UK Multi-channel Benchmarking Study
Retail Financial Services
In The Midst Of The Crunch
Summary of Highlights
November 2008
Welcome
Welcome to the second report on Multi-channel Retailing in the
Financial Services sector.
Commissioned by Charteris plc, the Chartered Institute of Bankers
in Scotland (CIOBS) and the Building Societies Association (BSA),
this latest study was researched and written by Cranfield School
of Management.
Building on the previous report it once again benchmarks major retail
financial service organisations in terms of how their Strategy,
Processes, Information, Technology, People and Metrics impact their
ability to deliver a high quality, customer focused services across
multiple channels.
Most significantly, this new study provides an insight into how banks
and building societies in the UK continue to strive to become more
agile and customer-centric, while adapting to turbulent market
conditions in the midst of the “Credit Crunch” of 2008.
We would like to thank all the organisations that participated in this
study and all those who were interviewed for their input.
Contents
1. Executive summary
3
2. Background to this report
5
3. Strategy
8
4. Processes
11
5. Information
13
6. Technology
14
7. People
15
8. Metrics
16
9. Conclusions
17
10. Benchmarking guide
18
Charteris in financial services
19
About Charteris
20
About Cranfield School of Management
20
About the Chartered Institute of Bankers in Scotland
20
About the Building Societies Association
20
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 2
1. Executive summary
This multi-channel benchmarking study was conducted jointly by Cranfield School of
Management and Charteris plc. Key sponsors were the Chartered Institute of Bankers in
Scotland (CIOBS) and the Building Societies Association (BSA), representing a significant
proportion of the deposit-taking financial institutions in the UK marketplace.
30-second overview
The survey was conducted during a period of great change in the financial services
sector, as the industry adjusted almost daily to rapidly changing market conditions We
report on the various issues raised by financial services institutions as they attempt to
become more customer focused in the face of the so-called “credit crunch”, which
struck the industry in summer 2007. We were interested in the degree to which the key
issues affecting multi-channel retail customer relationships were impacted by these
market changes.
♦ In many cases driven
by the so-called ‘Credit
Crunch’, financial
institutions are moving
more towards greater
service agility and
customer centricity, and
away from back-office
lean manufacturing
systems.
The survey was carried out by four MBA students at Cranfield School of Management
under the guidance of Stephen Regan, senior member of the economics group at
Cranfield. The survey involved a series of face-to-face and telephone interviews across
the UK retail financial services industry, and included most of the leading banks and
building societies.
♦ Customers are seen as
more demanding and
more in need of
advisory relationships
than in the past.
The major findings of the report are as follows:
♦ Branch capability,
teamwork, staff
empowerment and
reward structures based
on customer
satisfaction are key in
those organisations that
are achieving higher
sales and retention.
♦ Institutions believe themselves to be moving towards greater service agility
compared with last year’s survey. This is driven by a move towards
customer centricity and agility - and away from the back-office lean
manufacturing systems which have dominated the industry for a decade
and a half.
♦ Customers are perceived to be more demanding and constantly
benchmarking delivery against personalised service needs.
♦ Customers are seen to be more in need of advisory relationships than in
the past (we hypothesise this is a legacy of the traumatic market conditions
in certain product areas, such as mortgages)
♦ Financial services institutions are beginning to differentiate themselves
from the competition by clearly understanding their role as full-service
financial retailers.
♦ Rather than compete product by product against mono-line players the
organisations surveyed in this report indicate that they see value in a
differentiated and flexible (customer-centric) service offer. This is the
fundamental driver for making the appropriate investments in multi-channel
capability which they are envisioning in this report.
A key point to note is that multi-channel capability can be either value destroying or
value creating (for instance, it has the ability to either enhance or to erode customer
loyalty, and we have found many examples of each in this survey). Nevertheless, it
cannot be ignored as the marketplace enters a period of even more intense
competition.
♦ Multi-channel
integration and
customer centricity is
fast approaching the
status of a strategy in
many organisations.
♦ A single customer
database is central to a
customer-centric
approach.
♦ Management of
technology remains the
weakest area of all the
parameters surveyed.
♦ Those organisations that feel they are at the forefront of this retail
transformation report they staff their branches with the high-skilled
employees (the branches are still the dominant channel). These
organisations tend to emphasise teamwork, they empower employees and
they are confident they base their reward structures on customer satisfaction.
As a result, they typically deliver higher sales and higher retention.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 3
Opinion
♦ Customer centricity involves investment in people in all channels.
♦ Management and leadership is not rated as highly in 2008 as it was in
2007 - despite additional resources being applied to improve customer
focus, particularly tightening up around the FSA’s ‘Treating Customers
Fairly’ (TCF) Programme. One possibility here is that the credit crunch is
forcing financial services organisations to shift their short-term focus to
liquidity and cost reduction. Consequently, much of the visible short-term
leadership activity has been in this area. This is understandable but
perhaps not optimal nor even completely necessary.
“In difficult times, it
is more important
than ever that banks
and building
societies support
their retail and
business customers.
♦ Organisations are making their processes more flexible to better integrate
the customer experience. Back-office processes are overly-complex
because of legacy systems and these need to be simplified to enable a
flexible response to customer requirements.
♦ Most organisations surveyed clearly stated an objective to provide greater
channel integration and a single customer data warehouse. TCF has
highlighted under-performing processes, which are now attracting some
emphasis for improvement. Multi-channel integration and customer
centricity is fast approaching the status of a strategy in many organisations.
♦ Financial institutions that embrace proactive data integration, cleansing and
stewardship programmes are more confident they are successful in
customer centricity, since having a single customer database is central to a
customer-centric approach.
♦ Management of technology remains the weakest area of all the parameters
reported in this survey - and the most expensive in CAPEX. All
organisations are looking for ‘smart spend’ to deliver results. The appetite
for major infrastructure investment is understandably rather limited.
♦ Most organisations rate staff rewards and training less highly than last year,
though this area was starting from a high base relative to other factors in
the multi-channel offer. There is a sense that the people agenda recently
appears to be lagging behind other efforts in multi-channel.1
♦ Organisations that have taken time to develop and review metrics report
more success than their peers.
Customers rightly expect
to be dealing with highly
skilled, professional,
trusted advisors
regardless of channel.
However, it is clear from
our survey that there is still
considerable work needed
to raise standards across
the sector.
The challenge for the
financial services industry
now is to continue to
invest in employee
development and
engagement at a time of
financial constraints. At
the same time they must
continue to develop
effective cross-channel
systems that support staff,
customers and business
performance.
Organisations that do so
will create a sustainable
competitive advantage.”
Simon Thompson,
Chief Executive, Chartered
Institute of Bankers in Scotland
1 The demands here are immense. Customers in the mass market want the right product at the right
time, on demand, through the appropriate (perhaps all) channels, with a level of service which is
neither above nor below what they expect and which does not vary over time or place. Moreover,
each segment wants a different version of this configuration. It is complex but potentially significantly
rewarding for those organisations able to meet these requirements.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 4
2. Background to this report
The report presents findings of a survey conducted on behalf of the Chartered Institute of
Bankers in Scotland (CIOBS) and the Building Societies Association (BSA).
The terms of reference of the report are:
♦ Assess the extent to which the industry feels it is moving towards multi-channel
integration and the extent to which this initiative has delivered strategic benefits.
♦ Gauge industry views on changes in customer demand and behaviour by directly
talking with senior managers.
♦ Identify the nature and impact of changing consumer attitudes on multi-channel service
delivery, and assess the challenges and opportunities this creates.
♦ Allow participant organisations to benchmark themselves against a sector average.
♦ Provide a diagnostic reference guide for the industry and its stakeholders in relation to
this emerging source of competitive advantage.
Where do you stand?
As with last year’s study,
one of our key objectives
is to enable financial
services organisations to
see how they rate against
their peers in the sector.
To further assist you in your
progress towards becoming
more customer-centric, we
have included a detailed
benchmarking guide on
page 18.
2.1 Approach
The study involved extensive face-to-face and telephone interviews with senior managers
in a sample across the entire UK retail deposit-taking sector. The interviews took place
during the early part of 2008.
2.2 Important features of the research context
There are some important features of the research context which covered the period
between April and August 2008.
• Restructuring the Tier 2 Banking Sector:
♦ The number of Tier 2 banks (non-clearers without a large retail deposit base)
appears to be in decline, with some of the largest names (Abbey, Northern Rock
and Alliance & Leicester for example) undergoing the greatest change.
♦ Furthermore, each of these is a demutualised branch-based mortgage lender
making significant inroads into the banking sector and thus inevitably moving to a
multi-product/multi-channel platform.
♦ This diversification and growth strategy for Tier 2 banks has provided significant
strategic challenges that some, if not all, of these organisations were unable to meet.
• Recapitalising the Tier 1 Banking Sector:
♦ Recent activities in the capital markets have indicated that investors have already
made their decisions about the degree to which they are prepared to continue to
invest further equity even at very deep discounts (RBSG) or not at all (HBOS).
♦ It is generally the case that this is a signal from the equity markets that the
strategies pursued by the banking half of this survey during the upswing of the very
long current banking cycle since 1991 are no longer the appropriate way forward.
♦ To attract further capital they need new management teams and new strategies.
Until there is a retail banking growth trajectory again, both equity and debt markets
may remain effectively closed to the UK retail banking sector which is in crisis in
mid-2008.
♦ The issue of multi-channel/multi-product mass-market financial services and the retail
model which supports this could not be either more timely or more strategically
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 5
important as a research topic. Some banks have failed because of their inability to
master this competence.
♦ Other banks have failed due to their inability to recognise and manage the underlying
risks of highly leveraged, complex products.
2.3 Key dimensions for multi-channel integration
The figure below represents the key dimensions for effective execution of multi-channel
integration in financial services organisations. People, Strategies and Processes are the
cross-channel platforms on which the retail proposition is based. Information and
Technology vary channel by channel but they are both ever-present in different forms.
Finally, integration of these five strategic assets requires an effective measurement
framework, a set of Metrics to ensure the business as a whole benefits from its
investments in multi-channel. In a sense, this report is measuring the degree to which the
industry in the UK is moving towards an effective delivery of this framework.
Opinion
“Building societies
are owned by their
members, and as
such are focused
on the needs of
their customers
above all else.
Multi-channel Strategy: Key Dimensions
Technology
Information
Metrics
Processes
Strategy
People
Each interviewee was asked to be as objective as possible and to provide a qualitative
assessment of their organisation’s level of performance, covering each of the above
six areas.
Their answers were rated on a scale of 1 to 4, where 1 is characteristic of less mature
organisations and 4 is considered best practice. (See the benchmarking guide in the
appendix to this report for a full description of what these benchmarks mean strategically.)
At the same time, the subjective views of interviewees were probed as we asked them
to describe:2
Independent research has
consistently shown that
customers consider that
building societies offer not
only better value, but also
superior levels of service
than do other financial
service institutions.
However, building
societies continue to strive
to improve the service
they offer to their
members, investing
considerable amounts of
time and money to
achieve this.
This report helpfully
examines how to ensure
that customers experience
consistent service across
all of a provider’s
distribution channels in a
changing marketplace.”
Adrian Coles,
Director-General,
Building Societies Association
♦ How are customer demand and behaviour changing?
♦ What is the impact of these changes on multi-channel service delivery?
♦ What challenges and opportunities do these changes create?
2 We have presented this qualitative data at a number of points in this report in bold text and within
quotation marks to indicate they are verbatim industry views.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 6
2.4 Interpreting the diagrams
About the spider diagrams
In total there are seven spider diagrams in the body of this report: one example below
and one for each of the six features of the multi-channel framework we are testing. These
diagrams report the average performance of the financial services organisations in this
and our previous survey against industry best practice. This is our main benchmarking
reporting tool.
♦ The spider diagrams
illustrate the relative level
of maturity of the
financial services
organisations surveyed,
compared to current
best practice
Example
♦ Green scores indicate
‘Best of 2008’
performance; i.e. the
best score from a
respondent organisation
in this latest survey.
Process 1
4
2.70
2.53
3.47
3.45
Process 4 4
4
Process 2
3.50
3.04
3.22
2.95
4
Process 3
2008
2007
Best of 2008
In the example diagram above, the scores on process one show that there has been a
slight improvement in the average performance of respondent organisations since our first
survey in 2007. However, the 2008 score of 2.70 is still considerably below the industry
best practice score of 4 for 2008. Process 2 also shows some improvement since 2007.
Conversely, scores for processes 3 and 4 show that the average performance of
respondent organisations has slipped in these areas since our 2007 survey.
♦ Blue scores indicate the
average scores in this
2008 survey.
♦ Orange scores indicate
the average scores in
our previous survey, in
2007.
♦ It is important to note
that “best practice” will
always be a changing
dynamic – and that
financial organisations
must tailor their
approach to allow them
to anticipate and
respond quickly and
flexibly.
Also, within the scores there is a great deal of variation which is of interest to the
individual organisations surveyed. This is the main purpose of a benchmarking exercise.
Again, with reference to process one above, an individual business may feel it is
suboptimal if it has a score below 3 but referring to the industry average may give it more
data about where it stands competitively. This may then prove useful in terms of
developing some analytical frameworks for how to move the business forward in relation
to the industry.
Therefore, individual reports have been prepared for each business we surveyed allowing
them to benchmark themselves against the industry.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 7
3. Strategy
Financial services organisations are witnessing changing customer expectations. What
used to be competitive advantages (such as a good ATM network or internet banking or
sweep facilities) are now basic requirements for some segments and many organisations
are failing to track the migration of customers who move provider due to the service
variation across the industry.
Customer retention is a problem, but even senior managers in the larger Tier 2
organisations seem to think this desire to change provider is just a feature of customers,
almost a psychological property that financial service customers exhibit and which has to
be accepted. It is unlikely this is true: high levels of customer churn are strongly related to
the offers that the industry is able to make and the brand (i.e. service) promises that it is
able to keep. Customer churn, at the levels seen in the industry over the last decade,
could be argued to be the result of dysfunctional management as much as anything. In a
growing market, such poor customer service could be tolerated or ignored but given the
current shifts in the marketplace there is the strongest and most immediate imperative to
reorganise the service offer: for some providers it is actually a matter of survival.
The general feeling amongst the managers we surveyed is that customers have a right to
multiple channel options. The number of fully customer-centric offers in the mass market
is small but it is increasing in line with customer expectations. For instance, the same
customer may want to have investment advice in the branch (or her home) but to manage
her cash savings online. She may in addition want to manage her current account both
online and via the telephone. The great problem for many banks is that they offer this in
principle but they do not deliver on that offer: day by day and transaction by transaction,
customers experience service variation between channels and service degradation within
channels. Channel choice is a moment of truth for the relationship between a customer
and her bank: individuals express their preferences in their behaviours, which can shift
depending on their individual circumstances. Customers are more willing to complain if
expectations are not met, and more willing to defect if their complaints are not taken
seriously. The decision not to access a channel by a customer should be seen as the first
step in a decision not to do business with a financial provider. Channel behaviours,
therefore, should be monitored and managed as a priority.
The average performance of the banks and financial institutions surveyed with regard to
their multi-channel strategies is shown in the spider diagram below:
Seamless Delivery
4
2.70
2.53
3.47
3.45
Clear Roadmap 4
4
Customer Centricity
3.50
3.04
3.22
2.95
4
Leadership
Copyright © 2008 Charteris plc. All rights reserved.
We found a small number
of organisations to be
significantly ahead of the
game in the multi-channel
offer and that a number of
mainstream providers in
the industry would take
another 12-18 months to
reach the level of the best
in the sector.
Best practice
Overall the organisations
surveyed see themselves as
fit for purpose, taking
sufficient measures relevant
to current needs and
preparing to improve multichannel service in the future.
♦ Most financial services
organisations lie in the
‘Effective’ quadrant in the
strategy section (please
refer to the benchmarking
guide in the appendix).
♦ There is a need for such
service organisations to
move away from a
product-push, channel by
channel transactional
business model and to
adopt demand-pull with
more self-service options.
This will give both higher
quality and lower cost.
♦ Anticipating customer
needs by effective use of
the latest web technology,
which creates interesting
possibilities for channel
integration and thus
better product planning,
is an important new
trajectory for the industry.
2008
2007
Best of 2008
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 8
Our survey shows a significant improvement in Retail Financial Service organisations’
efforts to move from being product-centric (manufacturing businesses) towards being
customer-driven (service businesses).
All organisations surveyed set clear objectives to provide seamless channel integration
and a single customer-centric platform, and the data shows there has been considerable
progress in 2007-8.
We also found a small number of organisations to be significantly ahead of the game in
the multi-channel offer and that a number of mainstream providers in the industry would
take another 12-18 months to reach the level of the best in the sector. This is of great
competitive interest to the industry given the current changes it is going through. To achieve
customer centricity a multi-channel roadmap within the retail business plan becomes
crucial and all surveyed organisations responded positively to this question, indicating
that there was a clear roadmap in place. However, the current credit crisis is making its
impact felt in this area and a number of organisations admitted to focusing on bottom-line
and customer profitability in the short term rather than long-term multi-channel strategies.
Significant customer groups are shifting towards channels that provide self-service
options such as the internet, ATM and IVR. However, too many “service” organisations
appear far behind in providing the same customer experience online or in contact centres
as is provided at the branch. Almost 60% of the organisations surveyed in our report
suggest that branch transactions are declining and a new advisory role is emerging.
However, one major complaint customers make against organisations is service variability
across channels: there is a feeling that the move from branch transactions to fully
featured call centres is a result of “channel economics” rather than customer demand. If
this is a push strategy rather than demand pull, then there will be service variability and
customers will recognise and respond to this (as will staff). The behaviour of customers
between channels could prove to be unpredictable and potentially cost-increasing (the
reverse of what channel economics intends) as both branches and call centres have to
deal with unpredictable channel behaviour. The solution is careful preparation and well
defined and tested behavioural models which are truly multi-channel. No retail financial
services organisation has this capability.
What respondents said
“Our objective is to be
seen, regardless of the
channel, as the bank with a
memory across all
channels. Joined-up
banking.”
“Customers expect high
quality service, a well
recognised brand… more
people are choosing to use
the web but we have to
have multiple touch points.”
Organisational agility
We found in our survey that smaller financial services organisation do better (report
themselves happier with performance) on organisational agility than most of the larger
organisations. Tier 1 banks appear to suffer from a time lag between business decisions
and implementation - a level of inertia which is strategically very problematic for them
given the scale of the changes required. Technology plays a dual role here as both
enabler and blocker. Currently technology is seen as a roadblock for large financial
service organisations in becoming flexible and agile. Generally the IT function is aware of
the need for significant reconfiguration of the infrastructure to meet retention and product
per customer targets (the key profitability metrics). IT management is also aware of the
urgent needs of product heads, who are driven by short-term volume and margin targets,
and the current strategy of choice, which is to launch new products and acquisition
pricing (often loss making). The real management challenge is for the technology function
and product channel functions to develop a new “mezzanine” architecture which allows
business to rethink its usual churn and cover marketing strategies. The word mezzanine
implies that this is not a large-scale systems building; it is more a migration from existing
back-office legacy systems to appropriate front office customer-centric systems 3. Very few
organisations have great confidence in their ability to do this. It is a major challenge.
3 We are implying something different to middleware here. A pure middleware solution would imply that front
and back office systems were each fit for purpose and just needed to be made more agile by clever linking.
But front office systems are not fit for purpose as the replies by survey respondents in this report indicate.
Most of the complaints respondents make (and these are very clear in the individual reports) are about the
inadequacy of the front office as a multi-channel interface. They report almost no satisfaction with front
office multi-channel capability.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 9
Opinion
Stephen Regan,
Senior Lecturer in Management Economics,
Cranfield School of Management
Cranfield School of Management were happy to engage in this research which attempts
to put some practical evidence to the theory of Type III Banking that has been an
emergent theme from previous studies undertaken by us.
A Type III bank is
beginning to emerge,
because evolutionary
processes are restless…
it will be much more
focused on the consumer
experience and on service
- it will be a customercentric bank.
Type III banking involves the adoption of a customer-centric multi-channel model which
creates competitive advantage for those who learn, apply and adapt to the changes it
requires. Opportunities from adopting this model arise for the following reasons:
♦ Currently successful (Type II) banks have not configured themselves around this new
model and are struggling (some of them terminally) to do so.
♦ This process of industry restructuring is already in place (the longest upswing in the
banking cycle since the 19th century has just come to an end, globally).
♦ There are a number of current strategic opportunities for those banks who are less
adapted to the current structure, either because they are new to the industry or they
have smaller scale and thus are less embedded in the existing approach than their
current dominant rivals.
Over the last 30 years each epoch has produced a dominant model of what a successful
retail bank looks like.
Epoch/Dates
I/1973-1986
II/1986-2006
III/2006+
Name
Banking as a club
Banking as
manufacturing
(mass production)
Customer centric
banking
(customised
services)
Type I banks were removed in the 1990s by the process of competitive entry into either
the product market (Type II banks lost customers to new entrants) or more usually by
entry into the capital market. But more usually it is entry into the capital markets. This is a
shareholder-driven shift, since they are the main beneficiaries.
The current epoch in European retail banking is characterised by consolidation of banking
models into a single dominant type (Type II). A Type II bank is characterised by excellence
in manufacturing, leading to cost efficiency.
However, a Type III bank is beginning to emerge, because evolutionary processes are
restless and epoch II will give way to epoch III. Currently there is evidence that a Type III
bank will be different to a Type II bank in that it will be much more focused on the
consumer experience and on service - it will be a customer-centric bank. It may operate
effectively in a broader range of businesses and it may be more innovative.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 10
4. Processes
The average performance of the banks and financial institutions in the area of process
effectiveness compared with last year is shown below:
“The current credit
crunch is proving helpful
to the company because it
is allowing us to focus on
customers’ changing
requirements and be
more nimble.”
Well Designed
4
2.83
2.92
3.60
3.49
Staff 4
4
Effective Across
Channels
Best practice
2.92
2.85
2.79
2.37
4
Agile
What respondents said
2008
2007
Best of 2008
The main improvement is in the area of agility. There is an ongoing need for financial
services institutions to continuously redesign key processes from the customer’s
perspective. Processes are now seen by managers to be more agile and capable of
adapting quickly to changing customer needs and thus to deliver better value. Multichannel process design rarely looks easy on the drawing board but in practice it is even
more complex. The majority of organisations surveyed have clearly embraced the notion
of customer centricity in the design of processes but they also report significant
challenges in implementing these process innovations.
Resource constraints in terms of cost came top of the list of challenges facing these
organisations. Other challenges include:
♦ Coordination problems between the channels, such as prioritisation of work with shortterm needs of dominant channels taking priority regardless of the project management
requirements of the innovations planned.
The overall performance of
the industry falls in the
‘Efficient’ quadrant on our
benchmarking guide.
These organisations could
improve the performance
of their business
processes by:
♦ Designing process from
the outside in, i.e.
adopting a customercentric perspective in
order to enable
customers to access
services with greater
ease.
♦ Fast integration of
channels through the
efficient deployment of
suitable IT infrastructure
(but this is expensive
unless the combination
of all six activities
identified in this report
is part of the design: IT
alone is not the way
forward).
♦ Developing an
embedded culture of
continuous
improvement within all
channels with relevant
customer-centred
metrics. Process
improvement needs to
be measured.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 11
Cultural issues (e.g. “hands off”), which can be driven by regulatory compliance
differences between channels. Radical differences between channels can often lead to
project failure since workarounds simply cannot be found. Often these issues can appear
to be internal and political but frequently there are deeper and more substantive reasons
which are capable of being incorporated into the project design.
Even a casual reader of the report will see that there are considerable non-technical
management challenges to be faced in moving towards multi-channel financial services.
Some respondents in the survey pointed out that the current credit crunch is proving
helpful to their company because it is forcing them to focus on customer requirements..
There is a burning platform and this frequently dictates change.
Most of the participants reported dysfunctional processes. For instance, there is a high
level of manual intervention for back-end fulfilment. Where there is no intervention it is
always on one or two low-volume products, which is exactly the reverse of the way it
should be. For example, The majority indicated that they have an end-to-end broker
system for high volumes of business, but still admitted a high error rate. In other words,
existing processes are far from robust.There are indications that banks have a certain
amount of process knowledge which is vital to improving performance (the weighted
averages 3.4). However, this score has fallen since last year, perhaps due to the shift of
management time towards liquidity and cost management. The overall sense is of a
group of organisations with good process capability, significant challenges in process
delivery and a short-term attention span which is intensified by current business
imperatives.
In line with 2007 results, processes are product- and channel-centric rather than being
customer-centric, making it difficult to provide first point of contact resolutions to customers’
problems. This impacts on service perceptions by staff and ultimately by customers.
Opinion
“This year’s Survey
shows progress
which appears to be
slow and painful,
certainly not
universal.
The meltdown in the Retail
Financial Services industry
has focused minds, and
the FSA’s ‘Treating
Customers Fairly’
Programme has helped
organisations to highlight
processes that don’t work
well for customers.
Nevertheless, truly
customer-orientated
culture is still some way off
for several organisations.
In the coming year, we at
Charteris expect that a new
wave of developments will
define the winners and
losers shaping a new era.
New metrics that force the
cultural focus away from
volume, product and price
and into healthy customer
relationships with trusted
brands are essential.
Through our Customer
Centric Framework,
Charteris will be
supporting our clients to
become more agile and
responsive to their
customers’ needs as this
industry transition evolves.”
Allan Barr,
Head of Financial Services
Practice, Charteris
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 12
5. Information
The average performance of the banks and financial institutions in information
management compared with last year is shown in the figure below:
Accessibility of
Right Information
4
2.95
2.66
2.82
2.76
Single
4
Customer Record
4
Information Across
Channels
2.81
2.66
3.03
3.01
4
Use of Market
Intelligence
2008
2007
Best of 2008
Most of the organisations appear to have improved in terms of the management of
information, and some of these efforts will have been driven by the demands of the FSA’s
Treating Customers Fairly (TCF) Initiative. The key challenges are:
♦ Bad data (i.e. incorrect data, in particular the lack of a single view of the customer).
♦ Data inconsistency between systems for the same customer.
♦ Insufficient data; not enough (business relevant) customer specific data is gathered
during the customer transaction, despite the data entry process often being time
consuming and ineffective from a customer point view.
What respondents said
“ There isn’t a single view of customer, we have product systems, but we are trying to
bridge that.”
“ We should be enabling customers to use multi-channel interaction and track their
behaviour. Multi-channel travellers will be a key driving issue here if they are
sufficient in number, we’re UK-centric currently.”
Best practice
Current industry best
practice sits between the
‘Efficient’ and ‘Effective’
quadrants in our
benchmarking guide on
page 18. Very few
organisations have
sufficiently robust and
accessible customeroriented data to place
them in the ‘Agile’
quadrant, although some
have made attempts here
using manual data
manipulation and have
automated development
plans in place. Best
practice to aim for is as
follows:
♦ A single view of
customer, where the
organisation has a
‘memory’ of customer
interactions regardless
of channel and can use
data to predict, track
and analyse the results
of various customer
journeys in both sales
and service.
♦ Data derived in
operational systems
used to review
performance of cost,
income, service and
employee engagement
sensitivities, as well as
to inform ongoing and
regular reviews of
stated strategy, thereby
avoiding duplication
and manual rework.
“ We’re 18 months away from single view of customer, but it will be delivered
incrementally, contact centre first, then service, then lending, then support functions.”
“ We haven’t driven home the advantage of previous investments - we are upgrading
our data warehouse now, but value will be realised in 2009.”
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 13
6. Technology
Technology is one of the weakest (and least improved) areas of all the parameters
assessed. The average performance of the banks and financial institutions in this area
compared with last year is shown below:
Data Management
and Integration
4
What respondents said
“Systems are attractive
but they are not built with
the customer in mind.”
“The biggest constraint is
internal budgets. It’s a
bandwidth issue.”
2.73
2.48
3.13
2.83
Best practice
Customer 4
Value Chain
Flexible
Infrastructure
3
2.42
2.32
2.97
2.92
4
Customer
Information
Accessibility
2008
2007
Best of 2008
Some organisations report they are lagging behind the industry in terms of being able to
produce a coherently mapped out customer value chain and a flexible infrastructure to
support this.
Financial services organisations have spent massively on CRM systems with large
Systems Integration providers and most of them report that these investments have not
delivered the expected benefits. For instance, it is hard to mine the data even if it is the
right data if the information systems are too inflexible and not fit for purpose. This is a
frequently found difficulty: retrieving and sharing data across the whole organisation.
With expensive systems having failed to deliver, institutions are wary of further heavy
investment. The survey revealed that the agenda is for smart spending that delivers
results incrementally and which at all times reflects end-user requirements.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
The benchmarking guide
on page 18 of this report
indicates that most
building societies are in
the ‘Basic’ quadrant in
relation to technology
whilst banking
organisations are in the
‘Efficient’ quadrant. In
order to move to ‘Agile’ the
following best practices
are recommended:
♦ Training people to
implement technology
properly, which means
in advance of the
adoption of the
technology and to a
level reflecting the
changes in behaviour
the technology will
require to deliver its
benefits.
♦ User acceptance of
new technology is an
internal issue and must
be designed into the
technology
procurement process.
Page 14
7. People
Financial services organisations are significant employers (it is the largest sector of the
UK economy by employment) and its people are key to building better customer centricity
and profitability.
Our survey found people to be one of the strongest parameters. Nevertheless (as shown
below), the organisations surveyed believe they have gone backwards in this area since 2007.
Quality
Performance
3.40
3.09
3.5
3.24
2.97
Reward for 4
CC Behaviour
4
3
3.03
2.82
Pro-activeness
Managing
Complaint
3.19
3.09
2008
2007
Best of 2008
Customers’ shifting preferences for face-to-face interaction (and the changing definition of
what they want in that interaction) point towards the need for a pool of high-quality, welltrained, motivated and responsive staff.
Most organisations interviewed rated the quality performance of the front office staff as
high. They also endorsed the notion that front office staff are crucial to improving
customer retention and satisfaction. The link between staff turnover and customer
turnover is frequently made.
Our survey also revealed that front office staff are equipped to manage customer
complaints quickly and efficiently. Improving the value obtained by an individual staff
interaction (the return on interview) is an important part of any “share of wallet” marketing
strategy. But the success of such initiatives fell well short of management expectations. All
organisations believe in rewarding outstanding performance and view reward as not only
a morale boost but as a crucial lever for flexible management in all channels. However, it
appears that the people links in the customer service profit chain are weaker than they
could be. Compared to 2007, financial services organisations report perceived lower
motivation and reward for customer-centric behaviour. But performance on average is
seen to be better in the People dimension than in either Data or Technology.
Best practice
Most organisations are in the
‘Effective’ quadrant of our
benchmarking guide. In
order to move into the ‘Agile’
quadrant the following best
practices are recommended:
♦ Further development of
efficient reward systems,
which encourage
employees to exhibit
customer-centric
behaviour including the
acceptance of new
practices and
technologies, is very
much needed. In
particular, reward systems
which arch over channels:
too often reward is
channel by channel.
♦ The creation of an
environment of
empowerment and loyalty
amongst employees (and
linking this to reward and
culture) is long overdue.
Banks are not
recognisable as highly
service oriented and
empowered
organisations.
♦ The development and
deployment of costeffective training
programmes for
continuous improvement,
especially in front line
supervisors, would be
very effective.
What respondents said
“ There is a lot of centralised consistency in the framework of training, performance
management, appraisal, customer feedback and coaching.”
“ Teamwork is highly emphasised and reward metrics are based on customer
satisfaction and sales.”
Copyright © 2007 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 15
8. Metrics
The metrics employed by the industry were also assessed to identify performance against
best practice. The average performance of the banks and financial institutions in this area
compared with last year is shown below:
Financial Metrics
4
2.95
2.84
2.85
2.42
Future Value 4
4
3
3.05
2.81
Channel
Profitability
Customer
Satisfaction
3.69
3.29
2008
2007
Best of 2008
Financial institutions are realising that good metrics relate strongly to their ability to attract,
to value and to retain customers. Metrics provide the feedback mechanism for customer
centricity. While institutions have paid sufficient attention to match the demands of TCF,
some are making greater efforts in defining and using appropriate metrics. Those
organisations that have taken the time to institute and monitor metrics are the ones doing
best in customer centricity.
Institutions have employed various metrics such as product profitability, customer
profitability and future customer value across multiple channels. The last of these is very
promising. Most organisations we surveyed did not measure customer cost to serve and
as such this metric is not part of the business planning process. Our overall conclusion is
that appropriate metrics are not particularly strong in customer centricity and certainly
there is no adequate multi-channel version.
The method of updating metrics across channels differs between organisations and even
between channels within an organisation. Some rely on traditional methods such as
mystery shopping and the level of customer complaints, but others have relied on
surveys, recent transactions and measurements of process efficiency and effectiveness.
Only one institution reported the use of an effective balanced scorecard method as a
means of measuring key metrics across multiple channels. A multi-channel balanced
scorecard is potentially very valuable.
Best practice
Current best practice sits
in the ‘Efficient’ quadrant in
our benchmarking guide,
with a few glimmers of
‘Effective’ operation
amongst the larger brands.
Where these fail to deliver
is in translating Strategic
Intent, based on head
office metrics, into culture
and operating practice at
the sharp end, where the
brand channels interface
with their customers. Best
practice to aim for is as
follows:
♦ All metrics, where
appropriate, to be
common between
channels and used by
management to drive
consistent staff
behaviours and
customer treatment
strategies that are
congruent with the
organisation’s brand
and support efforts
towards improving its
business performance.
♦ Use of metrics to
monitor evolving trends
and adapt strategy and
tactics to take
advantage of emerging
market trends.
Channel profitability remains a major concern and most institutions try to measure this.
Unfortunately they then tend to react precipitately to what they find. It is rare to find
organisations that use measurement effectively - which means ongoing, standardised and
purposive activity which would allow them to make timely business decisions.
What respondents said
“ Key metrics carry a different weighting in each channel and thus different
approaches to retention, acquisition, product-holding , customer engagement exist.”
“ Between channels, everything up to and including acquisition is different - it’s
comparable thereafter.”
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 16
9. Conclusions
This study has examined the financial service industry’s progress towards customer
centricity. All organisations that have participated in this survey are progressing towards
developing an optimised multi-channel operating model whether they define it as such
or not.
However, there are still challenges that these organisations need to address, notably:
♦ Customers choose different channels based on their individual preferences and need
to be given options to move across channels without having to incur costs.
♦ Financial services organisations need to concentrate more on integrated delivery of
products and services across multiple channels.
♦ Organisations that aspire to become truly customer-centric must learn to service their
customers with a single holistic view, responding appropriately to their needs.
♦ All financial services organisations must equip, reward and train staff towards a nontransaction, future-value customer service proposition. Many are making strenuous
attempts to do this.
♦ Integrating data and processes across channels with flexible technology and an open
culture will be crucial for these organisations on the journey towards enterprise agility.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 17
10. A benchmarking guide
The continuing journey to true multi-channel financial services
Basic
Efficient
• Multiple, independent processes
People
Processes
Information
Agile
• One or two channels integrated
around customer
• Customer champion at Board
level
• Everyone dedicated to
maximising customer value
• Documented road map
• Single view of the customer
across several channels
• Organisational structure based
around the customer
• Service excellent irrespective of
customer’s journey across
channels
• Seamless customer service
Strategy
• Each customer channel based on
internal departments
Effective
• Documented roadmap towards
full agility
• Little understanding of how they
add value to the customer
• Some understanding of how they
add value to the customer
• Not empowered
• Some level of empowerment
• Slave to process
• Anticipating customer demands
• Looking for and satisfying new
opportunities
• Perceived to be ‘advocating’ the
customer
• Full understanding of how their
business unit add value to the
customer
• Complete understanding of how
they can improve value to
customers
• Able to request limited adjustment
of process to meet customer
needs
• Able to deal with all complaints
• Empowered to improve process
to prevent complaints
• Level of customer satisfaction part
of rewards package
• Personal and corporate reward
scheme based on customer
satisfaction
• Designed only to meet internal
objectives
• Core activities are customer
focused and shared
• All processes fully integrated
• Dead time in process
• Minimal get-rounds and well
documented
• No reward for customer-centric
behaviour
• Each channel has its own
processes
• Enabled to request a change to
process
• All products and services can be
handled via all channels
• Reward based on their
anticipation of customer needs
• Simple, customer focused,
comprehensive and integrated
• Anticipate customer needs
• Some integration of channels
• Necessary hand-offs well
managed for the customer
• Standardised processes are fully
automated and virtually real time
• Slow or unable to meet changing
customer needs
• Simple hand-offs managed
satisfactorily
• Seamless, consistent customer
experience
• Exceptions only needing manual
intervention
• Complex bespoke manual
processes mastered by only a few
• Other processes partly automated
• Adaptable and swift to change
• Slow or unable to meet changing
customer needs
• Staff empowered to improve
processes
• Continuous improvement
embedded
• Silo’ed, disparate data
• Satisfactory operational reporting
• Little cross-channel reporting
• Clear operational picture at all
times across all channels
• Digital dashboards
• Data difficult to get hold of
• Reporting very manual and
retrospective
• Multiple customer records
tolerated
• Trend analysis
• ‘What ifs’
• Single customer view developing
• Multiple customer records
maintained
• Main operational data
immediately available
• Immediate access to all data
• Slow, manual and time
consuming activity
• Management data being used to
improve performance
• Capabilities for drill down and
trend analysis
• Full understanding of customer
across channels and products
and access to other external data
sources (eg credit checks)
• Same data used by all
• Ready access to all data
• Awareness of cost effectiveness
by customer, product and channel
• Data actively used throughout to
improve performance and
anticipate customer demand
• Process transactions quickly
• Proactive cross-selling limited
• Proactive cross-selling
• Customer segmentation
• Reporting by exception
• Fully understand customer
propensities and demographics
• Proactively positioning proposals
• Working with and for the customer
Metrics
• Little or no customer metrics
Technology
• Basic financial
• Separate systems for different
products and channels
• No lifetime value
• Either product or channel-centric
• Some customer and non financial
measurement within business
units/product groups
• Financial and customer related
metrics
• Fully integrated predictive
customer/product/channel metrics
• Lifetime value metrics
• Understanding of high net worth
individuals
• Operational key performance
indicators (KPIs) and Performance
Framework
• Operational KPI framework
aligned with customer need and
process and desired customer
net worth
• Focus on channel or product
• Supports simple fact finding and
‘one dimensional’ problems
• Core products through main
channels share services and
systems
• All transactions can be handled
through all channels
• Pre-emptive problem solving
• Easy investigative searching
• New channels and products
easily accommodated on existing
platform
• Enables trials of new offerings
• Easy diagnosis of core queries
The transition to an agile enterprise
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 18
Charteris in financial services
Charteris specialises in helping leading financial institutions transform business
performance through agility, manage change and deliver tangible gain through
the strategic application of the latest proven technologies.
Finance markets are increasingly competitive, customers more demanding. Regulatory
demands require a high level of resource. Greater operational efficiencies are called for.
At the same time, systems and technology must keep up with the pace of change.
Call to find out more
To learn more about what
Charteris can do for your
financial services
organisation, please call
either:
Charteris has the expertise and experience needed to address these challenging market,
regulatory, operational and technology issues.
Through our work with a range of clients in the financial services sector we have identified
the following themes:
♦ The need to achieve a truly customer-centric approach so that an agile, fully integrated,
multi-channel service can be delivered to our client’s customers.
♦ The need to manage a complex portfolio of business and IT change within an agile
enterprise framework.
♦ Supply constraints, which result in the need for intelligent prioritisation, increased
productivity and greater resourcing flexibility so that a focus on customer centricity is
maintained at all times.
♦ The harnessing and careful management of new technologies, within an optimised
infrastructure, to facilitate business change.
Allan Barr, Head of the
Charteris Financial
Services Practice, on
020 7600 9199
or
♦ Carrying out due diligence to provide our clients with an independent assessment of
opportunity and risk.
Based on this experience and understanding we have developed solutions that tailor the
strong core capabilities of Charteris to the precise needs of financial services companies
looking to gain maximum business advantage through technology.
Roger Woods, Head of
the Charteris Scotland and
Northern England Practice,
on 0131 477 7741.
Charteris is proud to be a patron of the Chartered
Institute of Bankers in Scotland.
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 19
Enabling the agile enterprise
About Charteris
Charteris is a specialist in business change, delivering true enterprise agility through the
strategic application of technology in key business areas:
A selection of
Charteris clients:
Customer Centricity – Enabling organisations to deliver a fully integrated service to
Abbey
ABN AMRO
Argos
Avis
Barclays
Boots
Calor Gas
Financial Service Authority
HBOS
John Lewis Partnership
KCI International
Macquarie Bank
Marks & Spencer
Microsoft
Nationwide Building
Society
NHS National Services
Scotland
Premium Credit Limited
Sainsbury’s
SWX Swiss Exchange
customers, irrespective of sales or communication channel.
Integrated Enterprise – Transforming mid and back office processes and integrating
real-time decision-making into business operations.
This expertise is supplemented by core competencies in Agile Business Change,
Programme Management, Microsoft Dynamics AX, IT Service Transformation and more.
For more information on Charteris, visit www.charteris.com, email info@charteris.com or
telephone 020 7600 9199 (London office) or 0131 477 7741 (Edinburgh office).
About the Cranfield School of Management
Cranfield School of Management, located about 75 km north-west of London in the UK, is
one of Europe’s leading university management schools. It is part of Cranfield University,
renowned for its high quality postgraduate teaching and research and its strong links to
industry and business. Cranfield’s MBA, EMBA, Executive Education and Doctoral
programmes are all ranked in the major league tables. For further details visit
www.som.cranfield.ac.uk or telephone 01234 751122.
About the Chartered Institute of Bankers in Scotland
The primary aim of the CIOBS is to develop and maintain the highest industry-wide
standards in the banking and financial services sector through the provision of top quality
financial services qualifications and worldwide relationships with the main powers and
influencers in the banking industry. As the only Institute in the world that can award the
Chartered Banker designation, CIOBS considers Continuing Professional Development
(CPD) an integral part of its offering to financial services employees. For further details
visit www.ciobs.org.uk, email info@ciobs.org.uk or telephone 0131 473 7777.
For case studies and white
papers please go to
www.charteris.com
About the Building Societies Association
The Building Societies Association (BSA) is the trade association for all the UK’s building
societies. There are 59 building societies in the UK with total assets of over £360 billion.
About 15 million adults have building society saving accounts and over 2.9 million adults
are currently buying their own homes with the help of building society loans. For further
details visit www.bsa.org.uk or telephone 020 7520 5900.
Charteris plc
Head office:
Charteris House,
39/40 Bartholomew Close,
London EC1A 7JN
Tel: +44 (0)20 7600 9199
Fax: +44 (0)20 7600 9212
Edinburgh office:
Links House,
15 Links Place,
Edinburgh EH6 7EZ
Tel: +44 (0)131 4777 741
Fax: +44 (0)131 4777 742
email: info@charteris.com
www.charteris.com
Copyright © 2008 Charteris plc. All rights reserved.
Multi-channel Benchmarking Study: In The Midst Of The Crunch
Page 20