Banks segmenting client base, report suggests

If you think retail banks are impersonal now, just wait. According to the 2006 World Retail Banking Report by Capgemini, banks plan to leverage their various channels to better reach clients, largely at the expense of the one-on-one experience, at least for those at the lower end of the income ladder.

And clients apparently prefer this, according to the report. While two-thirds say an ongoing relationship with someone in their bank branch or having a personal relationship with an advisor is important, 96% say it’s even more important that the bank has up-to-date and accessible information.

The test for the banks is how to organize that information in a consistent format, says Steven Luckie, financial services leader, Capgemini Canada.

Given that a lot of the work on the retail banking side is transactional, it’s key that all client information be equally accessed both in-branch and through call centres, says Luckie. “Large organizations tend to have high turnover so that information needs to be there.”

In terms of sales and services, online and phone is expected to continue to grow. In 2005, about 5% of sales were closed online and 8% of sales were completed over the phone. By 2010, 17% of sales are expected to be competed online, while 13% will be conducted over the phone.

The web is also expected to become more important when it comes to the distribution of services, everything from day-to-day banking to ordering cheque books. In 2005, 18% of these sorts of transactions were completed online; by 2010, it’s expected that more than a quarter of these activities will be competed on the internet.

Distribution of sales among channels (%)
	2000	2005	2010
Branch	94	86	67
Web	2	5	17
Phone	4	8	13
Others	0	1	3

Distribution of services among channels (%)
	2000	2005	2010
Branch	70	42	30
ATM	19	29	28
Web	4	18	28
Phone	5	9	12
Other	2	2	2
Source: Capgemini interviews with 41 retail banks

Still, the banks’ branch networks are their key differentiator and they hope to use that to their advantage. As Capgemini says in its report, the traditional retail banks have started retooling their branches “to increase their value and attract more profitable clients, ‘the untapped gold’ within their customer bases.”

In other words, banks want to make their branches and services more appealing to higher-end clients, particularly the all-important boomer generation.

As Luckie points out, “We’ve got this whole baby boom generation and people think they are retiring but they are not. They are only just getting into their peak earning years and peak saving years right now because they all had kids late.”

Of course, the banks don’t just want to focus on this demographic, they want to target those individuals with the highest probability not only for revenue but for profitable revenue, he adds. “They are going to need to find a one-on-one relationship because these people who are becoming more aged tend not to use the internet for these types of transactions.”

But advisor turnover at the banks is a concern. A wonderful situation would be advisor turnover of once every three years says Kathy Kalafatides, transformation consulting leader, Capgemini Canada. But over a client’s investment life they may have 12, 15 or more bank advisors, she says.

“You can’t turn a teller into an advisor and you can’t turn a mutual fund advisor into a high-net worth advisor,” Luckie says. “You are going to see a fundamental change in the way the branches operate, become more advisory. That is the way that they will stem some of the turnover, but you will never eliminate it.”

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(05/24/06)

Mark Brown

FAIR Canada applauds Saskatchewan’s OBSI bill

Private equity firm buys maker of hockey rink boards

Scotiabank profits slip amid rising strain in auto loans, mortgages