BCG Retail Banking Benchmarking, U.S. Bank S.T.A.R.T. Example March 14, 2012
Almost one-half of the 40 largest banks participated Over $14 Trillion in assets, 400 M customers, 50K branches Note: Largest banks ranked by deposits; excludes investment banks and processing banks Source: The Banker Top 1000 World Banks 2011, Company documents 1
Four main levers for Operational Excellence in Retail Banking 1 Client excellence End-To-End performance Branch excellence Call center excellence Multi-channel delivery Online excellence 2 Efficient and effective 3 processes Streamlined organization Efficient new product processes Efficient administration processes Lean organization Sales focused FTE distribution Process automation & sharing Adequate Ops footprint (locations, sourcing) 4 Underlying capabilities Complexity management Performance management Continuous improvement Effective front/back office collaboration 2
Four levers of Operational Excellence Retail Banking Process & Productivity Benchmarking overview What is this benchmarking about? Four levers to achieve Operational Excellence Key Performance cockpit Top 30 retail banks North America Europe Asia-Pacific Unique benchmarking All retail products Operations and customer-facing activities Activity-based FTE mapping, rather than organization-based, applicable to all business models 1 2 3 Client excellence Maximized customer facing resources Aligned with profitability High utilization Efficient and effective processes High level of industrialization Processes simplified Harmonized activities Streamlined organization Reduced complexity; clarified accountabilities Customer attrition rate Call handling time (minutes) New product sales per sales FTE Sales conversion per inbound call Customers per total FTE 51,000 branches Effective use of sourcing/shoring Banks covering $14.5 trillion in assets 307 437 450 million customers Sub-scale units consolidated Share of sales & ser- 51% 87% vice as % of FTEs 4.5% 2.6 219 2% 4% 460 5.6% 4.1 71% 7.5% 5.4 803 16% 1,270 Sample KIPIs Sample KIPIs Sample KIPIs 4 Underlying capabilities Continuous complexity reduction Rigorous people performance mgmt across sales and operations Transparency on performance, cost Number of products 26 Incentives for improving i Ops "None" performance 58 217 "Aggressive" Sam mple KIPIs Worst Median Best 3
Benchmarking summary across full value chain and linked to four levers of Operational Excellence Value chain data collection Benchmarking overview 4
Detailed insights Critical capabilities and practices Customer-facing FTEs/roles Call centers service levels Client excellence KPIs 5
From academic to reality, from theoretical to practical Benchmarking Action Ranking Issue identification Anecdotal lessons from top performers Implication for US Bank Not a cost issue at all Sales force effectiveness Growth Innovation Identified the problem Formed a team to figure out a solution across at least six silos/groups Retail banking Credit cards Technology Finance Marketing Enterprise revenue office CEO mandate New value proposition to grow 6
Context and objectives of the effort Context Competitors launching new products Highly profitable, but no core relationship growth, lack "hook" Consumer research they want to save and need help doing it Objectives Create a powerful value proposition Positive impact on consumer engagement Generate excitement, strong desire to sell for field / branch and corporate employees Lack of collaboration across silos, inhibiting integrated offering Provide a compelling example to reinforce innovation theme Focus on delivering value in current fiscal with full roll within a year Provide a structure to facilitate cross-silos work 7
New product developed using rigorous customer research process Over 20 concepts brainstormed by y senior leaders Tested concepts through over 30 one-on-one customer interviews Identified and refined high-potential concepts based on interviews Tested concepts in a quantitative survey (against ( i t "control" " t l" concepts) t ) New p product candidates One-on-one interviews Final Concepts Survey Analyzed survey results and identified id tifi d conceptt for f market k t launch l h Final Product 8
Consumer responses to further probing informing development of functional product features Qualitative research Desire help with 'forced' savings Simple to communicate Avoid "too-good-to-be-true" Wary, quick to detect gimmicks, 'fine print' Idea must be simple enough to fully communicate Avoid "too-good-to-be-true" true kickers or language Creating significant value Disliked slow savings options A few mentioned low balance generation from "Keep the Change" Do not want to much bank exposure Avoid focus on 'goal identification Very negative reaction to "name" use of funds Choice, control, flexibility Not want to feel "forced" Need to be able to change their mind later Coupons not viewed as true way to save Discounts typically had to be in 15%+ range Preferred store selection varies considerably Simplicity (despite wanting everything) "Single-feature" concepts performed well Refer back to a single reference/sticking point often Aversion to use of credit cards, Trying to avoid further spend Mass affluent still seeking rewards maximization 9
Qualitative research Auto Savings and Rewards candidates for further testing Selected for quantitative and banker testing Deprioritized for further testingti Auto Save Rewards Auto Save Goal Save Pick Your Perk Control Rewards Goal Save Auto Save Discount Savings Goal Save Favorable Neutral Unfavorable Cash back rewards only 71 14 14 Flexible rewards 67 14 19 Travel rewards only 62 14 Choice in Auto Sweep only 57 29 14 Rewards & Auto Sweep 48 33 19 specific Lock w Reward 40 30 examples 30 removed Pick Your Perk 38 33 29 for Silver Package 33 24 43 confidentiality Cash & Gift Cards only 1 50 50 as CD - Incrementing Rate 2 40 40 many 20 still Dollar a Day 1 33 17 are Coupons 29 48 attractive Locked - Branch unlock 27 18 55 Reward choice only 18 73 9 Combination 14 52 33 CD - Tiered 10 40 50 Auto sweep choice only 67 33 24 0 20 40 60 80 100 % 10
Quantitative research Discovered consumer resonant concept that compared favorably with competitive offerings Purchase intent versus novelty for mass/middle-income subjects Novelty 60 50 Savings Turbo Control Peer B SAV-1KR C-W2S C-KTC 40 CBS SAV-RS Peer A SAV-SR TL-F 30 Peer C TL-T 0 C-P C-S Current offering 0 30 40 50 60 Purchase intent Note: Matrix represents share of respondents with top-2 responses for initial purchase intent, novelty. Crosshairs represent arithmetic mean values on each axis for control concepts. Top-2 responses for purchase intent "Definitely" and "Probably would sign up for;" for novelty "Extremely" and "Very new and different." Source: Consumer survey (~2,500 completes) 11
S.T.A.R.T. Video 12
Product features Bank 4000 1234 5678 9010 Savings Account Savings Pat Anderson Bank 4000 1234 5678 9010 Debit Bank Pat Anderson 4000 1234 5678 9010 Account Pat Anderson 1 Customers build savings through an automatic plan Prescheduled transfer 2 Cash back to savings Debit card With debit transactions ($ / transaction) Credit card With credit card transaction (% / $ / transaction) S T A R T rewards card Congratulations S T A R T rewards card Congratulations Savings Account Reward Reward 3 Customers earn 4 Customers earn 5 "ThinkTwice 6 Customers a Prepaid Card Prepaid Card hold" that automatically qualify when they build when keep customers can for banking package their savings savings for a install and year remove Tested better than BofA Keep the Change on novelty and purchase intent 13
Product description Savings Today And Rewards Tomorrow S.T.A.R.T. T makes it simple for you to start a savings plan that s right for you, stay on track to meet your savings goals and earn rewards along the way. All you need to do is set up recurring transfers from your U.S. Bank Package Checking account into your U.S. Bank Package Money Market Savings account. You can save a little every week, with every paycheck, or with every credit or check card purchase. And without even thinking, you can save $1,000! When you do, you ll earn a $50 U.S. Bank Rewards Visa Card. Keep a balance of $1,000 or more for a year and earn another $50 Rewards Card. Tested better than all other competing offers in market Source: USBank Web site 14
Best practices that drove success Key success factor 1 Senior leadership commitment Early organizational commitment allowed a "full speed ahead" approach (with appropriate senior touchpoints for regular evaluation/redirection of program) Enables rapid marshalling of resources and short time-to-market Empowers team to take creative risks 2 Understanding of customer needs Development of customer knowledge thoroughly research-driven Provides hard facts to inform discussions and provides a level of confidence as team makes decisions Provides credibility with the field and increases engagement Leads to discovery of counterintuitive results 3 Team was willing to "do things differently" and take creative risks at several stages of the project a Willingness to result of senior management mandate and confidence in the research and process try new approaches Allows for true breakthroughs (rather than incremental change) Creates opportunities for experimentation and learning 4 Solicited input from bankers / local leadership early and continued to engage them throughout the Constant process dialogue with Avoids a "think tank" approach to product design and implementation the market Provides continuous reality checks throughout process Builds engagement g and credibility with the field 5 6 Early & active cross-bu engagement Coordinated internal and external communication All involved parties across functional silos were at the table from day one as active members of project team, each with early opportunities to provide input and clearly articulated responsibilities Minimizes ambiguity by facilitating coordination and planning across silos Allows for rapid problem-solving Consistent messages and coordinated timing in all communications were critical to securing engagement Creates simple, straightforward product identity consistent with the US Bank brand Allows leveraging of materials for multiple purposes and avoids duplication of efforts 15
Results More than $2.7 billion saved by customers enrolled in program Enrollment Goals Exceeded $20 million in rewards earned 2009 Year End 2010 Mid 2010 Year End 2011 Mid 2011 Year End 56% of non-customers surveyed said S.T.A.R.T. was important in account opening decision 16