accenture consumer us retail banking survey
TRANSCRIPT
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Banking 2020 Thought Leadership Series
A Critical Balancing Act:US Retail Banking in theDigital Era
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2 | A Critical Balancing Act: US Retail Banking in the Digital Era
As the US retail banking landscape evolves
from physical to digital, traditional
providers need a radically new approach
to distributionone that combines a
simpler, yet more comprehensive branch
offering with the continuous innovation
of seamless digital services.
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The Digital Challenge
For US retail banks, todays
markets are fraught withchallenges: new digitalcompetitors and digitallyempowered customers prominentamong them. Yet most stillpursue business as usual, strivingto be all things to all customers.Despite their best efforts tofocus on the customer, many
still dont offer what theircustomers actually want. Thesebanks also tend to manage theirextensive channel networks
including digitalseparately,
and not as a holistic functionimpacting all aspects of theirretail operation.
This slowness to react to the digitalchallenge is understandable. Accentureconducted online interviews with morethan 2,000 US retail banking customersof the 15 leading retail banks doingbusiness in the US today. When askedhow happy they are with the performance
of their primary bank provider, 71 percentdeclared themselves satisfied and 68percent said they would be extremelylikely to recommend their primary bankto a friend, family member or colleague.
FIGURE 1. Convergent Disruption
2013 Accenture. All rights reserved
Inside Outside
StructuralChange
CustomerEmpowerment
EmergingNew
Entrants
OngoingIndustry
Convergence
DigitalInside and
Outside
ExpandedRegulation
SubduedEconomicOutlook
ContinuedConsolidation
Convergent Disruption
Multiple disruptive forces are converging on
the banking industry at the same time, both
from inside and outside the sector, creating an
increasingly complex and highly dynamic future
environment with permanent volatility.
Our research, however, also reveals justhow fragile this apparent customer loyalty
really is. More than a quarter (26 percent)of bank customers who remain with theirprimary provider do so simply because theyconsider switching to be a hassle. Amongthem, about half just havent seen competingoffers compelling enough to make themmove, and the other half believe the processof switching to another bank is justtoo difficult.
This not only exposes the tenuous relationshipbanks have with their customers. It alsoconfirms that the right offering and approachcan induce them to switch.
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FIGURE 2. Channel Balance
New Questions, New Answers
4 | A Critical Balancing Act: US Retail Banking in the Digital Era
Traditional players, of course, also have aninnate advantagethe extensive branch
networks that customers still value, as ourresearch confirms. But they cannot affordto ignore what the nimble new entrants aretelling them: winning with digital in thefuture will be all about winning more satisfiedand loyal customers with trusted, transparentand compelling offerings. And that meansbecoming an integral part of customerslives: an agile, ubiquitous presence, whereverthose customers may be.
In an era of industry consolidation, new
entrants, expanding regulation, more onerouscapital requirements, and continuing economicvolatility, retail banks urgently need a lower-cost operating model that can generatemore predictable and sustainable revenues.
Industry newcomers have
understood that in the post-financial crisis environment themost fundamental questionin retail banking has changedfrom how do you find yourfuture customers? to how donew customers find you? Andthey are leveraging their innateadvantage as digital pure plays
to deliver the speed, convenienceand low-cost personalizedservice that todays customersincreasingly seek.
Base: 2,001 2013 Accenture. All rights reserved
Indeed, if banks dont move swiftly anddecisively to build such a model, they will
lose more customers. On present trends, asa complementary Accenture analysis showsfull-service banks (collectively) could losearound 35 percent of their market share by2020, and as many as a quarter of US bankscould disappear altogether1.
The core challenge for banks: how to build aseamless digital customer experienceandoptimize its power with a better and morecost-effective complementary offering in thebranches that customers still find so attractive.
In which areas should your primary bank be developing and investing?
TRADITIONAL DIGITAL
OnlineBranch ATM MobileCallCenter
SocialMedia
43%
38%
21% 20%
12%
7%
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What are the main reasons youve stayed with your primary bank?
Good number
of nearby
branches
Good online
banking
services
Good branch
service
Low or
reasonable
fees
Stability of
bank
Trust my bank
acts in my
interest
Too much
hassle to
switch
Good ATM
networkPersonalized
service
Have not
noticed better
options
1 2 3 4 5
6 7 8 9 10
6 | A Critical Balancing Act: US Retail Banking in the Digital Era
Five Key Findings
Our researchthe second
consumer banking surveyin as many yearshashighlighted five key findingsthat underscore the need fora more forceful approach.
1Banks are managing a tenuous
relationship with their customers
Future customer relationships are plainly atrisk. Customers still value what they get frombranchesbut they also want more online.Furthermore, many of the offerings that keepthem with their primary providersgoodonline services, low fees, and personalizedservice (Figure 3)are also available fromalternative providers, which often do thembetter and are easy enough to switch to.Customers acquired more than one third (34percent) of traditional retail banking productsfrom CDs, money markets, and personal and
auto loans to new checking and savingsaccountsfrom institutions other than theirprimary bank, for example.
FIGURE 3. Why Customers are Loyal
Base: 1,822 2013 Accenture. All rights reserved
While only a few customers currentlybother to switch primary banks, those that
do switch are in search of significantlybetter options.
If retail banks dont build trust andtransparency with more compelling offeringsthe attrition risk will intensifyand threatentheir revenues. One need look no furtherthan the success of American Expressand Walmarts Bluebirdthe prepaid cardemphasizing fee transparency that grew to1 million accounts in less than a year. Orconsider the digital banking start-up, Simple,
which focuses on financial managementtools and reported 60 percent growth inaccounts over a three-month period.
2The branch-banking conundrum
Branches still constitute a significantstrategic asset for US retail banksandwill likely continue to do so for some time.Nearly four out of five customers (78 percent)say they expect to be visiting their localbank branch just as frequentlyor evenmore frequentlyfive years from now, forexample (Figure 4 on page 7); in large partbecause 66 percent of them still prefer totalk to a person rather than purchase a
banking product online. Two-thirds say theyconsider branch closures more than a minorinconvenience, and nearly half wouldswitch banks as a result.
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FIGURE 4. Future Branch Expectations
Base: 2,001 2013 Accenture. All rights reserved
W ll your bank offer more, less, orthe same number of branches in 5
years' time?
W ll you use branches more often,less often, or with the same
frequency in 5 years' time?
Less (10%)
Same (50%)
More (27%)
Many more (8%)
Less (13%)
Same (66%)
Much less (2%)None (3%)
Much moreoften (3%)
More often (9%)
Much less (4%)Not at all (5%)
Sameor more
85%
Sameor morefrequently
78%
Branches also remain banks primary enginefor sales. Nearly 60 percent of traditional
retail bank products were sold via the branch,according to our survey.
Right now, in short, the branch remains thepre-eminent channel. Even so, though bankcustomers still prefer branches to websites,the margin is narrow41 percent to 35percent. Over time, online and mobile bankingare likely to push branches into second place.
Branches, in addition, are expensive to buildand maintain. Our research shows that the25 largest US retail banks spend in excessof $50 billion each year on maintainingmore than 43,000 branches nationwide, andopening a new branch costs more than $2million on average.
Whats more, theres a significant mis-alignment between the cost of operating a
typical full-service branch and the value ofthe products and servicespredominantlysimple transactional products and services,such as check deposit and cash withdrawalsthat branches offer to customers. It is upto 95 percent cheaper to process depositsdigitally than through a teller, for example;and the cost of online and mobile paymentsis 65 percent lower than payment viaphysical checks.
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8 | A Critical Balancing Act: US Retail Banking in the Digital Era
4The digital era has arrived
Branches remain very importantbut digitabanking is becoming essential. Consumersview online banking as the single mostimportant area for banks to invest in anddevelop. Eighty-percent of them use this
channel at least once a month. Meanwhile,mobile banking activity has increasednearly 50 percent since 2012, with nearlyone-third of customers active at leastonce a month (Figure 6 on page 9). Digitalchannels are enabling customers to morefrequently interact with their bank, mostactive online and mobile banking customeruse these channels at least weekly.
FIGURE 5. Missing Revenue
Base: 2,001 2013 Accenture. All rights reserved
From whom d d you buy f nanc al serv ces products n the last year
Checking Savings CDs HELOCs MoneyMarket
PersonalLoan
CollegeLoan
CreditCard
PrivateBanking
Mortgage AutoLoan
Retire-ment
StudentLoan
Broker-age
P&CInsurance
AutoInsurance
LifeInsurance
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pr imary bank O the r ins ti tu tions
Higher-margin products
3The cross-selling challenge
persists for full-service providers
US banks still need to work a lot harderat cross selling higher value products. Theyalready have plenty of information abouttheir customers, but they dont necessarily
know how to make sense of it. Meanwhile,our research shows that customers areleveraging their particular advantagesignificantly more transparent informationon products and pricingto shop around.And many clearly dont think that theirprimary bank has the best offering. Morethan half (53 percent) of our surveyrespondents have chosen a provider otherthan their primary bank for credit cards, 60percent go elsewhere for home mortgages,68 percent use other providers for auto
loans, and 82 percent do so for brokerageaccounts (Figure 5).
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Where did you buy or sign up for the products that you purchased overthe last year? Online.
2012 2013 2012 2013 2012 2013 2012 2013
Auto Loan Mortgage Personal Loan Home Equity Loan
11%
21%
15%
25%
8%
24%
6%
30%
9
2012 2013
How often do you do mobile banking?
+50%
Daily, Weekly,or Monthly
21%
32%
FIGURE 6. Mobile Banking is Taking Flight
FIGURE 7. Rapid Jump in Online Sales
Base: 2,001 2013 Accenture. All rights reserved
Base: 505 2013 Accenture. All rights reserved
While branches saw a year-on-year decreasein sales of higher margin productstheInternet managed triple-digit growth acrossseveral such categories (Figure 7). Indeed,the Internet is now the most frequentlyaccessed distribution channel on a monthlybasiswell above the branch. And mobileuse has soared in the past year, almostovertaking the ATM in its perceived importance
to customers. More than a third (37 percent)of survey respondents also expect to usemobile banking more in future.
5The potential of social media and
video conferencing remains untapped
Most of the nearly three quarters (74percent) of banking customers active onsocial networks still feel that financial
activities should be kept separate. But somecustomers already see tangible benefitsfrom blending the two. Well over a third (38percent), for instance, say they would liketo be able to locate branches via social me-dia. And 30 percent would use it to accesscustomer services. Furthermore, 29 percentare interested in finding financial educationmaterial via social media and26 percent would be happy to receive billpay reminders.
The story is similar for video conferencing.Only four percent have used video conferencinto conduct their banking activitiesbut amajority is satisfied with the experience.And 31 percent say they would be interestedin using video conferencing in the future.
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The Way Forward
10 | A Critical Balancing Act: US Retail Banking in the Digital Era
Positioning more products in digital channelscan also help make operating costs both
lower and more flexible. And it can cutdistribution costs, just as it has in the retailindustry2. Digital banks will spend less onnew account acquisition, and new, digitalaccounts will, in turn, generate more sales.
The digital model can also improve branchperformance. Digital channels allow banksto track customer transaction experiences,for example, including at the branch. Andthe cost advantages of investing in digitalchannels can be re-invested in upgrading
branches. Digital, furthermore, cancomplement the cross-selling opportunitiesthat are currently being lost at the branch.
Revamp the branch
More branches close to where they live orwork was a key reason to switch providersfor 27 percent of our survey respondents.About half (48 percent) said they would beinconvenienced by the closure of nearbybranches to such an extent that it would
induce them to switch.
Yet, over the next five years, as technologyadvances and online services becomeincreasingly available, branches will likelylose businessunless traditional banksleverage their strategic advantagemore effectively by reimagining thebranch concept.
Some of the largest US retail banks arealready experimenting with more open and
flexible branch formats that give customersmultiple options, 24/7, and that could, inaddition, lower the banks own cost to buildby 33 percent and their cost to operate by25 percent.
The five key findings of our
research not only underscorethe need for a new approach todistribution. They also suggesta way forward.
Enable the digital model
More personalized service and faster problemresolutionthe key reasons for switching bankscited by those that do soare capabilities atwhich the digital leaders excel. Customer-
centricity and empowerment are theirmantra. And they are able to let the customerlead because thanks to their astute leveragingof Big Data and analytics, they know justwhat the customer wantsoften before thecustomer does. They can anticipate customerneeds and engage with them to fulfill thoseneeds in real time.
In addition, their insights enable them tocontinually innovate compelling new digitalofferings and experiences. Our research
shows that it is largely inertia that keepsbank customers from switching right now;but as their interest in alternative productand service capabilities growsand alternativeproviders continue to expand such offeringsinertia could soon give way to exodus.
Digital, in short, is critical to the more agileand innovative operating model that traditionalproviders now also require. They can investin digital to transform their IT platforms,overcoming rigid legacy technology in the
back office. They can also power an analytics-driven front office, equipped with deeperunderstanding of customer needs and thusable to develop a more compelling productsetespecially for the high-margin productsthat customers currently seek from others.
We foresee greater diversity of branchtypes, tailored to the locations and
functions they serve:
Light brancheshighly automated andfocused on sales, but providing accessto remote advisory specialists via videoconferencinga technology with thelong-term potential, we believe, to bridgethe service gap between channels
Kiosksgeared to routine account servicesfeaturing advanced ATMs with video, andlocated in malls and transport hubs. Thesewe believe, could account for up to half a
banks branch network
Full-service hubslike conventionalbranches but fewer in number, offeringfull sales and service support withextended hours and specialized providersfor such products as mortgages and trading
Flagshipsa small number of strategicallylocated centers of sales and serviceexcellence to promote the banks brandand introduce new offerings around simpleand seamless-to-use self-service tools
Pioneering banks are already investing inemployee tablets, self-serve kiosks andinstant-issue credit card machines. In thefuture some even plan to introduce videotellers and account opening facilities viamobile tablet, which could dramatically cutthe cost of processing deposits, relative tothe use of ATMs.
Digital channels could be leveraged to promotehigher-value branch usage. Moreover, these
developments will reinforce a holistic salesprocess since branch customers will be ableto use such digital access points as videotellers and mobile tablet account openingwhile in the branch.
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A Winning Combination
12 | A Critical Balancing Act: US Retail Banking in the Digital Era
In this regard, traditional providers havemuch to learn from the digital disruptors
players that have taken their cues fromthe best practices of the most successfulretailers: a customer-first approach thatleverages always on analytics to deliver aseamless, cross-channel experience (Figure 8).
The digital disruptors lure customers withoffers related to their ability to spendnewcategories of highly utilitarian bank account,for example, that dont come freighted withchecking or overdraft fees. They also marketthrough multiple online channels, notably
mobile and sociala channel with hugeunder-utilized potential that traditional bankscould also use to gain valuable customerfeedback and ideas, as well as informationvital to serving customers better.
By simplifying the cost structure
of their branches and optimizingtheir branch offerings, traditionalproviders can maximize theadvantages of what is still acore strategic asset. But it isonly by complementing thebranch with digital, andcontinually innovating thecustomers digital experience
across channels, that theywill develop a truly powerful,winning combination.
By infusing digital throughout the enterprisegetting smarter about data, and developing
one look and feel across all channels, USretail banks can ensure that wherever theircustomers are, they are there toobecomingintegral to the everyday lives of a sustainablecommunity of customers.
Common Characteristics of the
Emerging Disruptors
Emphasize social responsibility
Focus on customer centricity and empowerment
Present simpler fee structure to customers
Provide personal financial management tools
and access to other accounts
Embedded with social media, especially Facebook
Leverage Big Data and analytics
Offer mobile bill pay, P2P, remote-deposit, free
ATM access
Circa 2013 Circa 2013
Circa 2020 Circa 2020
Market entryScale
DisruptorsBanks
1Optimization and
Simplification
3Optimization and
Simplification
2Agility
2Agility
3Innovation
1Innovation
Market nimble Scale
FIGURE 8. Emerging Disruptors
2013 Accenture. All rights reserved
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Moving up the Value ChainBanks risk lower margins and,thus, shrinking market share, unlessthey can leverage digital to playa bigger role in their customerscommercial lives. We are, after all,
witnessing a digital revolution thatwill transform US retail banking,impacting an estimated 40 percentof revenues and 55 to 60 percent ofoperational processes3.
As banks come to appreciate the fullsignificance of this digital revolution weanticipate a major rethink in the industryand the eventual emergence of a newservice model that will open up entirely
new sources of growth.
FIGURE 9. Banks Should Look to Develop/Manage Three New Roles
2013 Accenture. All rights reserved
FSN
EEDSSATISFACTIO
N
SOLU
TIONORCHESTRATIONOF
LIFE
NEEDS
BANK
ASVALUE
AGGR
EGATORSB
ANKASACCESSF
ACILITATOR
BANK
ASADVICEPROVIDER
INFO
RM
AT
ION&
EDUCATI
ON
COMMU
NICATIO
NTRAVEL&LEISURE
HEALTH&
PROTECTION
HOME
CONSUMPTION
TRANSPO
RTA
T
ION
The key to effectiveness in making thisstrategic shift will be continuous innovationto enterand achieve a pivotal place inother value chains. Becoming so central toa customers life that when, for example,they buy a car, their bank is there not onlyto provide the loan, but also to negotiatethe best price and help insure, service andmaintain the vehicle.
To orchestrate the fulfilment of such needsthroughout their customers lives, dynamicbanks should look to develop and managethree new roles:
Value Aggregatorsoffering a distinctiveportfolio of products and servicesthrough the bank, but within a broader
ecosystem of services providers
Advisorscontinuously leveraging analyticsengines/algorithms to gain the deepcustomer knowledge that will enablethem to personalize their advice
Facilitatorsaccessing cross-industry
products and services through supportexperiences with hidden partners andleveraging tools like digital id and d-wallet
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14 | A Critical Balancing Act: US Retail Banking in the Digital Era
For more information
For more information, please contact:
Wayne Busch
Managing Director,North America Banking [email protected]
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About the research
Accenture conducted online interviewswith 2,001 US retail banking customers ofthe 15 leading retail banks doing businessin the US todayincluding the 10 largestUS-based retail banks, three of the largestforeign banks with a branch network in theUS and the two largest US virtual banks.
The survey was conducted in May 2013.It has a statistical margin of error of 2.2percent. Year-over-year comparisons arebased on the results of the same surveyfielded by Accenture in June 2012.
1
References
1 Banking 2020: As the Storm Abates,
North American Banks Must Chart a New
Course to Capture Emerging Opportunities,
Accenture, November 2013
www.accenture.com/Banking20202 The RE-banking Revolution: Innovative
Practices for Banks to Improve Customer
Engagement, Accenture, July 2013http://www.accenture.com/us-en/Pages/insight-re-banking-revolution-innovative-practices-banks-summary.aspx
3 The Everyday Bank: How Digital is
Revolutionizing Banking,Accenture,September 2013
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About Accenture
Accenture is a global management consulting,technology services and outsourcingcompany, with approximately 275,000people serving clients in more than 120countries. Combining unparalleled experience,comprehensive capabilities across allindustries and business functions, and
extensive research on the worlds mostsuccessful companies, Accenture collaborateswith clients to help them become high-performance businesses and governments.The company generated net revenuesof US$28.6 billion for the fiscal yearended Aug. 31, 2013. Its home page iswww.accenture.com.
This document is produced by consultants at Accentureas general guidance. It is not intended to providespecific advice on your circumstances. If you requireadvice or further details on any matters referred to,please contact your Accenture representative. Thisdocument makes descriptive reference to trademarksthat may be owned by others. The use of suchtrademarks herein is not an assertion of ownershipof such trademarks by Accenture and is not intendedto represent or imply the existence of an associationbetween Accenture and the lawful owners ofsuch trademarks.
Copyright 2013 AccentureAll rights reserved.
Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.