Branch Transformation: Key Components of a Successful Transformation Strategy

Transcription

1 Branch Transformation: Key Components of a Successful Transformation Strategy Chris Gill, Senior Director Global Advisory Services 1 April 7, 2016

2 Agenda Drivers of Branch Transformation Branch Transformation Approach Defining Your Ideal Client Experience Case Study Taking Action 2

3 Drivers of Branch Transformation 3

4 BRANCH NETWORKS ARE TOO BIG 4 Diebold, Inc. Confidential

5 BUT THEY DON T WANT TO GET TOO SMALL 5 Diebold, Inc. Confidential

6 Factors in Choosing a Financial Institution The availability of branches is also important to capture younger consumers despite their self-service propensity % Important & Very Important (< 35 years old) Total (All Ages) Attractive Rates and Pricing 73% 76% Web Banking Offering 65% 61% Products Offered 57% 58% Number of ATM's 57% 52% Number of Branch Locations 57% 55% Mobile Banking Offering 53% 39% Local Ownership / Decisionmaking 42% 42% Source: Diebold Forrester research, 2Q Diebold, Inc. Confidential

7 The Banker s Dilemma Compared to other retailers, the banking industry has not yet met consumer expectations. Memorable Experience Cross-Channel Integration Support and Education Exploration and Engagement 7

8 FREQUENCY OF INTERACTION The Evolving Role Of The Branch The branch is a key component to a multi-channel strategy and offers the richest experience to consumers. Financial planning and advising One-to-one marketing and sales Customer service and issue resolution Complex transaction handling Local community branch presence RICHNESS OF EXPERIENCE 8

9 Branch Transformation Approach 9

10 Diebold s Approach to Transformation We have developed an approach to transformation that enables us to ensure that you have a well defined strategy and robust roadmap before you deploy new solutions. DEFINE ASSESS DESIGN EXECUTE MONITOR What is your vision for enhancing customer experience, improving operational efficiency, and driving revenue growth? How does your strategy compare to those of your competitors? How effectively is the current operating model delivering on your stated objectives? Where should you focus your resources first to achieve the greatest financial impact in the shortest amount of time? What solutions will effectively move you closer to a target operating model while still supporting short-term goals? How should these new solutions be introduced and deployed within your current infrastructure? How can you quickly test solutions to validate your strategy before embarking on a network-wide deployment? How do you ensure that customers and employees adopt new technologies and processes? What key metrics will you measure to determine if you ve achieved your stated objectives? What changes will be required once you have initially deployed your new operating model? 10

11 Create a Comprehensive Branch Transformation Plan Understand the changes required to these key elements within the branch environment to deliver an ideal consumer experience. PEOPLE Upgrade recruiting & hiring Update training curriculum Develop new job descriptions Pay for sales performance - not transactional performance PROCESS Clearly articulate the ideal consumer experience Benchmark your performance Choreograph consumer treatment Be prepared for objections DESIGN Design branches to reflect your strategy, values and brand Embed technology into your design Design for younger demographics without alienating everyone else SALES & MARKETING Create engaging product demos Convert digital engagement into branch engagement Deploy self-service to reduce service burden SECURITY Rethink the definition of security Address physical, electronic and logical concurrently Create a plan that evolves with your branch TECHNOLOGY Deploy technology that aligns with your strategy and needs Ensure employee adoption Make everyone in the branch a technology champion 11

12 Invest In The Right People. You Will See A Change. Develop your next generation of branch employees. Give them the right goals, tools and training. Branch staff is the primary driver of success. Upgrade your recruiting and hiring process. Branch staff need to know your technology. Update your training curriculum. Migrating to self-service is an art, not science. Develop new job descriptions for your next generation employees. Converting to universal staff is hard, but worth it. Pay for performance - not transactions. 12

13 Improve Processes With Consumers Experience In Mind Create a unique, sustainable branch experience that keeps customers coming back. Infuse common sense in your policies. Clearly articulate your ideal member experience. Many branch processes are no longer relevant. Assess your current performance. Benchmark. Choreograph how members are treated. Measure the value of process improvements. Objections to new processes will occur. Be prepared. 13

14 Design the Branch to Deliver Your Ideal Experience Create a branch that is easy-to-understand and navigate. Make it comfortable and welcoming. Pretty doesn t necessarily mean functional. Design your branches to reflect your strategy, values and brand. Technology should not be an afterthought. Embed technology into your design. Design to drive the right employee behavior. Appeal to younger demographics without alienating older customers. Be prepared to be flexible to suit market needs. Uncover customer variations across markets. 14

15 Deploy Technology That Enables Your Strategy Today s technology has not been used optimally. Resist the urge to deploy technology for sake of new technology - ensure its purpose. Technology is an enabler not the solution. Align technology with members behaviors. Employee adoption leads to member adoption. Create a detailed employee adoption plan. Member adoption takes time. Create and stick to a member communication plan. Self-service lets your staff focus on relationships. Nominate technology champions in the branch to provide aid. 15

16 Differentiating the Client Experience 16

17 Transform your branch to deliver a WOW experience Four key zones focus on the ideal client experience. Approach High level client engagement through multiple channel offerings Solve Intricate client interactions conducted in a seated, collaborative environment Transact A fundamentally different client experience through an open transaction area Explore Creating an interactive and social client experience

18 Approach Zone: Technology Enables Branch Transformation Deposit automation at the ATM can help migrate deposits from the teller line to a self-service device Deposit Automation Easily deposit checks or cash without an envelope Address over 50% of all teller transactions Reduce teller headcount US average about 25% migration Cash recycling capabilities Energy efficient ATMs Mobile Cash Access Pre-stage ATM transactions with mobile app More secure (card-less) Better member experience 18 Diebold, Inc. Confidential

19 Deposit Migration Industry Benchmarks Deposit migration rates vary significantly. This is primarily driven by the financial institution s focus on driving adoption rather than simply deploying new technology. Mid-Size Regional Bank Large Regional Bank 10.5% 16.8% CRITICAL SUCCESS FACTORS FOR DEPOSIT AUTOMATION ADOPTION Ensure branch employees are proficient with technology Large Credit Union 18% Deploy technology in branch clusters to ensure consistent customer experience US Industry Average Large Credit Union 20-25% 25% Implement lobby management program to ensure customers are made aware of new functionality and the value it delivers Set measureable migration targets at the branch level Mid-Size Credit Union Chase Bank NA* 35% 53% Ensure policies and processes are aligned to support migration Establish a customer awareness program leveraging branch and digital marketing Bank of America 60% Large Italian Bank 70% Large Belgian Bank 95% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: Diebold Advisory Services analysis, JPMorgan Chase 4Q13 Investor Presentation; PNC 4Q13 Investor Presentation * Figure includes ATM, Express Banking Kiosk, and Mobile 19 Diebold, Inc. Confidential

20 Teller Pods Teller pods can be used to fundamentally change the interaction between clients and branch staff. Description Offer services found in a traditional teller line Break the barrier between the client and the teller Require a choreography to manage depth of conversations Include: Cash recycler/dispenser, teller capture devices and PC terminals Value Proposition Improves Staff/Client Relations Facilitates Cross- Selling Reduces Staffing Increases Security Why it Works Simplified transaction allows for more focus on building relationships Less confrontational stance allows for more personal communications and service Fosters universal staffing model (associates service both transactions and sales) Secures cash and more personal interaction discourages robbery attempts 20 Diebold, Inc. Confidential

21 Express Cash Recycler Express Cash Recyclers improve teller efficiency and accuracy, enhance the customer experience, and promote employee mobility in the branch. Reduce customer wait times Reduce cash handling Minimize teller outages and reconciliation efforts Simplify opening and closing procedures Minimize teller outages and reconciliation efforts Increased focus on customer 21 Diebold, Inc. Confidential

22 In-Branch Self-Service Incorporation of self-service or partially-assisted service inside the branch provides opportunities to increase efficiency and consumer education. IN-LOBBY TELLER TERMINAL IN-BRANCH ATM Source: 22 Diebold, Inc. Confidential

23 In-Branch Self-Service Denali Alaska FCU (Kent, WA) 23 Diebold, Inc. Confidential

24 Interactive Branches A technology station within the branch represents another opportunity to educate consumers about available banking channels. TABLET STATION ON-LINE STATION Source: 24 Diebold, Inc. Confidential

25 Two-Way Video Video can be used to connect customers with remote specialists or to representatives in a call center. Two-Way Video Two-way video conferencing at the ATM or in a office setting Enhances consumer experience Expands access to financial service experts touch points and times Advances targeted marketing 25

26 Teller Transaction Volume and Cost Breakdown Over half of transaction volumes and nearly half of the cost of teller transactions can be addressed immediately with existing solutions. 3% 9% 43% Teller Transaction Volume 54% 44% Teller Transaction Cost 47% Basic Transactions Which Can Be Completed With DA Self-Service More Complex Transactions Which Require Systems Integration Transactions Which Requires Customization by Processor Source: Numerous Financial Institution Transaction Data; Diebold Analysis 26

27 Transaction Migration Roadmap - Overview A phased approach to transaction migration will ensure that you achieve benefits immediately while developing more complex transactional capabilities. Phase 1 Phase 2 Phase 3 Phase 4 Build a Foundation Accelerate & Expand Adoption Partner with Your Network Complete the Migration Implement deposit automation solutions to address basic transactions that can readily be migrated to self-service solutions Focus on in-branch solutions that not only drive greater transaction migration, but also improve customer experience Work with your transaction processor to modify existing business policies to enable additional transactions Focus on developing more complex transactional capabilities that are not available via traditional networks ~54% 3% 43% Basic Transactions Which Can Be Completed With DA Self-Service Device Transactions Customized by Processor Complex Transactions Requiring Integration 27

28 The Evolution of Consumer Touchpoints Greater diversity in physical touchpoints, in conjunction with digital channels, can lead to improved consumer experience and improved profitability. DIGITAL Self-service via online and mobile channels using consumer devices. Provides anywhere, anytime banking. UNMANNED SELF-SERVICE Advanced-function devices deployed beyond the branch network. Efficiently expands local presence. MINI (~500 sq ft) Limited banking services. Efficiently expands network. Can be temporary location or located in retail stores. CONVENIENCE (~1,500 sq ft) Essential transactions delivered in high traffic, high cost locations. Offers self and assisted service. Small staff. STANDARD (~3,000 sq ft) Most common branch model today. Transaction and relationship focused. Offers self, assisted and full service. FLAGSHIP STORE (~5,000 sq ft) Relationship and community focused. Encourages exploration of full suite of bank solutions. High brand value. 28

29 Standard Branch 29 Diebold, Inc. Confidential

30 Entryway 30 Diebold, Inc. Confidential

31 Convenience Branch Teller Pods Technology Station Enhanced Platform Area Revamped Waiting Area ILT & Greeter Station 31

32 Technology Station & ILT 32

33 Case Study 33

34 Case Study: Branch Transformation Automation technology and a focus on personal connections drove efficiencies for this community bank. With a rich, 125-year history in the region, First Citizens National Bank (FCNB) was ready to raise the bar for its consumers. Led by President and COO Judy Long, the bank engaged in a strategic branch transformation project that included a de novo branch as well as a rebuild of the highest volume branch in their network. Judy Long President & COO 34 Diebold, Inc. Confidential

35 Showcase Branch Before Remodel 35 UPS Store The existing branch processed more than 25,000 teller transactions monthly with minimal in-branch automation and a sub-optimal customer experience. Long Traditional Teller Line Approx sq. feet

36 Showcase Branch After Remodel 4000 Sq Ft 3 Teller Pods with Recyclers 1 In-Lobby Teller Commercial Teller Windows with Recyclers Tech Stations 36

37 Case Study: Branch Transformation Automation technology and a focus on personal connections drove efficiencies for this community bank. 37 Diebold, Inc. Confidential

38 Taking Action 38

39 Branch Transformation Strategy Given changing industry dynamics, there is increased urgency to take action to address the key questions related to your branch network How do I justify my investment? How many branches do we need? What s the next How do I migrate generation transactions? format? What kind of technology do I need? What experience do I want to deliver? Where do I start? How do I optimize my network? How do I improve profitability? How do I appeal to a younger demographic? 39 Diebold, Inc. Confidential

40 Market Value Analysis Branch investment should align with market potential, which varies at the submarket level. 40

41 Self-Service Propensity Understanding channel preference at the sub-market level allows for better alignment between in-branch technology offerings and market preference. 41

42 Customer Channel Usage Profiling Profiles are created for each customer based on their historical usage of the bank s delivery channels Self-Service class Pure Self-Service (100%) 109, % Self-Service Preferred (75-99%) 30, % Mixed (25-74%) 99, % Attended Preferred (1-24%) 32, % Pure Attended (0%) 162, % FM Customers Total 435,299 Percent of Total ILLUSTRATIVE 32% high self-service 45% high attended 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Benchmark Comparison 43% 44% 45% 42% 33% 32% 30% 29% 26% 26% 27% 23% Self-Service Preferred Mixed Attended Preferred 42 Total Benchmark Peers All Other FirstMerit Bank Benchmark Sample: 21 FI s - 6 Peers w/ average branch network size of 305; 15 Other w/ average branch network size of 40 42

43 Branch Usage by Self-Service Class Understanding customer self-service propensity across branches is important in prioritizing transformation initiatives ILLUSTRATIVE Branch Used Self-Service Preferred (66-100%) Mixed (33-66%) Attended Preferred (0-33%) FOGELSVILLE 36% 21% 42% ALLENTOWN 36% 19% 45% KUTZTOWN 31% 14% 54% LEHIGHTON 31% 21% 48% EASTON 30% 19% 51% BETHLEHEM 22% 14% 63% 43

44 Branch Clusters Customer Cross Branch Usage Understanding customer cross-branch usage is critical to ensure delivery of a consistent experience across locations Example: Olympia-Tumwater-Lacy Cluster ILLUSTRATIVE Chehalis Martin Way Tumwater Town Center Tumwater Trosper Lacey- LCUC Olympia West Olympia Chehalis 5, Martin Way 263 8,959 1,045 1,198 2,060 1,730 1,457 Tumwater Town Center 337 1,045 6,260 1, Tumwater Trosper 613 1,198 1,953 7, ,455 1,605 Lacey - L.C.U.C , ,249 1,333 1,066 Olympia 187 1, ,455 1,333 9,470 2,117 West Olympia 216 1, ,605 1,066 2,117 8,593 Unique customers using branch in 3 month time frame Moderate overlap in usage ( customers) High overlap in usage (500 + customers) 44 Source: Bank Customer file July 2015

45 Branch Transformation Initiatives Institutions that have successfully transformed their branches have had a comprehensive implementation plan addressing the six key components Branch Experience Development Technology Adoption Planning Pilot Definition & Planning Pilot Program Management Define the target customer experience in the new branch environment Develop branch choreography and lobby management strategies Develop an employee training program to support the branch experience and new technology Conduct on-site training for branch associates Develop employee readiness program Recommend marketing tactics to drive customer adoption Identify changes to processes / policies to support new branch solutions Develop a measurement framework to assess the impact of new solutions Determine people, process and technology components to test at pilot branch(es) Develop implementation plan to support pilot including: Employee readiness playbook Branch choreography Process changes Technology functionality Conduct test and learn pilot at select branch(es) Train employees on new processes and technology Measure impact on key performance metrics Provide recommendations based on pilot and determine changes to implementation plan Measurement plan 45

46 We are more than a solutions provider, We are your innovation partner. Chris Gill Chris.gill@diebold.com

47 Diebold Global Advisory Services Portfolio Diebold has a deep set of capabilities that can assist you throughout your transformation journey. STRATEGY DEVELOPMENT Clearly articulate your long-term vision and strategic actions to achieve a solid foundation to your transformation journey. EXPERIENCE & DESIGN Deliver your desired customer experience in your current branch environment or create a new branch based on a comprehensive plan. NETWORK OPTIMIZATION & EXPANSION Understand your current performance and hidden opportunities. Make data-driven decisions rather than relying historical assumptions. READINESS & ADOPTION Ensure you are maximizing return on investment and branch staff can support new technology solutions and drive customer adoption. FINANCIAL PERFORMANCE IMPROVEMENT Review the current operating model highlighting areas for improvement and areas of strength to build upon. TRANSFORMATION EXECUTION The most difficult part of a transformation strategy is executing on the change management and technology implementation. 47