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Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
Leveraging Branch Delivery with Online Account Opening
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Leveraging Branch Delivery with Online Account Opening

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Traditionally, banks have viewed the online channels as competitive with bank branches. But that is rapidly changing. The combination of accelerating online channel utilization and the pressure most …

Traditionally, banks have viewed the online channels as competitive with bank branches. But that is rapidly changing. The combination of accelerating online channel utilization and the pressure most banks face to dramatically reduce operating expenses are leading an increasing number of executives to examine where the lines between branches and online channels are blurring. This presentation explores opportunities to marry the differentiating benefits of online channels with those of in-person, local branches to drive more fee revenue and deposits at a lower total cost than was achievable just a few years ago. It highlights how your competitors might utilize an integrated “clicks and mortar” strategy to attack your institution, steal your customers and reduce your profits.

Other key topics include:

-- Online channel innovations and the substitution/augmentation impacts on branch-based transactions

-- How online account opening and funding is creating new value for branch banking

-- The roles of online channels and branches in financial product shopping and purchase behaviors

-- Why online is not cannibalistic to the branch and why banks that don’t aggressively pursue deposits and payments online risk losing existing customers

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  • 1. Best of Both Worlds
    Leveraging Branch Delivery with Online Channels
    Paul McAdam
    eCom Advisors
    March 2, 2010
  • 2. An opportunity to provide a differentiated customer experience
    Branch Channel
    Online Channel
    • Increase new account growth
    • 3. Increase cross-sell
    • 4. Increase online services activation
    • 5. Reduce operating expenses
    New Customer Accounts
  • 6. Discussion topics
    The Multichannel Mandate
    The Customer Journey
    Management Implications
  • 7. The influence of eChannels is accelerating
    Source: ABA telephone survey of 1,000 U.S. consumers conducted by Ipsos-Reid. The 2009 survey was conducted Sept. 14 - 16
  • 8. Many forms of e-banking & payments have reached mass-market penetration
    Online Bill Pay
    (bank site)
    Online Banking
    Contactless Debit Card
    Online Bill Pay (biller site)
    Pre-paid Card
    Debit /ATM Card
    Mobile Banking
    Innovators
    Enthusiasts,
    Change Agents
    2.5%
    Early Adopters
    Respected,
    Opinion Leaders
    13.5%
    Early Majority
    Pragmatic, Deliberate
    34%
    Late Majority
    Conservative, Skeptical
    34%
    Laggards
    Traditional, Suspicious
    16%
    Sources:
    • Adoption curve framework: Everett Rogers, “Diffusion of Innovations.”
    • 9. Adoption data points: Federal Reserve Bank of Boston, 2008 Survey of Consumer Payment Choice
  • The portion of transactions reliant on brick & mortar branches is low, and decreasing…
    Electronic
    ______________________
    DEPOSITS
    DISBURSEMENTS
    ATM
    Primary Transaction Account
    Paycheck
    Electronic Bill Pay
    Benefits
    ACH Debit
    Retirement
    70%
    Checks
    Transfers
    Debit Card
    Branch dependent
    _______________________
    DEPOSITS
    DISBURSEMENTS
    Checks
    Cash withdrawal
    30%
    Cashier’s Check
    Cash
    Money Order
    6
  • 10. In spite of this, the # branches and branch operating expenses have increased dramatically
    Additional annual branch operating expenses
    $1.8 B
    $.69 B
    $1.7 B
    $1.1 B
    $.13 B
    $.46 B
    $.27 B
    $.35 B
    $.63 B
    $27.3B
    Source: FDIC and U.S. Census Bureau. eCom Advisors analysis
  • 11. Customers still reward banks for branch convenience…But for how much longer?
    What if a third of new accounts are opened online in five years?
    Accounts Opened in Branches
    Accounts Opened Online
  • 12. The unit costs of branch-based interactions will steadily increase
    Source: TowerGroup, Fiserv/M-Com
    Source: Highline Financial, Novantas
  • 13. Online account origination is now a competitive “must have”
    Source: eCom Advisors review of bank websites, as of 02/22/2010
  • 14. Four significant shifts in thinking are required
    A growing number of customers will trade local branch presence for an improved online value proposition
    It’s time for meaningful modifications to the density, configuration and operations of the branch network
    It’s time to invest branch channel savings into the next generation of eChannel capabilities
    It’s time to stop viewing online and branch as distinct channels when it comes to new customer and account generation. It must be an integrated customer experience
  • 15. Yes, online banks can make money!!! Segmented and multichannel players perform well
    $ Bln.
    All Commercial Banks Assets $10B+
    - 4.57%
    Source: Call Reports, eCom Advisors analysis
  • 16. Within many banks, the process is inefficient and not necessarily customer friendly
    Industry Averages
    Traffic
    Internal/External organic and marketing (Banner Ad ) - viewed a page with “Apply Now” on it.
    Traffic
    Apply Now
    Clicked “Apply Now” and landed on the “Overview” page.
    Products Page
    50% initiate app from the first / products page
    Application Initiated
    Clicked “Next” button on the “Application Start” page and landed on the “Personal Info” page.
    20% drop at personal info questions
    Apps Initiated
    10% drop after providing contact info
    70% complete the application
    Apps Completed
    20% drop out for manual verification
    Application Submitted
    Completed the app. and clicked “Submit”
    10% fail due to fraud / risk reasons
    Apps Funded
    Funded Accounts
    ACH/Internal Transfer/Check
    44% industry Conversion Rate*
    * Conversion Rate begins at application
    Source: eCom Advisors client engagement sand executive interviews with ~20 FI’s
  • 17. Practices of higher performing banks
    Banks that target their efforts are happier with their results
    Minimal impact to abandonment rates when customers are presented with a maximum of 6-7 “out of wallet” questions
    Sports sites and local web sites are used as low cost channels that led to acquisition of long-term relationships with customers (versus-bankrate.com)
    Anticipate that ~ 30% of applications will be kicked out due to address verification and risk management guidelines
    Prioritize manual call backs to targeted segments. Industry average success rate for the applications that were followed up with an email or a call is 10% - 25%
    Applicants that dropped out of the online process and then called the bank had a 20%+ close rate
    Average acquisition/online conversion cost:
    • $2.00 - $3.50 for fully automated
    • 18. $8 - $15 with manual involvement
    • 19. $56 - $85 per account marketing cost
    Source: eCom Advisors client engagement sand executive interviews with ~20 FI’s
  • 20. We need to start thinking about “online branches” and how they support physical branches and reduce overall delivery system costs
    Physical Branch
    Online Branch
    6 – 7 FTE
    7 – 9 FTE
    ~ $2 million to build
    ~ $1.75 million annual operating expense
    ~ $1.2 million first year operating expense (fully loaded with staff, technology & extensive marketing)
  • 21. Online account opening with branch support will move us past the inflection point
    • Relative Advantage – the degree to which an innovation is better than the idea it supersedes
    • 22. Compatibility – the degree to which an innovation is consistent with past experiences
    • 23. Technology Clusters – Adoption of innovations are higher when the technical elements of the process are perceived as being highly interrelated
    Innovators
    Enthusiasts,
    Change Agents
    2.5%
    Early Adopters
    Respected,
    Opinion Leaders
    13.5%
    Early Majority
    Pragmatic, Deliberate
    34%
    Late Majority
    Conservative, Skeptical
    34%
    Laggards
    Traditional, Suspicious
    16%
    Source: Adoption curve framework and insights regarding adoption; Everett Rogers, “Diffusion of Innovations.”
  • 24. Re-invention of online account opening from purely online to “online with branch support”
    • Innovations are re-invented
    • 25. Changed or modified in the process of its implementation
    • 26. Occurs when an innovation must be adapted to the structure of the organization that is adopting it
    • 27. Later adopters profit from the experiences gained by earlier adopters
    • 28. Re-invention leads to:
    • 29. A faster rate of adoption
    • 30. A higher degree of sustainability
    Innovators
    Enthusiasts,
    Change Agents
    2.5%
    Early Adopters
    Respected,
    Opinion Leaders
    13.5%
    Early Majority
    Pragmatic, Deliberate
    34%
    Late Majority
    Conservative, Skeptical
    34%
    Laggards
    Traditional, Suspicious
    16%
    Source: Adoption curve framework and insights regarding re-invention; Everett Rogers, “Diffusion of Innovations.”
  • 31. Online shopping with in-store pickup is quickly becoming the norm in retailing
    In 2007, Walmart rolled out Site to Store to its entire U.S. network of 3,330 stores
    50% of Site to Store orders are new customers to Walmart.com
    Site to Store accounts for 1/3 of Walmart.com sales
    When arriving at the store for a Site to Store order pickup, 20% of customers spend $60 or more on in-store purchases
    By consolidating shipments of online orders to stores instead of to consumers’ addresses, Walmart saves 1,000 gallons of gasoline each week and 20,000 packing boxes each month
    Christmas 2009 shopping season: 40% of Walmart.com orders were picked up at nearby stores for free
    Testing drive-through windows in Chicago and Minneapolis where customers can pick up online orders
    Other retailers with e-commerce websites that offer in-store pickup
    Source: Walmart website & press releases
  • 41. Discussion topics
    The Multichannel Mandate
    The Customer Journey
    Management Implications
  • 42. Multiple channels play key roles through the entire purchasing process
    Shopping
    Account Opening
    Onboarding
    Relationship Building
    Buying Event
    Activation
    Experience
    Loyalty
    Trial
    Awareness
    Consideration
    Research
    Decision
    Defections
  • 43. Shopping for and purchasing banking products is a multichannel experience
    2008 McKinsey European survey of banking/insurance customers
    Offline sales influenced by online touchpoints
    Cross-channel impact
    Online sales influenced by offline touchpoints
    Purely offline sales
    Purely online sales
    Source: McKinsey & Company
  • 44. The multichannel shopping & account opening experience
    Shops online for bank account
    Online chat with CSR during shopping process
    Completes account application online
    Establishes account and communication preferences
    Opts to complete the final documentation and funding process at a branch
    Schedules an appointment at branch to complete the process
    At the end of the session, notified that’s prequalified for loan up to $10,000
    Pop up message. “Thank you. Call us if you have questions”
  • 45. The multichannel account funding & activation experience
    Email confirmation of account opening details
    Banker leaves “Looking forward to our appointment” voicemail
    Day before the appointment, receives a text message reminder on mobile phone
    Arrives at branch for appointment
    Banker greets customer and has all information
    Banker helps customer enroll in online services and account alerts. Receives activated debit card
    Banker explains opt in and overdraft protection opportunities
    Banker probes for credit opportunities
  • 46. Onboarding: Multiple, non-intrusive touchpoints during the first month
    Getting customer familiar with bank & account
    Relationship expansion
    • Welcome message
    • 47. Account funded and ready for operation
    • 48. Practical information
    • 49. When checks and debit cards will arrive
    • 50. How account operates and fees
    • 51. Account benefits
    • 52. Highlights other services related to DDA
    • 53. Promotes:
    • 54. ATM deposit
    • 55. Online banking
    • 56. Bill payment
    • 57. Overdraft protection
    • 58. Alerts
    • 59. Leads into cross-sell based on monitoring of account behavior
    • 60. Notifies of other bank services
    Welcome kit via mail
    Phone call from bank
    Day 1
    Day 7
    Day 5
    Day 14
    Day 28
  • 61. For starters, apply this multi-channel approach to your most valuable / profitable customers
    Tech Savvy, Emerging Affluent Account
    ~ 15% of population
    Retirement Income Account
    ~ 10% of population
    Young, Tech Savvy Account
    ~ 25% of population
    Mass Market, Loyalty Account
    ~ 40% of population
    Income / Wealth
    Age
    Checkless Checking Account
    ~ 10% of population
  • 62. You will generate ROI from providing superior customer experiences to today’s early adopters
    • Will adopt based on mass market communication
    • 63. Better educated
    • 64. Wealthier
    • 65. Higher social status
    • 66. Greater upward social mobility
    • 67. Interpersonal networks that extend outside of their local system
    • 68. Change Agents
    • 69. Opinion Leaders
    • 70. Role models
    Innovators
    Enthusiasts,
    Change Agents
    2.5%
    Early Adopters
    Respected,
    Opinion Leaders
    13.5%
    Early Majority
    Pragmatic, Deliberate
    34%
    Late Majority
    Conservative, Skeptical
    34%
    Laggards
    Traditional, Suspicious
    16%
    Source: Adoption curve framework and insights regarding early adopters; Everett Rogers, “Diffusion of Innovations.”
  • 71. Discussion topics
    The Multichannel Mandate
    The Customer Journey
    Management Implications
  • 72. Each cell in the “multichannel account opening experience” requires explicit attention & ownership
    Sr. Exec Oversight
    Develop guiding principles, strategies and tactics for each cell
  • 73. Best Buy’s defeat of Circuit City is instructive
    Source: Time magazine. CustomerThink.com
  • 74. Management implications: Some potential quick fixes
    Education
    Have every frontline employee open an account online
    Sales goals & performance tracking
    Recognize the multichannel influence in sales goal setting
    Recognition of leads that come in online, but are opened in a branch
    Employee compensation & recognition
    Incent branches to encourage customers to open accounts online
    Pay commissions for online sales made within a specified distance to the branch
    Give the online sales team credit for sales closed in branches – when customer researched online but opted to close in a branch
    Marketing & Customer Experience
    Measure the return from online advertising and search engine marketing across total sales across all channels, rather than just against online sales
    Create a team dedicated to creating experiences for the customer journey
  • 75. Contacts
    eCom Advisors provides executive consulting services to banks, billers, vendors and investors in financial services technology and online banking, billing and payments. Our consultants possess 175+ years of direct operating experience, and are considered leading experts in the industry. We help executives make their most crucial ecommerce management decisions. 
    Boston office
    Chicago office
    95 Washington St.
    Canton, MA 02021
    781.784.1663
    1 Westbrook Corp. Cntr.
    Westchester, IL  60154
    630.865.3135
    Atlanta office
    Columbus office
    3340 Peachtree Rd. NE
    Atlanta, GA 30326
    404.848.7709
    5650 Blazer Parkway
    Dublin, Ohio 43017
    614.734.8372

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