Each quarter, CFC surveys nearly 20,000 consumers around the globe on their financial sentiments, product satisfaction,  confidence in financial institutions, and overall engagement with their finances.

Our Q4 2011 survey shows continuing declines in consumer financial sentiment in most markets. Feelings about personal finances, confidence and providers, and product and service satisfaction all show global declines. Under the surface the data, however, a few bright spots emerge for segments and markets:

1. Asia Pacific continues its positive trends, as consumers in India, China, and Indonesia all express strong optimism about their financial outlooks.

2. Mass affluent consumers are maintaining positive feelings about their personal finances despite ongoing economic malaise. However, the mass affluent in Europe have not avoided the debt crisis, and show rapidly declining sentiments and confidence in financial service providers.

3. In every market, younger segments have more confidence in financial service providers than older segments. While this is at least partly reflective of the relative simplicity of younger lives (no mortgage, little debt, little experience), it also shows that despite economic hardship everywhere, most young people remain optimistic about their relationships with their banks.

Download our complete Q4 2011 global view of consumer financial outlooks.

Market level views are also available:

Asia-Pacific

Europe

Latin America

North America

Economists recently downgraded global growth forecasts. Unfortunately, financial institutions cannot “delink” from these doldrums. For most, the implications of this news will involve an intense management focus on costs. To help with this pressure, CFC is hosting a webinar focused on cutting costs out of the branch sales activities.

While removing costs from the branch will help, it is clear from a recent CFC survey that cost problems are embedded across our institutions. We recently polled FS executives as part of the Corporate Executive Board’s quarterly Business Barometer and 60% of them told us that cost pressures are rising at their organizations.

Executives also tell us they intend to invest for growth even as they look for opportunities to bring their overall costs in line with tepid growth conditions. Most will execute this plan badly. Only 11% of companies sustain cost reductions over a three year period.

To help you avoid being one of the 89% who fail, we offer financial services executives six ways to manage down costs while simultaneously improving productivity and revenue potential. They include:

1. Deploy “Lean” Process Management Methods: Three questions can help you identify and eliminate the activities that bog down processes and drive up expense.
2. Target Hidden Inefficiencies: Operational inefficiencies show up in many unexpected places. Focus on standard-based and coordination inefficiencies to make immediate progress.
3. Implement Customer-Oriented Process Designs: Poor listening and analytics stand between you and a more effective customer oriented process.
4. Eliminate “Waste” in the Sales Process: Three activities dramatically improve sales productivity.
5. Focus Sales Prospecting: Concentrate on referrals, onboarding and pipeline management.
6. Remove Accounting Frameworks that Distort Distribution Decisions: Eliminate the four ways you distort how your channels – particularly branches — are performing.

With Europe’s future teetering on the brink amid the sovereign debt crisis, executives must navigate seismic shifts in regulation, technology, and consumer behavior, many of which challenge the most foundational assumptions of the traditional branch-based sales and advisory model. Yet while there is growing acknowledgement of the need to change, there is little consensus around the type of change required, and even less on how we might go about accomplishing it.

The only certainty, almost three years on from when crisis first hit – things will not get better by themselves. The consumer confidence problem, if anything, has become more pronounced and better mobilized; new ideas have become new competitors, with Movenbank and Bank Simple ready for battle; while deteriorating economic conditions continue to render even the most imaginative cost cutting measures woefully inadequate.  

To help members build “Resolve in Uncertainty” – the confidence to make those big strategic decisions now, before it is too late – The Council is excited to announce our inaugural Financial Services Conference at the Park Lane Hotel, London. Alongside a number of high profile keynote speakers, the event will offer a series of executive work-shop sessions to drill down on the following key competitive challenges:

• Achieving High-Impact Channel Migration – Branches can no longer be the hub of all things financial. Learn how to migrate customers while preserving valuable relationships.
• Implementing Mobile Solutions – Realize opportunities the mobile channel presents for retail customers including payments and social media.
• Leveraging Social Media to Humanize the Virtual Experience – Determine how to change your firm’s strategy to meet the needs of the emerging segment of social bankers.
• Managing Operational Risk – Understand how to effectively manage capital and solvency requirements in the retail bank while taking out cost.
• Capturing the Mass Affluent Mindset – Discover how to serve the needs of the six sub-segments within this attractive yet complex group.
• Exploring Innovations in Global Payments – Learn about global payment initiatives around the world and how to leverage innovations in your business.

Register for this free event here, or visit  www.CEBTowerGroup2012.com for more information. The decisions we make today will likely determine relative market positions for many years to come.

CFC recently surveyed customers from 7 different markets on their channel behavior for their primary bank. We asked respondents to provide two basic forms of information:

• To indicate their preferred channel for research, sales, transactions, and service.
• To rate the quality of their experience for different tasks through different channels.

Through our survey, CFC has been able to create detailed profiles of different kinds of channel users and to begin to understand how channel preferences are formed and how decisions are made. Our findings (which we will share in our webinar, “Replacing Consistency with Quality,” next week) offer three important insights for managing toward sustainable channel migration:

1) The multichannel user is more myth than reality: We often imagine some idealized customer who uses the call center in the morning, the branch in the afternoon, and the web in the evening. The reality, however, is that customers tilt either toward in-person channels or toward technology—with very little balance between the two.

2) Banks should be focused on the relative quality of their channels: In-person channels receive higher overall quality ratings than remote channels for every task in our battery.  Customers perceive a quality gap between channels that, in most cases, represents the lopsided nature of bank investments toward the branch network. Until remote channels can deliver better value propositions, banks will not see sustained growth in that direction.

3) Consistency is the wrong goal—shoot for an intentional channel strategy: A cost-sensitive environment demands that customers understand the best channels for specific tasks. Costs are created when customers expect to be able to accomplish any task through any channel with the same degree of quality. Banks should be focused on clear communication around channel strengths and making sure that the “right” channel choice is obvious to customers.

For more on understanding the drivers of customer channel usage and implementing migration strategies, please register for our upcoming webinar on Channel Strategy (members in Australia and Asia, click here).

To learn about CFC’s diagnostic tool for setting priorities around multichannel strategy, please email CFCresearch@executiveboard.com.

Related Posts:

Preparing for Multichannel Competition

Branch Staff Skills in a Multi-Channel World

The Cost of Reluctant Innovation

The Council recently profiled ASB Bank’s “Your Money Explained” as a particularly innovative approach to helping consumers engage more constructively with their personal finances. Today, with consumer confidence at an all time low, and economic adjustment and de-leveraging ongoing, these basic building block insights apply more than ever. Whether the end-goal is a Personal Financial Management (PFM) tool, financial education communities, or even re-deployed branch staff, success is more likely if members:

1)      See beyond the quick sale – Understand there is an imporant new role for retail banks post-crisis: financial education. This means rejecting thinly veiled “product push”, and understanding that if you strive to help your customers they will likley become more engaged, trust you more, and ultimately, might just purchase more products and prove more profitable long-term. Put another way: banks will win when their customers win.

2)      Offer practical, “here and now” support – Linked to the above, ASB worked first to understand what broad umbrella issues were common to customers at various life-stages, and then organized information and resources around these real-life experiences, rather than product and service offerings. For example:   “When you’re young, how do you pay down your debt?”. “If you have a mortgage, how to you manage risks around redundancy?”.  Support resources then offer concrete – and free – assistance with precisely these issues.

3)      Understand literacy issues among the “middle” –  Financial literacy initiatives are traditionally focused on those with low incomes. Yet ASB found that those who have been used to job security and unlimited credit – the “middle” – now suddenly find themselves with neither. For the first time they are having to think carefully about redundancy, debt servicing and budgeting, and many are in need of help.

4)      Leverage investments across channels – Although an on-line tool, ASB found “Your Money Explained” to be a great resource for in-branch staff when speaking to customers about their financial needs. Particularly for new employees, information from the tool gave them the confidence to initiate new conversations around sensitive topics, and to begin offering concrete assistance with budgeting tools and saving plans.

To learn more about what made “Your Money Explained” a success, access a full interview with the architects of the tool, and read The Council’s full case profile.

Economists recently downgraded global growth forecasts. Unfortunately, financial institutions cannot “delink” from these doldrums. For most, the implications of this news will involve an intense management focus on costs. We recently polled FS executives as part of the Corporate Executive Board’s quarterly Business Barometer and 60% of them told us that cost pressures are rising at their organizations.

Executives also tell us they intend to invest for growth even as they look for opportunities to bring their overall costs in line with tepid growth conditions. Most will execute this plan badly. Only 11% of companies sustain cost reductions over a three year period.

To help you avoid being one of the 89% who fail, we offer financial services executives six ways to manage down costs while simultaneously improving productivity and revenue potential. They include:

1. Deploy “Lean” Process Management Methods: Three questions can help you identify and eliminate the activities that bog down processes and drive up expense.
2. Target Hidden Inefficiencies: Operational inefficiencies show up in many unexpected places. Focus on standard-based and coordination inefficiencies to make immediate progress.
3. Implement Customer-Oriented Process Designs: Poor listening and analytics stand between you and a more effective customer oriented process.
4. Eliminate “Waste” in the Sales Process: Three activities dramatically improve sales productivity.
5. Focus Sales Prospecting: Concentrate on referrals, onboarding and pipeline management.
6. Remove Accounting Frameworks that Distort Distribution Decisions: Eliminate the four ways you distort how your channels – particularly branches — are performing.

As members struggle to come to terms with a “new normal” in retail banking, there are many difficult questions to answer around the form, function and focus of branch networks. In particular, what role for Full Time Employees (FTE), by the far the biggest “bricks and mortar”-related expense? Here, as in other areas, practitioners must carefully balance tactical time-to-market priorities – in this case, getting your staff to do the things that matter most, now – against more long-term strategic priorities, such as ensuring your staff are able to do the things that will matter in 3-5 years.

On the “here and now” question, The Council’s Branch Salesforce Productivity Accelerator offers actionable insight. Based on survey responses from over 20,000 front-line bankers across 7,000 different branches, we identify the key characteristics of high performers versus core performers across crucial dimensions of in-branch activity, including:

• Defining the Optimal Branch Sales Role
• Building a Succesful Coaching Programme
• Hiring and Developing High Performers
• Generating News Sales Opportunities and Leads
• Learning from High Performing Branch Bankers

Re-orientating your core around these principles  is proven to drive considerable revenue uplift. Yet looking out across the next 3-5 years these skill-sets will clearly not prove “future-proof”. For one, declining and increasingly transactional footfall in-branch will  diminish opportunities for reactive sales, a key driver of sales according to our data. Likewise, a more self-directed, social-media savvy consumer will test the effectiveness of  in-branch advisory support, another important sales driver.  Yet whatever shape the branch finally takes, teaching and serving customers broadly construed looks set to remain an important constant. In a branch-based, on-line or genuinley multi-channel world it will remain the one true path to successful sales.

European banks’ shares have fallen by 25% since the start of the year, while consistently underperforming both wider markets (S&P 500, MSCI Europe) and American banks, as the graphic on the left demonstrates. These developments send an unequivocal message: the process of de-leveraging and restructuring that everyone knew would be multi-year in the immediate aftermath of the crisis now looks set to become the new normal. Surviving – quite aside from prospering – in this environment will require genuine change, not simply moving the sand around the sand-box. The question is: what type of change is required, and how can we make it happen?

The first order priority is getting the basics right. Resurrecting a range of improved “deja vus” around cost reduction will not be sufficient to weather the current storm, but it will establish a firmer foundation and provide some much-needed  respite. The Council’s Cost Reduction Summit, convened at the height of the crisis, explores how the application of lean tools and methods to financial services can rejuvenate the basic operating platform, underpinned by a series of blogs around the “age of cost reduction”. A key part of this effort is re-configuring and re-conceptualising the branch network, which we exlpore in our Re-Thinking Channel Strategy work.

The next, and more difficult task, is begining to build something new and meaningful amidst all this cost cutting. Often during crisis organizations enter a period of paralysis; or worse, after all the talk of change, they don’t actually end up changing that much. To guard against this, one member explained his organization repeatedly asks one question: “what would an alien do if they were in charge of our business?” That is, if someone with fresh eyes assumed control, not imprisoned and strait-jacketed by long-standing assumptions and various sunk costs, what would they build and how would they build it? More often than not, this approach unearths a long to-do list around using social media and various on-line tools to forge deeper and more profitable relationships outside of the branch. A new virtual customer experience free from the baggage and pin-stripes of banking.

To facilitate this process, The Council has launched a new Multi-Channel Strategy Audit Tool to identify areas of strategic uncertainty and dissonance across the enterprise and evaluate members’ level of readiness to execute on critical new strategies.

In 2007, The Council surveyed members on “what channels will best serve customers for purchasing products end-to-end?” for both 2007 (“today”, then) and in 5 years time (2012). Responses were unambiguous: a sharp decline in branch sales – from well over 80%, to just over 40% – and a sharp incline in on-line sales, from just under 10% to just short of 50%. As we approach the end of 2011, it is clear these projections were wildly optimistic. But today the stakes are higher: banks that do not enable non-branch sales will miss crucial opportunities for cost reductions and brand differentiation. The question is – why have on-line sales failed to realize their potential? 

1. Banks continue to hope for a “return to normal” – Confronted with uncertainty, many institutions have fallen back on what they know – the branch, where they have most tried and tested experience selling – rather than try to build something new. Economic austerities inclined toward a less aggressive “run-the-bank” versus “change-the-bank” split, notwithstanding the potential cost savings associated with the latter. As sales growth flattened, pouring more resources into the branch seemed more promising to many banks than investing in an unknown.
2. The branch is viewed as the home of customer relationships– Many senior executives remain unconvinced they can effectively manage relationships through non branch channels. Indeed, the Council’s data does suggest that customers who use technology-only tend to be less loyal than other groups. Accordingly, serious concerns remain around on-line relationships becoming too transactional, losing the depth otherwise assured by in-person interactions.
3. The website still lags far behind the branch for sales activity– Customers make channel decisions based on the relative quality of channels for specific activities. Until the web can begin to rival your branch for on-line sales customers are unlikely to switch channels. Supply, not demand, drives channel use, and bank investments and marketing have long declared the branch as the best channel for sales. Customers have simply used the supply banks offered.
4. Internal accounting still over-estimates the contribution of the branch – As a general rule, remote channels receive scant recognition for the sales they aid, and no domiciling of the account openings they actually record. Such systematically biased branch-centric accounting precludes an objective, fact-based conversation around right-sizing branch networks. It is difficult to build a business case for the online channel if it always appears unprofitable next to the branch.
5. Bank websites are not offering the right kind of help – The web is the dominant channel for research, but bank sites are not giving prospective consumers enough help when it comes to researching products on-line. By failing to provide the content and functionality to support customers throughout the entire purchase journey, customers are encouraged to go elsewhere for information – such as various off-domain social media sites. In other words, the service to sales process so crucial to the branch barely exists on bank websites. Giants like Amazon, iTunes, and Netflix have created online shopping experiences that highlight just how much room there is for bank websites to grow in terms of delivering actionable, real-time sales advice.

For further background on building a more compelling on-line offering, members can access  The Future of Internet Sales  and previous blogs on personalizing the on-line experience  and managing channels from cost to profit.

Based on the 60 member interviews the Council has conducted over the last six months, five guiding principles appear to separate those firms realizing the promise of social media from those continuing to flounder.

1)  Understand that social media is changing your consumers - The rise of social technologies is changing the way consumers want to interact with their bank, the way they buy products, and how they rationalize post-purchase decisions, as our consumer survey data demonstrates. Leading firms take this alone as mandate to better engage this more aware, empowered and self-directed consumer through social touch points.

2)  Build intestinal fortitude – and experience – by experimenting internally – For many banking executives social media is an anathema.  It hacks away mercilessly at the principles of “command and control” communication, which have safe-guarded information privacy and reputation management, the cornerstones of the industry, for centuries. By experimenting first with internal social networks, leading firms have not only built understanding and raised awareness, but by demonstrating the benefits of these tools, garnered considered executive support for more customer-facing initiatives.

3)  Consider investments as part of a coherent multi-channel strategy – Rather than attempting to emulate the functionality of established channels, leading banks are using social media for what it does best – forging the initial human connection – then driving traffic to established sales and service channels (branch, call-centre, on-line) to exploit the expertise and experience that already resides therein – a “social hub and spoke model”. Likewise, these firms are leveraging the human element of these technologies to deepen on-line relationships and replicate the all-important social component of in-branch interactions.  

4)  Get closer to customers by getting out of the way – As social media drives increased reliance on peer-2-peer communities for self-help, guidance and advice, leading firms are consciously re-imagining their role – their entire value proposition – around supporting and facilitating consumer networks. In effect, using corporate websites to host consumer networks. This approach not only disempowers “shadow” communities, bringing much of their authenticity and credibility on-brand, but generates a wealth of consumer data to help drive better calibrated product recommendations.   

5)  Build the type of community you hoped for with the branch  - For all the hyperbole of “new” surrounding social tools, leading firms take social media merely to be the newest expression of the oldest component of their business: building community and relationships. In particular, the community they hoped to build through branches, a meeting place for consumers and bank representatives, is now being pursued more effectively through the power of social media.

In coming weeks, The Council will release a Social Media Resource Centre with a number of “best practice” case studies unpacking the guiding principles detailed above. In the meantime, register for our upcoming webinar Leveraging Social Media in Consumer Financial Services  to understand how leading providers  are integrating this new medium into consumer banking strategy.