Many banks are turning their attention towards their branch networks in

the increasingly stiff competition for a bigger share of customers’

business, say Roy O’Neil and Chris Gentle.

Some people say the trouble with banks is that they are run by bankers.

Desperate to re-ignite their growth potential, many of Europe’s retail

financial institutions are undergoing a two-pronged cultural

revolution. First, sober-suited bankers are hiring high flyers from

grocers, telcos and travel companies. Their aim: to inject the

fundamentals of retailing into financial services to create a

super-charged (responsible) selling-machine. At the same time, and just

as significant, is the fundamental shift that is occurring in staff

skills and behaviour.

After years of being obsessed with cost reduction, today more and more

bankers are rebalancing this view by focusing on growth, too – and

rightly so. Across Europe, financial services companies have recognised

that to be successful in future they must have strong and sustainable

revenue growth. The key to success lies in maintaining a dual focus:

continuing to emphasise cost optimisation while building a strong

selling machine to enhance share price growth.

Competition for customers

The battle to gain a greater share of a customer’s business will not be

won by buying more technology or inventing exotic financial products.

The financial services industry’s key to future success lies in

bringing about a cultural revolution in the skills, ethos and quality

of people, and simplifying the processes that are used to offer

personal financial services. This battle will be played out largely in

the branch.

The branch will be central to success. It provides a showcase for

changes elsewhere in the organisation. If the people and process

changes have been implemented well – and linked to the organisation’s

strategy and structure – revenues and service quality are likely to

improve significantly. In short, the branch will be critical both in

manifesting changes made within the business and as a flagship of the

organisation. Without doubt, the branch will be the battlefield of the


The branch is key

Customers regard the branch as central to being a retailer in financial

services. Deloitte research (Branching Out? 2003) shows that the branch

is the preferred channel of more than 50% of all customers in the UK.

Other data shows that customers in most major European markets visit a

branch at least once a month.

With branches accounting for up to two-thirds of the operating costs in

a typical European retail bank, there is still strong pressure for

further branch closure. Our survey found that many players were

grappling with how to optimise branch use in their overall business.

Many of the institutions that responded were the result of a large

domestic merger, requiring branch rationalisation. However, there

appears to be no industry consensus on the optimal density, staffing

levels and service offerings in branches. The average number of staff

at a typical branch across Europe has remained almost constant in the

past 10 years, according to Unisys data.

Transformational role

Our survey showed that many institutions are turning their attention

towards the branch network. The case of a Belgian bank highlights the

role the branch is beginning to play in the cultural and business

transformation of financial institutions. The division of

responsibility at the branch has changed radically, with 20% of staff

now tellers dealing with “daily banking” needs; the remainder of staff

focus on service and sales.

The Belgian bank has also introduced dedicated teller tools, such as

‘one click’, for total customer information. In some instances, tellers

also sell simple products that are easy to handle. The tellers have

instructions to send customers to either retail advisers (operational

advisers who work on their portfolio of customers, make late

appointments and answer queries) or to professional advisers (who

provide independent advice for wealthy individuals and small

enterprises). Some branches also have administrative staff: the bigger

the branch, the more administrators are needed.

However, other survey respondents have moved all processes out of their branches.

There are many reasons why the branch is at the core of building a

successful selling machine. They include the shift from an

administrative culture to a service culture, manifestation of the

brand, and creating an experience that delivers on the brand promise

and optimises customer service. The bank that takes the lead in

balancing its investment in branch infrastructure with its investment

in branch culture is likely to achieve significant competitive



Surviving and prospering in the retail financial services market of

the future requires an obsessive focus on the day-to-day detail:

micro-management. But financial institutions are complex organisations

that rarely reward such behaviour. However, some banks and insurance

companies are now shedding the shackles of old banking practices to run

their businesses more efficiently and effectively.

Central to an effective micro-management strategy is the ability to

track the correct data. The following five categories are recommended

for measuring data: customers, product sales, staff, profit and

branch/channel usage. For instance, in the customer category, measures

such as customer satisfaction, footfall and churn are key indicators.

In the profit category, margin per product and branch profitability are

two possible measures. What is critical is that these data are

available at the branch level within 24 hours.

A huge challenge for large financial institutions involves capturing

and collating the correct metrics. However, the vast majority of

institutions were not built to deliver this kind of information. This

gives new entrants an opportunity to build greenfield business

infrastructures that deliver key performance indicators as part of the

day-to-day functioning of the business.

It is paramount that the infrastructure can collate, analyse and send

out sales targets on a daily basis. Although this is only a pipe dream

at present for many financial institutions, some are making progress.

One major UK bank already has such a system in place. Another expects

to have a branch P&L breakdown for each product sale within 24

hours sometime next year.

New model

This marks a fundamentally different way of operating an organisation.

Such systems allow true micro-management from the centre as products

are pushed that meet customer demand and have attractive margins. This

provides the type of model that will have online, real-time reporting


The future winners are likely to be banks and insurance companies that

embrace this transformation. The blending together of retail, finance

and technology skills will pave the way for a more adaptive, flexible

and profitable organisation. Nothing less than a complete cultural and

business transformation will allow businesses to succeed – and the

difference will be in the detail.

Retail in the Detail: How financial institutions can grow revenue in

the 21st century is a joint report from Deloitte and Dresdner Kleinwort


Roy O’Neil is a partner in the financial services practice at

Deloitte and Chris Gentle is global research director of financial

services at Deloitte Touche Tohmatsu.


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