Luận văn thạc sỹ - Improving retail banking distribution BIDV

Luận văn thạc sỹ tiếng Anh: Cải thiện phân phối ngân hàng bán lẻ tại BIDV.CONTENTSACKNOWLEDGMENTSEXECUTIVE SUMMARYABBREVIATIONLIST OF FIGURES, TABLES AND CHARTSINTRODUCTION1CHAPTER I: THEORETICAL BACKGROUND OF RETAIL BANKING DISTRIBUTION CHANNELS5I.1. Retail banking distribution channel overview5I.1.1. Retail banking and retail banking market5I.1.2. Retail banking channel6I.1.3. Evolution of retail banking channels8I.1.4. Classification of retail banking distribution channel11I.2. Challenges in the distribution of retail financial services13I.2.1. Changes in Customer Behavior13I.2.2. New technologies16I.2.3. Competitive dynamics in retail financial services17I.3. Trends of distribution of retail banking services18I.3.1. Trends of distribution retail banking services via branches18I.3.2. Contact Center21I.3.3. Selfservice – ATM22I.3.4. Mobile banking22I.3.5. Internet banking23I.3.6. Telephone Banking24I.3.7. Other new channels24I.4. Some considerations in Retail banking channel management25I.4.1. Organizational Structure25I.4.2. Technology26I.4.3. Human Resource27I.5. Conclusion28CHAPTER II: CURRENT STATE OF RETAIL BANKING DISTRIBUTION CHANNEL AT BIDV29II.1. Current state of retail banking market and retail banking channel development in Vietnam29II.1.1. Current state of retail banking market in Vietnam29II.1.2. Current state of retail banking channel development in Vietnam32II.2. Overview of BIDV and retail banking channel at BIDV33II.2.1. Overview of BIDV and retail banking at BIDV33II.2.2. Retail banking channel development at BIDV35II.3. Conclusion44 CHAPTER III: SOME SUGGESTIONS AND RECOMMENDATIONS FOR IMPROVING BIDV RETAIL BANKING DISTRIBUTION CHANNELS46III.1. Overall direction: Integration of multichannel through the distribution of the customer’s preference.46III.2. Specific solution and suggestions for improving physical branch channel46III.2.1. Evolution of physical branch46III.2.2. Transformation of Organization Structure toward sales – oriented47III.2.3. Redesign the look and feel as well as the workflow of retail branches48III.2.4. Setting up some new different kind of roles in branch layout50III.3. Specific Solutions and suggestions for improving electronic channel52III.3.1. ATMPOS System52III.3.2. Internet bankingMobile banking53III.3.3. Contact Center55III.3.4. Technology55III.3.5. Human resource57III.4. Conclusion57CONCLUSION59REFERENCESAPPENDIX

Investment and Development of Vietnam

INTRODUCTION

Rationale

Customers, competition and technological advances are rapidly changing thelandscape of the provision for financial services globally Customerrequirements, current and anticipated preferences need to be centre of thebanking/financial services experiences One of that is to allow the customers tohave choice of how, when, where they can interact with the banks Customerinteractions need to be increasingly accessible, efficient and simple, tailored toindividual requirements and trustworthy Recently, these market drivers arerapidly transforming the retail distribution landscape for banking services from abranch-dominated paradigm to one of integration and balance among multiplechannels

Owing to deregulation, new technology and changing customer behavior,competition in Vietnam banking sector is getting fiercer The intensifiedcompetition recently, especially in retail banking has resulted in a number ofbanks, specifically Joint-stock commercial banks (JSCB) like Asian CommercialBank (ACB), Techcombank, Sacombank, etc have already launched some state-

of the art distribution channel like on phone banking, internet banking, mobilebanking, call center, act These new changes in banking channel strategy of JSCBhas more and more impact on State-owned commercial banks (SOCB) like BIDV

in the battle for customer as well as for growth and future of banks

Bank for Investment and Development of Vietnam (BIDV) founded in 1957 isone of the 4 biggest states – owned banks in Vietnam Its main customers arelarge state owned companies with project finance and long term loan and SMEsfor other banking services Therefore, its core businesses are fund mobilization,lending, guarantee, agent banking, etc However, starting from 2005, realizingthe increasingly importance of banking services to the stability development ofthe bank in common as well as retail banking in specific, BIDV is in the changeits direction from focusing mainly on wholesale banking to promoting retailbanking Recently, BIDV has set up its objective to become one of 3 leadingbanks in retail banking in Vietnam in 2015

more than 200 face-to-face transaction points Almost all these branches are fullservice ones which offer an entire range of products and services under the BIDVumbrella Other methods of interaction such as ATM network, POS play not veryimportant role in delivering financial services to customers Other remotechannels such as Internet banking, Mobile banking, etc are just emerging in

BIDV Up to now, the retail banking distribution channels in BIDV are insufficient, not good enough to serve even more and more demanding customers That might be a greater problem in case they would like to become one of 3 leading banks in retail banking in Vietnam in 2015.

When studying about the changes in retail banking distribution channellandscape globally and nationwide, as an officer of BIDV with responsibility tostudy, propose and implement some new channels for the bank, the author would

like to choose the topic for the final thesis “Improving retail banking distribution channels at Bank for Investment and Development of Vietnam” The author hopes

that the results of this research would bring useful suggestions for BIDV indeveloping optimal retail banking distribution channels

Objectives and research questions

The objective of the study is to examine the changes and trends of retail bankingdistribution channels recently as well as best practices in developing retailbanking channels; analyze the current situation of retail banking distributionchannel development at BIDV In doing that, the study also identify someproblems in BIDV’s retail banking distribution channel development and proposesuggestions and recommendations for the successful setting up and implementing

an optimal retail banking distribution channel at BIDV

Here come the research questions (specific objectives):

(i) What are the changes and trends in retail banking distribution channel

development recently? What are the best practices in developing thesechannels?

(ii) How is the situation in BIDV?

(iii) What BIDV should take into consideration to improve retail banking

distribution channels in the coming time in order to reach its desirableobjective?

The author limits the scope of study in BIDV retail banking distribution channelsfrom 2006 up to now

The thesis deals with retail banking distribution channel management in term ofcustomer’s perspective instead of trying to analyze as well as give out proposalsrelated to commercial management of these channels

Research methodology

To conduct the analysis in preparation for this final thesis, intensive datacollection has been carried out to categorize primary and secondary data for theresearch:

Primary data includes official data and findings, reports published by BIDV

related to banking channel management

Besides the above source of information, the author conducted some in depthinterviews with BOM of BIDV, the head of some departments at BIDV who are

in charge of channel management to explore different views and interests inbanking channel management

Secondary data on the other hand is extracted from the World Wide Web and

from the reports published by some international institutes such as McKinsey,IBM, Capgemini, Boston Consulting Group, etc as well as from the domesticjournals

Structure of the thesis

The thesis will aim at pointing out some problems and propose suggestions,recommendations for improving retail banking distribution channels at BIDV incoming time Apart from the Introduction and Conclusion, the content of thethesis consists of three parts as follow:

Part 1: Theoretical background of retail banking distribution channels

This part goes through the overview of retail banking activities and thendiscusses retail banking distribution channels The thesis mentions from theevolution of such kinds of distribution channels to its changes, recent trendsglobally, its practices for best retail banking as well as some considerations thechannel managers should pay attention in retail banking distribution channel

Part 2: Current status of retail banking distribution channels at BIDV

This part will assess and discuss retail banking distribution channel development

at BIDV This starts with the current status of retail banking and retail banking distribution channels in Vietnam to give the reader an overview of the whole playing field in which BIDV is operating and ends with pointing out all problems related to retail banking distribution channel management as well as its limitations for each specific channel (branch, ATM system, Internet banking, Mobile banking, Call Center, etc)

Part 3: Some suggestions and recommendations for improving retail banking distribution channels at BIDV

Based on assessment from part 2 of this thesis, the author gives out some suggestions as well as recommendations for some critical problems in retail banking distribution channel development and management at BIDV in the coming time in order to reach its desirable objective as the first retail bank in Vietnam in 2015

CONTENTS Subject: Improving retail banking distribution channels at Bank for

Investment and Development of Vietnam 1

INTRODUCTION 1

ACKNOWLEDGMENTS 6

EXECUTIVE SUMMARY 8

11

ABBREVIATION 12

LIST OF FIGURES, TABLES AND CHARTS 13

CHAPTER I 14

THEORETICAL BACKGROUND OF RETAIL BANKING DISTRIBUTION CHANNELS 14

I.1.Retail banking distribution channel overview 14

I.1.1.Retail banking and retail banking market 14

I.1.4.Classification of retail banking distribution channel 20

I.2.Challenges in the distribution of retail financial services 22

I.2.1.Changes in Customer Behavior 22

I.2.2.New technologies 24

I.2.3.Competitive dynamics in retail financial services 26

I.3.Trends of distribution of retail banking services 26

I.3.1.Trends of distribution retail banking services via branches 26

I.3.2.Contact Center 29

I.3.3.Self-service – ATM 30

I.3.4.Mobile banking 30

I.3.5.Internet banking 31

I.3.6.Telephone Banking 32

I.3.7.Other new channels 32

I.4 Some considerations in Retail banking channel management 33

I.4.1.Organizational Structure 33

I.4.2.Technology 34

I.4.3.Human Resource 35

I.5.Conclusion 35

CHAPTER II 37

CURRENT STATE OF RETAIL BANKING 37

DISTRIBUTION CHANNEL AT BIDV 37

II.1.Current state of retail banking market and retail banking channel development in Vietnam 37

II.1.1.Current state of retail banking market in Vietnam 37

II.1.2.Current state of retail banking channel development in Vietnam 40

II.2.Overview of BIDV and retail banking channel at BIDV 41

II.2.1.Overview of BIDV and retail banking at BIDV 41

II.2.2.Retail banking channel development at BIDV 42

II.3.Conclusion 52

CHAPTER III 53

SOME SUGGESTIONS AND RECOMMENDATIONS FOR IMPROVING BIDV RETAIL BANKING DISTRIBUTION CHANNELS 53

III.1.Overall direction: Integration of multi-channel through the distribution of the customer’s preference 53

III.2.Specific solution and suggestions for improving physical branch channel 54

III.2.1.Evolution of physical branch 54

III.2.2.Transformation of Organization Structure toward sales – oriented 54

III.2.4.Setting up some new different kind of roles in branch layout 58

III.3.Specific Solutions and suggestions for improving electronic channel 59

III.3.1.ATM/POS System 59

III.3.2.Internet banking/Mobile banking 61

Customer segmentation 61

Marketing Strategy 61

III.3.3.Contact Center 63

III.3.4.Technology 63

III.3.5.Human resource 64

III.4.Conclusion 65

CONCLUSION 66

REFERENCES 68

APPENDIX 69

ACKNOWLEDGMENTS

I would like to express my sincere thanks to MD Dang Manh Pho for his valuable guidance and advice for my research I also would like to thank all ULB members for their valuable arrangement and kind support during

my studying period.

I greatly thank BIDV Retail Products and Marketing Department for their consultations and providing valuable documents for my research.

Finally, I am heartily indebted to my family for their help, encouragement and support during my study.

EXECUTIVE SUMMARY

Jean Paul Votron from Bank Foties in Stephen Timewell Magazine on retail marketused to say that "Retail is the problem of distribution" This is especially true forretail banking today as banks are moving nearer and nearer to be alike as retailers Distribution channels are playing more and more important role in retail bankingnowadays In retail market, beside the quality of the service as well as reasonableprice, a convenient method of distribution which is used to deliver the financialservices also has great impact on the customer’s buying decisions Bankingcustomers are today demanding access to their finances through a range oftraditional and emerging customer touch points anytime, anywhere They aredemanding seamless, multi-channel sales and service experiences These demandsare rapidly transforming the retail banking distribution channel landscape all overthe world from a branch – dominated paradigm to one of integration and balanceamong multiple channels

The same situation is taking place in Vietnam retail banking recently Starting from

2003 up to now, retail banking distribution channels in Vietnam have graduallydeveloped in the battle among banks to catch as many retail customers as possible.These banks, especially some joint – stock commercial banks have launched manystate – of – art distribution channels like Internet banking, Phone banking, Mobilebanking, Call Center, etc This period also witnessed the financial turmoil andeconomic downturn all over the world in general as well as in Vietnam economy inparticular In this context, all banks are eyeing into retail banking as a stable marketfor development BIDV is not an exception Starting as corporate banking since

1957, BIDV now is one of the 4 biggest state-owned banks in Vietnam providing awide spectrum of commercial banking products and services to their retail andcorporate banking customers From 2005, the banks started to promote its retailbanking and recently stated its objective to become one of 3 leading banks in retailbanking in Vietnam in 2015 To realize its dream, the bank has been putting greatefforts on reinforcing its distribution channels

Although BIDV now is among three banks that have extensive branch as well asATM network, retail banking distribution channels at BIDV are still not highlyappreciated by customers A recent survey on customer satisfaction in 02 typicalBIDV branches in Hanoi showed that around 32% of asked customers complainedabout BIDV service quality in almost of its channels such as not good staff attitude,

so many procedures, long waiting queue at branches, errors of ATM system, poorfunctionalities and less competitive in services supplied in such channels as Internet

banking, mobile banking in comparison with other banks, etc These factsencouraged me to find out the real problems lying behind and made me ask myselfwhat can be done to improve retail banking distribution channels at BIDV wherenow I am working as an officer.

Starting from studying retail banking distribution channel landscape globally, thethesis has realized some important trends as follow:

• There is a increasing recognition that a change in the role of the branch, frombeing transaction-oriented to advice – oriented, brings with it a change in role

of key people in the branch – especially the branch manager and the staffresponsible for selling an increasingly broad and more complex portfolio offinancial services products The branch of the future is likely to be a lotsmaller, more sales and advice oriented, automated and better connected toall other channels

• As banks cannot return to the single channel worlds, banks heavily invest inalternative channels to keep up with market development and customerdemand Moreover, technological advances can enhance the ability for directchannels to fulfill their potential as a source of banking sales and service withhigher convenience at lower costs

• Banks are aware of the increasing importance of channel interconnectivityfrom a customer experience perspective

• Whenever rethinking of the distribution channels, the banks should take intoconsideration such problems as the change of organizational structure, newtechnology enhancement as well as human resource challenges

Returning to BIDV current status of retail banking distribution channels, the thesishas point out some critical problems, as follow:

• Retail banking distribution channel at BIDV is limited in number as well asservices supplied with customers At the moment, branch is the dominantchannel Such direct channels like Internet banking and Mobile banking isemerging and just provide some basic information such as balance, interestrate, location of ATM, etc

• Retail banking distribution channel management at HO as well as at branchseems to be not good enough Specifically, each channel is managed by aseparately department at HO, lack of overall management

• Branch organizational structure shows the lack of retail oriented with theabsence of a dedicated team to serve individual customers Now at BIDVbranch, there is only one department called Customer Relation Divisionwhich serves both individual and corporate customers without segmentation

• Branch look and feel seems to be transactional – oriented in which there is noroom for private banking customers, no financial advice corner, just place forteller to conduct all kinds of financial transactions.

• About self-service channels, services provided through this channel (such asATM, POS) are so poor There is no call center for supporting customers andmerchants, just a hot – line which is routed to one card center staff at a time

• Lack of integrated channel management platform to manage channelsincluding ATM, POS, mobile banking, internet banking, IVR, etc

To deal with such problems, the author suggests BIDV to take into considerationssome recommendations to improve its retail banking distribution channels suchas:

• Setting up multi-channel approach which means the banks need tocombine and balance its strength in network of branch with otheralternative channels to provide customer a fully integrated customerexperience across all channels It also helps to satisfy customers anytime,anywhere according to customer’s preferences

• Transforming the branch organization structure towards sales – oriented

by redesigning the branch layout, refining some processes as well asadding some more new roles at branch for some new customer segmentssuch as loan advisers, Service Customer Representative, Private bankingofficers, etc

• For self-service channels, it is necessary to improve customer service bynewly setting up a call center for customer and merchants support,diversifying services provided via this channel by partnership with someservice providers

• For Internet banking and Mobile banking, it is high time to set up a clearstrategy of development in which at first setting the purpose of catching asmany customers as possible as high priority to win the challenge in the battlewith other banks because BIDV is a follower in this field

• Taking into consideration of implementing some critical technologicalprojects such as CRM, MIS, Autobank, etc as well as designing carefultraining plans to set up the ground for retail banking development as well

as its human resource improvement

ATM Automated Teller Machine

CRM Customer Relationship Management

SMS Short Message Service

HSBC Hong Kong Shang Hai Banking Corporation

P2P Peer to Peer

PC Personal computer

IVR Interactive voice response

ICT Information and Communication Technology

IT Information Technology

POS Point of Sale

GSM Global System for Mobile communication

GDP Gross Domestic Product

FDI Foreign Direct Investment

SBV State Bank of Vietnam

BIDV Bank for Investment and Development of Vietnam

AGRIBANK Vietnam Bank of Agriculture and Rural Development

VCB Vietnam Commercial Bank

TA2 Technical Assistant Phase 2

VIETINBANK Vietnam Joint Stock Commercial Bank for Industry and TradeFTD Fixed Term Deposits

CSR Customer Service Representative

WTO World Trade Organization

LIST OF FIGURES, TABLES AND CHARTS

Figure

Figure 1 Retail banking customer segmentation

Figure 2 Service channel

Figure 3 Global Consumers: Preferred Purchasing Channels

Figure 4 Banking channel evolution

Figure 5 Models of channel Organization

Figure 6 Retail and Networks Group Organization Structure

Figure 7 BIDV Brach Organization Structure

Figure 8 BIDV Card Center Organization Structure

Figure 9 Multi - channel approach

Figure 10 Proposed Organizational Structure at HO

Figure 11 Proposed Organizational Structure at Branch

Figure 12 Proposed Branch layout

Figure 13 Proposed strategy for Internet banking and Mobile banking

development

Table

Table 1 New role description in proposed branch layout

Chart

Chart 1 Physical network from 2006 - 2009

Chart 2 Teller workload

Chart 3 BIDV ATM in comparison with the whole market from 2006-2009

CHAPTER I THEORETICAL BACKGROUND OF RETAIL BANKING

DISTRIBUTION CHANNELS

I.1 Retail banking distribution channel overview

I.1.1 Retail banking and retail banking market

According to the Bank for Foreign Trade of Vietnam: "retail banking is activitiesbetween banks and individuals and/or small and medium enterprise customers” For Asian Institute of Technology-AIT, retail banking can be understood as "theprovision of banking services to each individual, small and medium businessthrough a network of affiliates or customers direct access to banking servicesthrough means of information technology, electronic telecommunications

So, in general, retail banking refers to banking in which banking institutionsexecute transactions directly with consumers, rather than corporations or otherbanks It is also known as consumer banking or personal banking Servicesoffered normally include savings and checking accounts, mortgages, personalloans, debit cards, credit cards, and so forth

The retail banking market is not a homogeneous market segment, but consists ofseveral levels of client groups that can be targeted with their own set of products

or service levels

Generally the retail market can be divided into four market segments, in whichthe next level market segment typically consists of private individuals who have

an higher income and more assets than the previous level Typically the highercustomer segments will demand better services for the bank, thus requiring thebank to assume a more tailor - made approach to the client.

The market segmentation for the retail market is depicted in the Pyramid below,

in which also the most appropriate distribution channel is mentioned

Figure 1 Retail banking customer segmentation

(Source: Rabobank research)

I.1.2 Retail banking channel

Let talk about “Place” in Marketing Mix, distribution channels help in the

“place” aspect of the marketing mix; distribution provide place, time andpossession utility to the consumer

The distribution channel is generally understood as a chain of intermediaries,each passing the product down the chain to the next organization, before it finallyreaches the consumer or end-user This process is known as the 'distributionchain' or the 'channel.' Each of the elements in these chains will have their ownspecific needs, which the producer must take into account, along with those ofthe all-important end-user

Stern and Ansary11 in a book called “Marketing channels” defined thatdistribution channels are sets of independent organizations involved in theprocess of making a product or service available for use or consumption

Bucklin in theory of distribution channel structure published in 1966 defined achannel of distribution comprises a set of institutions which perform all of theactivities utilized to move a product and its title from production to consumption

1 Louis Stern, Adel I El-Ansary, Marketing channels

In any marketing mix, the place component (distribution) is concerned withmaking sure that a product reaches the target market at a convenient time andplace In relation to physical goods, distribution decisions are concerned withboth channel management and logistics Channel management refers to all thoseactivities involved in managing relationships between the producer and thevarious organizations that distribute the product (e.g wholesalers and retailers).Logistics is made to the place where they will be purchased Within the consumergoods domain, retailing represents the dominant channel through which goodsare purchased This channel may operate on a direct basis by which products areshipped direct from manufacturer to consumer Supermarkets represent the bestexample of the direct distribution channel for consumer goods Alternatively,goods can be moved from site of manufactures to the site of purchasers on anindirect basis Indirect distribution channel may involve some combination ofagents, brokers and wholesalers interposed between producers and retailers Thelogistical dimensions of tangible – goods distributions is often referred to assupply chain management Success in the field of tangible – goods distributionsrequire expertise in both the strategy and management of sales channels, and insupply chain management.

Of course with financial services there is no physical product, so the logisticselements of distribution are of little relevance Instead, distribution in financialservices marketing is concerned with how the service is delivered to theconsumer, making sure that it is available in a location and at a time that isconvenient for the customers

Meidan2 (1996) in his book as marketing financial services stated that channels

of distribution for financial service should be thought of as means to increase theavailability and/or convenience of services that help satisfy the needs of existingusers or increase their use among existing or new customers In order to envisagesuch a criterion, the financial services marketers must facilitate the right productfor the right people at the right price and in the right place

Distribution channels for financial services are usually direct channels that meanthe banking services are delivered directly to the consumer as illustrated in thefollowing diagram:

2 Arthur Meidan, Marketing Financial Services

Figure 2 Service channel (Source: Author’s illustration)

As far as financial services concerned, distribution fulfils the following roles:

- The provision of appropriate advice and guidance regarding the suitability

of the specific products

- The provision of choice and a range of product solutions to customerneeds

- The mean for purchasing a product

- The means for establishing a client relationship

- Product sales functions

- The provision of information concerning relevant aspects of financialservices

- Access to the administration systems and processes required for theongoing usage (consumption) of the product or service

- The mean for managing a customer relationship over time

- The cross-selling of additional products to existing customers

I.1.3 Evolution of retail banking channels

Over the past twenty years, the evolution of banking channels in both numberand sophistication has been extensive The change has been undeniablysignificant: from the humble branch – based model to the concierge type servicesoffered today; from the cash machine (or ATM) to the self-service kiosk; andfrom the simple telephone banking inquiry to the self-servicing capabilitydelivered by the internet The subsequent introduction of mobile banking hasgiven rise to a complex distribution landscape Whilst this has deliveredincreased convenience and access to customers, it has often added in creased costand complexity to bank operations without a commensurate increase in sales orwallet-share

The branch model has remained the principal channel and despite previousbranch rationalization programs it has enjoyed a renaissance in recent years as acritical customer touch point and ideal vehicle to deliver advice and sales

Internal debates rage as to whether the ATM represents a cost centre or channel.When considering that, for many customers, ATM often represents the mostfrequent touch point with their bank, recent investment in CRM andpersonalization support the notion of a channel that is more than just a cost ofcurrent account provision The introduction of telephone banking in the late1980s and later the full service contact center represented a significant departurefrom previous relationship-based models Whilst decreasing in usage in certaingeographies, the contact center remains a pivotal part of the distribution mix andfor some direct players this represented their primary channel, such as the launch

of HSBC’s direct-only subsidiary First Direct in 1989, before the advent ofInternet and mobile channels

Then launch of the online channel in the late 1990s initially focused on providingincreased frequency and access to account information driven by customerrequests as opposed to monthly statementing processes However, as adoptiongrew and technology infrastructures evolved, the channel moved to a self-servicemodel offering transactional capability and elements of financial servicesplanning Although the branch model remains the preferred channels in marketssuch as Spain and Italy, the Internet dominates in terms of usage across otherEuropean geographies Undeniably the Internet channel has become an integralelement in the customer interaction process Whilst multi-channel integrationcontinues to represent the “holy grail” for retail financial service providers,perhaps this challenge is no greater than the integration of online and offlinecapabilities where customers increasingly desire and demand a more seamlessinteraction that combines the convenience and information access supported bythe Internet with face-to-face sales and advice delivered via the branch

To bring recent channel development up to date, much analyst commentary isdevoted to the adoption of mobile banking and its future implications forestablished banking channels The introduction of SMS-based accountinformation represented first generation mobile banking services and positionedthe mobile as a potential fifth channel Recent technology developments haveachieved a level of integration with core systems to deliver not onlyinformational but also transactional-based services Its potential as a platform tosupport cross-selling and deepen the customer relationship is acknowledged,especially when considering its appeal to the anytime, anywhere financialdemands of an increasingly technology-savvy generation According to Juniper

Research 3, the number of people accessing banking services via mobile phoneswill reach 816 million by 2011 The largest adoption is forecast to occur in theFar East and China followed by western Europe and India Despite theseforecasts banks need to define how mobile fits within their overall channelstrategy and whether it should indeed evolve into a full-service bankingproposition given the potential to conflict or replicate existing internet offerings.However, it would seem that the fifth channel has finally arrived.

Whilst the growth of the Internet, and latterly mobile channels, can be partexplained by users determining when and what information they would like to to

“pull” from their financial institution, the one constant has been that banks haveowned and controlled the customer interaction in the provision of financialservices Until recently, the perception that banks possessed exclusive rights tothis relationship was supported by the belief that customers placed high import

on trust and security offered by these organizations However, this basic premise

is being challenged through the growth of financial social networks such as P2Plenders and by a 2006 United Kingdom survey on Internet-based social lendingconducted by Social Futures Observatory (SFO) A key finding highlighted howrespondents felt social lending schemes offered a more authentic and transparentfinancial service guided by the experience of lending and borrowing directlyform people than a mainstream bank

Recent developments in the banking sector – deregulation, mergers andacquisitions, the rise of the Internet, etc have all significantly altered the way thatthe financial services industry does business At the same time, new entrants tothe market, global competition, diversification of products and services and anincreasingly sophisticated customer base are presenting serious challenges to thebanks In order to survive in the increasingly competitive environment the banksare looking for cost reductions and more efficient ways of delivering theirservices, development of technology has facilitated the delivery of bankingservices and widened the portfolio of delivery channels ATM and phone basedbanking systems were in the forefront of change in the 80’s, followed by PC-andInternet-based banking services in the 90’s The role of digital television andmobile services is yet to be seen In any case, the technology is likely to be thekey factor driving the change within the banking sector for the foreseeable future

As the result the bank customer is faced with a range of different channels anddifferent services to choose from Banks attempt to direct customers towards

3 Juniper Research, Mobile Financial Services: Banking & Payment Markets 2007-2011

electronic channels by reducing branch offices and pricing products in favor ofself-service channels.

Increasing customer sophistication, broadening competition and changingtechnologies have significantly impacted retail financial services and thechannels through which customers interact with financial institutions It is notonly the number of channels that has increased dramatically, but also thefunctionality of those channels has expanded significantly

I.1.4 Classification of retail banking distribution channel

Physical retail banking distribution channels

- Brach office: This traditional brick-and-mortar channel was the first

channel offered by banks, and many times the impressively designedbuilding is confused with the bank institution image It regularly offers allkinds of transactions, from teller-oriented transactions to more complexsolution-oriented transactions Highly personalized interaction will mostlikely lead to a more upscale version of this channel in the bankingstrategies of the future

Electronic retail banking distribution channels

- ATM: The automatic teller machine (ATM) was one of the first remote

channels to bring customers out of branch offices, offering beyond thebranch office’s time, convenient operations During the last five years, theimplementation of new and sophisticated channels, such as Internet andweb phone have decreased the volume of transactions through the ATMs;however, currently new redesigned ATM has been implemented, offeringfull-service operations in convenient locations The ATM has theadvantage of supplying cash, which is not yet available in any otherremote channels Use of debit and credit cards to pay for products andservices as well as for withdrawing cash from ATMs became commonrapidly recently

- Call Center/Contact Center: This was also one of the first remote

channels offered to customers It has increased its importance for bankingchannel strategy as a channel of basic deliveries, with a great part ofcustomers interested in processing simple account transactions Therefore,banks are struggling to implement new applications and technologies likemulti-channel integrations, as a way to support attendants in offering morecomplex solutions This trend also helps to move the basic transactions to

IVR systems that can handle these operations without attendants in a veryefficient and low cost structure

- PC Home-banking: This channel was the precursor of Internet banking.

Banks offer an exclusive line and modem system to connect customers’home PCs directly to the bank’s central computer, from which they canexecute several transactions similarly to the Internet banking operations

- Internet banking: This is the most stylish adoption in recent channel

management It has been attracting customers based on its easy operationand low cost structure, representing an open window to several aggregateservices, such as business-to-business solutions with payment throughonline websites or PC financial planning software Services enabled byICT make it possible for the customers to manage their banking needs 24hours a day, seven days a week The customer can connect to the serviceseither through Internet with a graphical interface, or a proprietary networkwith a text based interface Use of text-based services has decreasedconsiderably as the Internet has become more popular with other types ofservices as well In addition to the connection to the Internet, the customerneeds to make a contract with a bank and receive means for secureidentification, typically a user ID and a password as well as a list ofsession passwords Basic functionalities of the different electronic bankingsystems are roughly the same: balance and activities information,payments, ordering new credit and debit cards

- Web phone/Mobile banking: This channel has been increasing its

penetration with the high adoption of wireless phone Although it is veryconvenient, banks are still struggling with matters of connection speedsand customization Moreover, the lack of a “comfortable” keyboard oreasy operability is a restriction that wireless phone producers and banksare improving to increase usage of this potentially lucrative channels

- Digital TV: This is one of the most recent channels to emerge, as well as

the least adopted Banks in partnership with cable operators offer a series

of banking transactions that are available on the TV screen, wherecustomers can navigate and perform transactions with the help of a remotecontrols Similarly to the web-phone channel, lack of keyboard could be arestriction for the further development of this channel, but TV familiarityand easy operation mean it has the potential to attract lots of customers

- Telephone banking: Most banks offer telephone banking systems utilizing

push-button phones and a speech synthesizer integrated with banksinformation systems These services are interactive with the system

requesting given information, the customer keying them in with thephone, and the system then replying with a response The customer onlyneeds a push-button phone and identification means provided by the bank.Despite the easiness of use and low costs for the customer, use of phone topay bills has not gained popularity, only a few percentage of populationuse this channel regularly.

- Mail: is part of the postal system which itself is a system wherein written

documents typically enclosed in envelopes, and also small packagescontaining other matter, are delivered to destinations around the world.This can be used to deposit cheques and to send orders to the bank to paymoney to third parties Banks also normally use mail to deliver periodicaccount statements to customers

I.2 Challenges in the distribution of retail financial services

I.2.1 Changes in Customer Behavior

The pressure towards new distribution channels comes from the demand sides offinancial services A general increase in organizations’ customer orientation,owing to increased competition, has heightened customer expectations in retailbaking, too Customers are becoming more demanding in terms of the level ofservice they expect and how they are able to access services when required.Demands of greater convenience and accessibility are reflected in longer branchopening hours and an increase in the choice of delivery mechanisms

The changes in consumers’ demographic, economic and social factors alter thedemand for distributions channels of financial services as well Changing workpatterns and an increase in time pressure raise the demand for greater flexibility

in attending bank affairs As a more computer literate generation emerges, farmore trusting of and at ease dealing with technology, the IT based deliverysystems are likely to become more popular

Booz Allens’s4 consumer research in 2007 reveals that despite the development

of alternative channels, customers still prefer to purchase in the branch However,the importance of the branch is in decline and the mass affluent form the groupleading the march away from branches, and towards mobile sales force and theInternet When it comes to alternative channels, customers prefer online totelephone transactions, particularly when the product and the transaction itself

4 Booz Allen Hamilton, Striving for Growth Best Practices in Retail banking Sales and Service

Channels,2007, p.2

are relatively simple One area in need of significant development is limited ornonexistent in all but a few countries.

Figure 3 Global Consumers: Preferred Purchasing Channels

(Source: Booz Allen Hamilton Revenue Enhancement Study 2007)

Industries across the board have raised customer expectations for service.Moreover, customers themselves are technologically aware and willing to usecompetition in the market place to their advantage Hence, consumers in today’s

24 hour society expect and are able to eat at a café in the small hours, go groceryshopping at midnight and to register a complaint at whatever time of day theywish and through whichever means they can access – email or phone Whyshould they expect any less from banks?

Customers have strong demands from banks too and want to transact theirfinancial business on their own terms In an age of instant gratification andpersonalized service, they want access to their money anywhere, and they want itnow – every time they ask for it They want exemplary service, tailored productsand a rich and positive experience from the bank Unfortunately, it is not thesimplest of tasks to fully satisfy this demanding breed of customers This isunderscored by a recent survey of customers from the top 32 United State

financial institutions which reveals that 58% of clients feel that their bank doesnot do what is in their best interest

A primary way by which a bank can delight customer is by seamlesslyintegrating its multiple channels Today, the customer hopes between differentchannels, depending on her convenience, location, time of day and thetransaction being made The quality of her experience is affected by theconsistency of service the bank provides By ensuring that each channel offersthe same products and displays the same information, channel integration creates

a better use experience

As customers interact with their banks over a variety of channels, they demand aconsistent experience and the same information, updated in real time, regardless

of the channel For instance, a customer withdrawing funds from an ATM ormaking a deposit at a branch needs to see those transactions when she logs intoher online banking accounts

According to a White paper of Temenos 5 issued in 2007, if we were to be ask thecustomer what they wanted from a bank, a customer describe the experience thatthey expect from a retail bank today:

- Treat me consistently, whatever the channel

- Treat me as a customer not as a number

- Be aware of the products I have bought and those I have rejected

- If I say “no”, then don’t ask me again

- Let me use the channel most convenient to me

- If I start a “transaction” in one channel, let me include it in another

- If you pass me on to another member of staff, don’t ask the samequestions again

- If you already have my information, don’t request it again

- Communicate in a way that is convenient to me and of my choice

- Give me the use of automated channels whenever I want

I.2.2 New technologies

Internet banking has received the most coverage in the past decade; however, theadoption of new technologies may profoundly influence the distribution of retailbanking services One area of impact may be the movement toward greatermobility as mobile phones become more sophisticated and, therefore, morecapable of handling advanced applications and services Banking via mobile

5 Temenos, Changes in bank delivery channels in the pursuit of customer centricity and efficiency, 2007, p.4

phones appeals to consumers on multiple fronts Customers may not know thelocation of their closest branch or even where their credit or debit cards are, butthey always have their mobile phones nearby Mobile phones also serve as anefficient vehicle for making contactless payments or person-to-person transfers,providing greater security protocols and storing in-depth preference information.This is efficiently accomplished via an existing device, without the need to load

an extra smart card Various software platforms for mobile phones and otherdevices will allow customers to use the Web through their handhelds as easily asthey do through their computers It is anticipated that this will spur rapid demandfor mobile-banking services over the next decade

Other technology development is also poised to affect the distribution of retailbanking services For instance, growing broadband internet penetration and wideruse of low-cost, high-quality webcams will allow banks to use Web 2.0 or othercollaborative tools to reach customers at their homes offices, in branches and atATMs This capability is providing banks with fresh alternatives for customerinteraction such as video conferencing or co-browsing to support dynamicconsultations at convenient locations Additionally, the growing use of instantmessaging as a business tool, the expanded use of social networking sites, andincreasing consumer acceptance of self-service kiosks are likely to influenceconsumer preferences for banking delivery channels going forward Dramaticimprovements in security and authentication are addressing the concerns of thosecustomers who have been hesitant so far to use mobile technologies or to bankonline as well

Meanwhile, technological progress is also providing the means for banks tooperate more efficiently and cost-effectively Advances in network capabilitiesand “thin client” computing are enabling banks to deploy different ITconfigurations in branches and remote offices, thereby reducing the cost andcomplexity per outlet while providing more functionality to staff and customers.Other developments such as Radio Frequency Identification (RFID) can be used

to provide increased security and better risk management while enabling banks tomore rapidly access customer information Web-based approaches, such as onlineassistance, can enable banks to provide person-to-person assistance moreproductively than branch-based staff, while also allowing them to employ leadingoff shoring techniques at a far lower cost per interaction Finally, the growth inaggregate knowledge sources and tools will likely enable banks to better

merchandise and respond to their potential customers, tailored by distributionchannel.

I.2.3 Competitive dynamics in retail financial services

While scale is important at the micro-market level or in selected product lines,newcomers can sometimes achieve the volumes necessary to be competitivewithout taking a leading market share position As a result, non-banking financialservices companies are increasingly entering the retail and small businessbanking space, competing for customers and their balances

With the competitive door continually ajar, existing banks are constantly underthreat Several other industries have chosen to enter banking services including,but not limited to, retail brokerage firms; life insurance companies, property andcasualty insurance companies; health care insurance companies; and retailers ande-commerce companies Banks should be on alert and planning for theinevitability of multiple, non-bank entrants for a number of reasons First, theerosion of branch-based transactions may significantly reduce the naturaladvantage retail banks have had for decades to blunt the invasion of new bankentrants Second, several non-bank companies have stronger sales cultures,higher customer service approval ratings, and more formidable brand equity.Third, each type of non-bank competitor offers customers an individual valueproposition that may include, for example, bundled insurance and deposit orsavings products, one-stop shopping with a single institution, convenient storelocations, or innovative products such as mobile payments Finally, some non-banks such as online retailers or search firms may bring approaches and a set ofthe “old retail banking payment systems”, making banks little more thancommodity vendors of a low-cost banking service within these emergingcustomer paradigms

I.3 Trends of distribution of retail banking services

I.3.1 Trends of distribution retail banking services via branches

According to EFMA research6, the long-term vision is that branches will continue to be an important distribution channel in the delivery of financial services, but they will no longer the “star” They believe that in the future there

may be no distribution channel “star” but only key component parts – onechannel will be no good without the rest functioning in a fully integrated and

6 EFMA Banking Advisory Council in Partnership with Microsoft, The Future of Multi-Channel Delivery,

2006, p.8

efficient manner Therefore, the branch will be viewed rather as a key cog in theoverall delivery of an integrated customer experience The branch will not die,but it will not be as important as it is today Rather than fewer branches theremay be even more physical points of distribution in the future, but they are likely

to be a lot smaller and in different locations from today

CR2 also confirms that branch will continue to be an important channel and there

is a lot of evidence that many channel management initiatives are beginning atthe branch channel

In a recent research done by Booz Allen Hamilton7, we know that despitetechnological advances and the shrinking of networks in many countries;

customers still want to do most of their banking in branches It is their preferred

purchasing channel for all products, but especially for current and savingsaccounts and mortgages

According to Deloitte Center for Banking Solutions8 in a research recently, overthe next decade, the primary channel will likely remain the branch, but otherchannels will become significantly more important for both sales and service.The research suggest that the branch changes over the next 10 years will likelycenter around five main areas: branch redesign to help customers better navigatethe outlet; operating model and staffing changes to improve customer service byengaging the customers in new ways; technology enhancements to improve thecustomer experience and increase cost productivity; enhanced networkmanagement to increase customer convenience while improving flexibility andcost effectiveness; and better connecting the community and the customer tocreate greater brand loyalty

These changes focus on putting the “retail” more dramatically into thedistribution of banking services Banks should view branches as outlets ordestinations for customers and, as such, should redesign them to meet the needs

of individual customer segments and to enrich the customer experience Inparallel, the associated investment and operating costs should be reduced

Retailers have long recognized that it takes more than just good products to bring

in customers and keep them in the store The most sophisticated retailers have

7 Booz Allen Hamilton, Striving for Growth Best Practices in Retail banking Sales and Service

Channels,2007, p.2

8 Deloitte, Evolving Models of Retail Banking Distribution Capitalizing on changes in channel usage,

2008, p.6

become very adept at designing their stores around the needs of their customers,with the goal of making them “destinations” – some place that customers want tovisit as opposed to some place they have to endure Bank branches, on the otherhand, have typically been designed as transaction centers, aiming for speed andefficiency as opposed to creating a positive and memorable customer experience,that attracts customers.

“Next generation” branches are gradually moving from formats that focus onteller lines and transactions to models that give customers clear signs of where to

go when they come in, with an eye toward significantly improving the retailexperience and revenue per square foot Some banks are enthusiasticallyembracing this trend by borrowing the “concierge” concept from hotels, where alobby manager and other bank employee greets customers and expeditiouslydirects them to the areas of greater opportunity for the bank Other navigationaids include prominent signage that provide clear directions to product areas andcentrally located information kiosks that create an obvious first stop forcustomers when they enter the branch

About the future look and feel of the branch, the EFMA research9 stated thatbanks are focusing their branch transformation efforts in areas such as zoning,appointment booking and waiting areas However, what all these new branchtransformation programmes have in common is that they seek to create a moreattractive and welcoming environment for the customer

The main features of the new look branch are:

- Much smaller and more open plan

- Brighter “retail style” environment

- Use of concierge or meet and greeter at the door or walking the floor

- Very few, if any, tellers

- Zoning of areas for different customer usage

- Improved automated services

- Self-help interactive information services

- External visibility – more clear glass and welcoming environment

- Ancillary non-banking services available in the branch

- More access to other channels such as call centers and online services

- Flexible opening hours

- Different locations – more high traffic areas and travel points

- More accessibility

- Better queuing systems with priority customer systems

9 EFMA in partnership with Microsoft, The future role of the “Bank Store” and its interconnectivity with other Channels, 2007, p.10

Booz Allen Hamilton10 listed all the most valued Global Attributes for branchafter conducting a comprehensive study of more than 100 banks across 17countries as follow:

- Privacy

- Product knowledge

- Query resolution

- Central location

- Short wait time

- Staff knowledge of customer

I.3.2 Contact Center

Industry evidence from more mature markets would suggest that Call centretransaction volumes are inversely related to Internet penetration rates In allterritories where Internet banking has been deployed, a large portion of the CallCentre traffic has been reduced Ultimately, the belief is that this channel willhave less importance in the future

According to EFMA research11, a smaller number of “super contact centers” thathave the technology to identify an individual customer’s value whilst they are inthe queue They can then vary service levels accordingly, but still offer aconsistently high level of service in terms of call – answering time to allcustomers The customer contact center of the future may not be located withinthe bank’s home geography but will have the capacity to do outbound selling andturn inbound calls into outbound sales

Customer contact center staff will have far superior product knowledge andadvisory skills compared to today’s staff They will be able to build customerrelationships over the phone and provide a sense of trust and ability to meetcustomer’s requirements without the need for face-to-face meetings This willrequire superior technology and processes, both to enable quicker processing andbetter understanding of customer needs, and much better levels of staff trainingthat results in superior customer handling skills

IVR systems have often been used to address wait times and costs but areencountering some customer satisfaction issues Voice recognition systems could

be a way through this, to service customers in a more human-friendly manner at

10 Booz Allen Hamilton, Striving for Growth, Best Practices in Retail Banking Sales and Service

Channels, 2007, p.2

11 EFMA report, The Future of Multi-channel Delivery, 2006, p.10

an acceptable cost Voice identification systems have also progressed and provide

a newer and more interesting way in which customers can access bankingservices and authenticate themselves

I.3.3 Self-service – ATM

It is approximately 30 years since the patent for the first automated tellermachine (ATM) was issued Yet the ATM carries the dubious distinction of beingone of the most revolutionary innovations in banking history that, nevertheless,has failed to keep pace with other technologies

However, a combination of business pressures, regulatory mandates, and opensystems has changed the landscape and the new wave of next generation ATMpresents new opportunities to the banking industry

In the future the ability to provide highly personalized messages and services tocustomers via ATM is key Personalization and related CRM tools which supplypattern-based information about customer preferences between the ATM andunderlying systems, enable banks to exploit cross-selling opportunities andprovide services to their customers, while enhancing the customer experience.ATM is and will continue to grow in importance Currently it is a critical deliverychannel which takes over 60% of all customer initiated retail transactions.However, more than any other, this channel will require extensive modernization

to deliver the benefits of channel management

The primary focus of the POS channel is still focused on retail sales and as suchthis channel is likely to see less change Improvements in POS device technologywill likely to introduce web protocols and improved security however it is likelythat, with the exception of additional fraud related services, no furtherbroadening of the channel will occur

I.3.4 Mobile banking

In the future, there is an increasing customer demand to perform bankingfunctions through mobile devices; the ability to deliver more complex products isnot part of the vision of the future This does not mean the capability will not beavailable The issue is the willingness of customers to use mobile devices for thistype of service

The vision seems that the customers will still use mobile devices as aninformation delivery channel between banks and their customers The main

applications will be in balance information, personal information changes,appointment booking, pricing and product information.

Mobile is a channel of growing importance as it is the primary deliverymechanism for “Exception Based” banking SMS based banking has had limitedsuccess but it is growing in value In developing markets where branch and ATMdeployments are expensive and limited to date, growth will be delivered usingthe mobile channel which is all pervasive Over 1 billion registered GSMsubscribers worldwide – April 2004, GSM Association) 2.5 and 3rd generationphone handsets will deliver full function banking requirements

I.3.5 Internet banking

According to CR2, Internet is the 1st generation Internet baking deployments will

be replaced with high-end channel management solutions which will deliverconsistent views of the business to Retail, Corporate, Brokers and Agents, Staff,call centre Internet will become pervasive within other delivery platforms, e.g.ATM and Kiosk

Customers – especially mass affluent customers – are increasingly demanding theopportunity to purchase products and transact online, and this trend is likely toaccelerate as broadband connections reach more and more homes worldwide.Security is absolutely paramount in the online channel Banks need to developsystems that combine sophisticated security mechanisms – multiple passwordsand virtual keyboards – with simple logon procedures Secure sites are ideal saleschannels because they offer a unique opportunity to tailor product alerts andoffers to the individual However, because not everyone is comfortable withtechnology, banks should be able to provide live technical support as well asanswers to product queries Given the importance of the internet to time-poorcustomers, banks must develop websites targeted solely at the mass affluent ifthey are to fully exploit this segment

At the very best banks, performance in the online channel is near perfect in allareas However, global performance is much less impressive, with most banksachieving average scores, especially with regard to a segmented offering, wherescores are weak South Korean banks are leading the field in online banking,offering innovations such as secure sites that can be personalized, security codesfrom separate devices, and dedicated websites for the mass affluent

According to a recent research done by Booz Allen Hamilton12, the most valuedGlobal Attributes of online channels are

- Robust security measures

- Simple and quick logon

- Site availability

- All services on same site

- Clear and intuitive layout

- Comprehensive information

I.3.6 Telephone Banking

Phone banking is a channel of secondary importance which is unlikely to seehuge change It may end up being integrated in to the channel manager tosimplify the number of authentication tokens required

I.3.7 Other new channels

A range of new self-service devices may develop that could be used to deliverretail financial services If these new devices meet the industry’s vision ofintegrated channels that help reduce overall cost, increase sales, and can beintroduced easily – they will be welcomed with open arms However, none ofthese will have an impact on any of the other main channels in the near future.Potential new channels include:

- Television

- Instant Messenger

- Retail distribution – in – store co – branded banking

- White label banking

- Virtual social worlds

- Gaming environments (online)

In conclusion, before the advent of multi-channel distribution, the relationshipbetween a client and his or her bank was based in the branch, which providedboth sales and service Today, however, the client is served by multiple channelslike Internet banking, phone banking, mobile banking as well as self-service such

as ATM, POS, etc thanks to the development of technology The trend in the nearfuture is that the physical branch continues the most important channel with thechange in its role from being transaction-oriented to advice-oriented Otherchannels are increasingly playing more important role in selling products andservices Some successful banks can now sell up to 20 percent of their total

12 Booz Allen Hamilton, Striving for Growth, Best Practices in Retail Banking Sales and Service

Channels, 2007, p.2

products and services though direct channels The changes of multiple channels

as described in the following figure:

Figure 4 Banking channel evolution

I.4 Some considerations in Retail banking channel management

I.4.1 Organizational Structure

With the change in usage of channels, a huge change in the organization structurewill be taking place For example, transforming the branch from transaction –oriented to sales-oriented will change the organizational structure of the branchwith the appearance of some new division in charge of financial advice andwealth management customers

Integration of all channels at a bank also creates great changes in organizationstructure Depending on the level of integration, Holmsen13 et al (1998)distinguish three types of hybrid channel organization

• Coordinated channels models: In this “monolithic” system channelswithin the organization are completely integrated with uniform businessprocesses, shared technology architecture and common key performanceindicators are used

13 Holmsen, C.A.,Palter, R.N.,Simon, P.R and Weberg, P.K (1998) “Retail banking: managing competition among your own channels.” The McKinsey Quaterly, Nr.1, pp 82-92

• Managed competition Model: In this model channels have some uniformbusiness processes, shared technology architecture or common keyperformance indicators.

• Competing channels models: The competing channel models transfersaccountability for results down the organization, exposing channels to thediscipline of the market In this system, each channel is treated as anautonomous business entity with distinct business processes, separatetechnology architecture and key performance

When a bank choose one of among these models, it will affects its organizationstructure as centralized or decentralized or mix

Figure 5 Model of hybrid channel management

(Source: McKinsey Quaterly “Retail banking: managing competition among your own channels”)

I.4.2 Technology

Technology is basic ground for the development of retail banking because most

of retail banking products and services (except for complex products for somehigher segment customers like financial advice or wealth management need to bestandardized and packed) which require a good basis of technology of the bank

To introduce a new channel, the banks need to equip some new technologysystems Let take an example:

Recently, the proliferation of channels has created immense new challenges forbanking technology With transactions and customer information generatedacross a number of touch points, the reliance on traditional processes for movingdata inevitably leads to delays and errors The heart of the issue is disparate,disconnected systems that have made it extremely complex to integrate customerand transactional information That creates a need for integration channelplatform to integrate all channels to provide customer with a seamlessexperience

Launching Internet banking and mobile banking channels is also a typicalexample in which technology plays critical importance The banks shall spendbudget for external consultants before choosing vendor who provides Internetbanking solution The comprehensive solution should include Internetinfrastructure, security infrastructure, and server system, Internet bankingapplication and database, and disaster recovery center for Internet bankingsystem The size of Internet banking of the bank decides the technology, the size

of IT infrastructure, server system and other things

I.4.3 Human Resource

The changes of the role of branches as well as the emerging of alternativechannels are creating some new requirements for the banks Human resourcemanagement should adapt to this changing because in retail banking services,people will be the basis for differentiation and this covers all roles within thebank including front line customer service staffs, back office administration, ITprofessionals, executive managers, etc

Let take an example of the change in role of braches today Transformation fromtransaction office to service centre is a very big operation for human resourcemanagement as staff competencies should increase significantly Thereforetraining has to be developed and organized Apart from retraining employees,banks may also need to change staffs in positions in order to align thecapabilities, skills and knowledge of its staffs with the newly developed jobdescriptions that banks aims to implement in the future For this purpose anemployee development plan, including a commercial training plan, has to bedeveloped Introducing mentorships has to be taken care of as an importantinstrument in learning from each other experiences

I.5 Conclusion

Starting from studying retail banking distribution channel landscape globally, in thischapter, the thesis has realized some important trends of distribution of retailbanking as follow:

• There is a increasing recognition that a change in the role of the branch, frombeing transaction-oriented to advice – oriented, brings with it a change in role

of key people in the branch – especially the branch manager and the staffresponsible for selling an increasingly broad and more complex portfolio offinancial services products The branch of the future is likely to be a lotsmaller, more sales and advice oriented, automated and better connected toall other channels

• As banks cannot return to the single channel worlds, banks heavily invest inalternative channels to keep up with market development and customerdemand Moreover, technological advances can enhance the ability for directchannels to fulfill their potential as a source of banking sales and service withhigher convenience at lower costs

• Banks are aware of the increasing importance of channel interconnectivityfrom a customer experience perspective

• Whenever rethinking of the distribution channels, the banks should take intoconsideration such problems as the change of organizational structure, newtechnology enhancement as well as human resource challenges