In today’s competitive, cost-conscious and profit-driven economy, Asian banks must continually focus on optimising their distribution channels in a way that allows them to move customers into higher-value relationships.
Cost to Serve is still a consideration but equally is Share of Wallet and Customer Retention when it comes to initiatives to optimise distribution.
How do Banks prioritise their initiatives in optimising distribution and in meeting customer expectations on Price, Convenience and Trust?
Spending on distribution channels continues to be a major expense for banks across Asia and globally. It is also an increasing expense as technology enables more channel options, such as mobile, and more interaction options within existing channels.
Banks are expected to reduce service costs as customers replace branch visits with lower cost-to-serve channel options.
The irony is that most banks are finding that customers have not fully abandoned branch visits, but instead have increased the frequency of their interactions which raises four critical considerations:
Overall, branch transactions are reducing somewhat, but others, e.g. Call Centre, ATM and Online transactions, are increasing significantly. The higher number of total transactions has led to a higher cost to serve than anticipated.
As distribution and channel options increase, so do the customers demands and expectations. Failure to meet these heightened requirements by some banks has contributed to a sharp decrease in customer satisfaction.
Banks will not only need to continue to invest in alternative channels, but will also need to be smarter in how they prioritise and optimise their distribution capabilities. They must move away from the one-size-fits-all distribution strategy to focus on increasing customer value by improving three key metrics:
Against these metrics, initiatives to optimise distribution must directly address these buying drivers of retail banking customers:
Most banks are not starting from scratch, so optimisation involves rationalising distribution across existing assets. Since products and channel networks are essentially fixed, banks must prioritise optimisation across customer segments, and in doing so, focus on several key imperatives, namely:
Optimising distribution will eventually allow banks to migrate customers into higher-value relationships.
At the end of it all, these initiatives will help the bank achieve the goals where:
David Batrouney, Associate Partner, IBM GBS – Financial Services
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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