Creating New Business Models Around
Banking is gearing up across the world for massive shifts in the
basics of business. While the Internet provides a part of the
momentum, it goes much deeper than technology. An entirely new
style of banking is emerging. Some of its main components are:
- direct interaction with customers instead of passively waiting
for them to come into branches
- narrowcast targeting of both customers and offers, instead of
relying on broad marketing programmes
- relationships rather than products as the source of
- giving customers new power and flexibility in the management of
- rewarding staff for their contributions to customer
Transforming revenues and costs
The institutions pioneering this new style are discovering that
they can transform both the banks' revenue and cost base.
Established product transaction banking business model is being
replaced with what we'll call a customer conversation business
Banks everywhere are rushing to cut costs as the self-evident
first response. In the US, overall efficiency ratios have improved
by around 15% in the past 10 years. The number of banks has dropped
by over a third - from 14,500 to 9,000.
To grow revenues, banks have increased the risks they take.
'Sub-prime lending' - loans to consumers with poor credit and
payment records - has tripled for cars and mortgages since
Banks are confronted with a climate of enormous opportunity. The
key is to recognise that the customer relationship conversation is
central to every aspect of banking future, including the use of
technology. The most valuable technical tool is the telephone call
centre, not as a transaction machine but as a style of customer
interaction. There are more and more successful examples of this
style in banks, other financial service providers and business in
There are huge opportunities for banks to offer an integrated
direct banking service combining telephone call centre and Internet
technologies and built around the customer conversation model.
Building relationships via technology
While many of us believe that the Internet will be the long-term
medium of relationship with customers for much of banking, that
case is unproven as yet and very expensive in terms of marketing
and initial losses. The Internet should not be a single strand but
part of the integrated offer.
It takes a long time to build the customer relationship
conversations, of which there are four basic types:
- transaction conversation
- research and evaluation conversation
- account management conversation
- collaboration conversation
When a firm achieves these, it establishes a new brand, a
trusted relationship, and creates a new marketplace for itself.
Underlying the specifics of Web commerce are some general
principles that do open up new areas for banks. The Web enables a
relationship approach to the basics of banking that is literally
defined in terms of conversations. For instance, Amazon's product
offers are undistinguished from any other provider's but it manages
relationship conversations superbly. So, too, does Dell Computer,
which built a multi-billion dollar business on 1-800 phone calls
and catalogues and extended the relationship conversations through
the Web. It's the conversations that matter, not the technologies
Call centre strategy
A telephone and call centre-based strategy should start small
and address short-term revenue and cost needs. It can then be
scaled up rapidly to meet mid-term demands, and provide the base
for a more aggressive and large-scale long-term strategy.
Most US and European companies are investing heavily in call
centres. To be effective, they must combine three capabilities:
- new selling culture that manages the customer conversation
- access to customer and product information
- call centre technology and operations base
Many companies' investments in call centres have centred on the
software and equipment involved, and missed the third element.
Staff are managed to meet transaction quotas, keep calls short, and
talk at rather than listen to customers, to interact and make
offers. Often call centres are staffed with poorly paid workers who
communicate unhappy moods and do not establish the conversations
that are at the very core of future business success.
If a company provides a superb account relationship service via
technology - phone and/or Web, it encourages customer
self-management. Rather like a salad bar or buffet in a restaurant,
the customer does some of the work and sees this as an attraction.
A key to profitability in service-dependent business such as
banking is to facilitate such self-management.