environment, banks need to have technology that is flexible and easy to deploy  Understanding what the customers want – Banks have a wealth of customer data that needs to be better leveraged to drive strategies18
  19. 19. Future Role of the Branch19
  20. 20. Branch Role Will Evolve Dramatically Handling of more complex transactions Customer service Right-sized and and problem efficient resolution operation New Brand presence Sales & advice Branch in local community Role20
  21. 21. Imperative for Branch Transformation Flat Growth Scenario: Deposits and Loans Stop Preserving 2012 Profitability Growing, Spreads Remain Constant Total Operating Cost Total Revenue1 FTE (bar, $000) (line, $M) ‘12-’16 CAGR ∆ from Reduction Rev 0.0% Year 2012 EBIT Required2 Costs 2.8% EBIT (1.3%) 2013 -$20K 0.4 Revenue 2014 -$41K 0.9 2015 -$63K 1.3 2016 -$86K 1.7 Under this scenario, branches will be able to maintain current levels of profitability through headcount reductions aloneBranch $1.7 $1.7 $1.7 $1.7 $1.6Profit ($M)21
  22. 22. Banks Will Need a New Branch Strategy Branch Planning Dimensions Customer Facility Design Experience Distribution Network Technology Channel Strategy Integration Optimization Leveraging Staffing Customer Information22
  23. 23. Branch Space Needs to Be Used Differently Dimension Implications  Smaller footprint Facility Design  Greater emphasis on sales rather than transactional capabilities  Greater level of customer Customer Experience engagement  Integrated across channels23
  24. 24. Branches Require Major Transformation Videoconferencing ILLUSTRATIVE Teller Automation Mobile / Tablet Demo Concierge Interactive Marketing24
  25. 25. Optimize Delivery Channels to Align With Customer Needs Dimension Implications  Branch and ATM network plan that optimizes market coverage at an effective cost Channel  Prioritization of investments Optimization across channels  Consistency of the customer experience across channels  Migration of routine transactions Technology  Automation of branch processes Integration  Save customers time25
  26. 26. Execution is Critical Dimension Issues to Address  Defining the target customer experience Operations  Changing policies and procedures  Integrating with existing systems Employee  Communications Preparation  Training  Education / Communications Customer Adoption  Incentives Measurement /  Customer behavior Tracking  Return on investment26
  27. 27. New Branch Concepts – Leveraging Technology to Lower Operating Costs
  28. 28. A New Branch Staffing Paradigm is Required Dimension Implications  ‘Universal banker’ concept  Hiring for sales and customer service Staffing aptitude  Fewer FTE per branch  Deeper understanding of customer Leveraging Customer channel usage and preferences Information  ‘Predictive analytics’ tools  Cross-channel information sharing28
  29. 29. Key Takeaways29
  30. 30. Bank Strategies Need to Address Three Key Issues Issues Questions to Address • What channel capabilities are most important to our customers today and in Channel the future? • How do we prioritize investments across Strategy channels? • How do we maximize the return on new technology? • How can we operate our branches more Branch efficiently and at a lower operating cost? • How do we increase sales productivity in Transformation our branches? • What capabilities are required to deliver Customer our target customer experience? • How do we ensure consistency of the Experience experience across channels?30
  31. 31. Diebold Consulting Channel Optimization Expense Management • Channel management strategy • Workflow optimization • Branch optimization • Transaction migration • ATM optimization • Deposit automation • Market assessment • Teller automation • Customer channel usage analysis • Employee/customer engagement Customer Experience Revenue Growth • Customer experience strategy • Customer-centric innovation • Payments migration • Product/fee packaging and pricing • Process improvement • Analytic-driven promotions Account opening • Payment/channel-driving innovations Problem resolution • Product line analysis Chris Gill Senior Director, Diebold Consulting chris.gill@diebold.com 704-651-6167 www.diebold.com/consulting31

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