Andy is the global leader of the Retail Banking segment within BCG’s Financial Institutions practice area. Before joining BCG, Andy accumulated extensive experience in retail, corporate, and private banking.
How did the financial crisis change the retail banking industry?
The economic fundamentals of the banking business are changing. Not only are deposit margins being squeezed by low rates, but the ability of banks to recover is being compromised by incredible competition for funding, not to mention pressure on fees from regulators. As a result, the search for profitability is tilting permanently toward the asset side of the balance sheet.
These trends threaten the viability of some retail banks. But they also create opportunities for institutions that adapt their strategies and implement change quickly, efficiently, and effectively. Banks that move adroitly will come out of the crisis as winners in their markets. However, they have to recognize that the roles of core products and distribution channels are shifting.
Which steps can retail banks take now to begin the drive toward success in the postcrisis era?
Banks need to do some very specific things. They need to create a superior customer experience, streamline their product portfolios, sharpen their identities in the market, and drive sales force effectiveness. They also need to develop seamless multichannel pathways, optimize operations, focus on early-tenure customer management, and reorganize their companies in a way that will foster true success.
Success in retail banking has less to do with business models than with simply getting a sufficient number of things right in day-to-day activities. We’re not talking about checklists but about coherence—seeing the overall puzzle and making sure your pieces fit together. This may sound easy enough, but relatively few banks take even half of the necessary steps to get there. As always, the devil is in the details.
What can banks do to improve and sharpen their identity in the market today?
Relatively few banks clearly communicate their core value proposition to current customers and to the market at large. Are you a specialist in certain products or channels? Do you have other particular areas of excellence? Leading banks market their answers to questions like these carefully and explicitly.
In fact, success is really less a matter of what the specific value proposition is—say, low-price consumer champion, high-convenience bank, affluent-customer specialist—than of choosing a distinct identity, sticking with it, and lining up your organization behind it.
Most of the public discontent with the retail banking industry stems from bad customer experiences. What can retail banks do to improve?
They can embrace a philosophy of transparency and market that frankness as a differentiating feature. They can make branches friendlier, brighter, with clear signage, and have friendly and knowledgeable greeters to direct customers to just the right place or person, real first-contact resolution on the phone, and an Internet channel that does the simple things easily. I think banks should try to emulate the best hotels by focusing intently on service and on delivering for the customer.
Above all, it is the core, high-value, high-frequency products—like checking, savings, and card accounts— that form the crux of the customer relationship. Banks really need to get these things right. But relatively few do.