WHITE PAPER. Driving Retail Banking Transformation. Adam Montgomery FIS Consulting Services

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1 Driving Retail Banking Transformation Adam Montgomery FIS Consulting Services

2 As financial institutions race to re-engineer all facets of retail banking, the branch channel looms large on the radar of many executives. Wide-ranging technologies offer incredible opportunities to reduce cost. At the same time, even tech-savvy millennials look for the inperson customer service that branch staffers provide. Navigating this striking balance is difficult, but not impossible. This paper provides insight into the technology behind the need for retail banking transformation, and then presents several options bankers can take to get started on transformation in a sensible, pragmatic way. The fourth industrial revolution There is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a major impact on businesses. Major shifts on the demand side are also occurring, as growing transparency, consumer engagement and new patterns of consumer behavior (increasingly built upon access to mobile networks and data) force companies to adapt the way they design, market, and deliver products and services 1. This observation correctly characterizes the Fourth Industrial Revolution occurring throughout the world. Advances in technology drive change at velocities that are faster than ever before. Timelines are shorter and learning curves steeper. The following graphic characterizes the sequence of this revolution of change: 2 No longer should banks care about being first to market; instead, the critical timing is about being right to market. Nonetheless, in terms of accelerated product development, banks aren t off the hook. Four- to five-year product development life cycles are a thing of the past. Short bursts of Agile product development introduce product features in sprints. Artificial intelligence think Alexa driven by voice commands, increases consumer expectations for ease of use along with more advanced automation. This Fourth Industrial Revolution challenges bankers with speed, flexibility and rapid product introductions. 1 World Economic Forum, The Fourth Industrial Revolution, January Commerce.gov, April

3 What s needed to transform retail banking? Clear and consistent vision from the top To develop the necessary preconditions for performance improvement, successful transformations start with clear, consistent and ongoing direction-setting initiatives. Bank executives must communicate with a concerted and sustained effort to clarify priorities, create energy and signal commitment to change in expectations. Many transformational efforts fail to achieve critical mass due to missing and/or inconsistent support from the top of the organization. An appreciation for the demographics of tomorrow s customer As we begin to see Generation Z and now Generation Alpha emerge, projections about their future financial needs come into focus. Factors such as the following should play into any future branch transformation efforts: 1. Generation Z individuals will shift careers five times, own 15 homes and hold 17 different jobs. 2. In 2025, Gen Y and Gen Z will comprise 64 percent of the workforce, forcing retirement and down-aging of jobs to Gen X. 3. Future generations are creating the KIPPERs life stage (between young adult and adulthood) Kids in Parents Pockets Eroding Retirement Savings. How the different generations consider the Internet, Mobile, and Branch channels is depicted in the following graphic from the American Banker. As expected, the Mobile channel is the preferred banking access method for consumers, ages

4 An appreciation for all things online How retail customers interact with the internet, including how they search, provides a foundational element to any new retail transformative effort. Understand that individuals are more likely to search on what to avoid than on what they like, according to the following Google research: 3 80 percent growth in searches for Best 65 percent growth in searches for Should I 150 percent growth in searches to Avoid Consumers of all ages rely on the web as they begin investigating new financial providers, or when considering new financial products. Banks need to carefully orchestrate their online channels with the personal touch branches can provide. Online messaging should reinforce branch outreach. Chat sessions should easily pass to personal bankers. Most customers expect omnichannel experiences, with little regard for how hard banks must work behind the scenes to pull it off. Change in retail service orientation Part of the alignment needed for a retail banking transformation is the creation and development of a new kind of branch banker. Branches must provide highly personalized contact. Many banks are creating universal bankers, ambassadors or digital advisors to address complex services and solve problems. They combine this new type of employee with a diversity in branch offerings and an integration of digital services, providing the customer with multiple and flexible options for a 24/7 approach with high-touch service and capable expertise. Importance of banker and customer experiences As banking focuses more on the qualities of branch staffers, winning institutions will succeed due to their customer and employee focus. Bank employees are shifting to expect intuitive, graphical technology interactions. Branch banking is also transitioning as bank customers raise expectations to not only bank anywhere, at any time, but also require a consistent experience regardless of channel or time zone. Non-traditional competitors are making inroads into commercial banking markets with intuitive new apps. The user experiences of these digital offerings are similar to consumer-friendly, high-tech products offered by Amazon and Google. Bankers must address these market conditions with exceptional financial user experiences. Creating exceptional user experience that leverages open banking and analytics can be a daunting proposition for many banks. A partnership with an exceptional user experience team allows banks to take advantage of the partner s continuous investment in banking technology. An exceptional user experience will allow bankers to hire and retain new employees more cost-effectively. And it will also help attract and retain retail and commercial customers. 3 Google, Assisting Today s Super Empowered Customer, June

5 Capabilities to Differentiate Exceptional banks and user experiences should support and provide: Human-centered design built through a different lens incorporating banker input on how to optimally conduct daily tasks A clean, clear, friendly look and feel that is easy to read and laid-out in more intuitive patterns Consistent experiences and handoffs tailored to different roles and job functions Streamlined, optimized workflows with automation of repeatable tasks, fewer clicks and focused views A customer journey and life event focus to always know customer status, health and preferences Contextual insights to improve your ability to manage tasks and track goals and opportunities Omnichannel capabilities to untether bankers from the branch and serve customers where they are and where they re going An integrated solution with IBS Analytics and IBS Open APIs embedded into user and customer experiences Secure, highly responsive solutions to protect customers and improve productivity Enabling a transformation Bankers need to make sense of new technology, multiple delivery channel options and shifting demographics that transform the role and function of traditional retail personnel. A variety of enabling technologies can re-engineer traditional branch-based service and teller duties, creating further impetus for change. Branches must evolve to support a financial advisory role that cements and grows relationships. Bank executives will require new channel strategies to transform current staff and better leverage enabling technologies. Along with aiding in the transition to advisory roles, the new strategies will transform the existing retail network to: Improve distribution efficiency. Align resources with current and future opportunities. Increase digital integration. Enhance the customer experience. Drive branch revenues. Empower the sales staff to sell. Seven services to align a transformation to your environment FIS Consulting can provide a jump start to transformation efforts by offering seven key services as depicted below. These services can be delivered in tandem or individually and increase the value of FIS core and sales and service technology as well as third-party branch solutions. 5

6 A joint team of FIS and bank subject experts can collaborate on all, or a subset, of the following deliverables: Retail technology plan This includes a comprehensive plan that covers deploying the latest technology, including mobile, tablets and artificial intelligence while also providing a digital product assessment. Channel strategy This strategy creates a branch-based delivery channel plan for integration with mobile/tablet technology, including Intelligent Teller Machines and kiosks. Branch network optimization This provides store rationalization and the planning for future branch network requirements. Product reconfiguration for retail and small business This reconfiguration optimizes market position and profitability of retail deposit and lending products and services while segmenting and profiling customers. Sales and relationship acquisition and expansion This plan uncovers market-potential-based opportunities and sales goals, and determines if your bank has its fair share of the market s deposits. Process improvement Process and workflow simplification includes paperless technology enablement and elimination of bottlenecks between the front and back offices. Manpower planning This holistic approach to branch staffing answers the who and when, while providing organizational structure, staff positions, and roles and responsibilities. It also analyzes the value of universal staffing vs. a specialist approach within the branch. Collaboration is the key Regardless of the services your bank selects, FIS consultants will work with your retail team in a highly collaborative process. FIS consultants conduct facilitated strategy and planning sessions carefully designed to include all bank leaders, irrespective of title. The Retail Banking 2100 engagement provides a logical starting point for any branch transformation initiative. Contact us For further information on Retail Banking Transformation and FIS Consulting Services, visit fislglobal.com or contact your FIS strategic account manager (SAM) FIS and/or its subsidiaries. All Rights Reserved. 6