First Direct: Branchless Banking

8/11/2019 First Direct: Branchless Banking

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First Direct: BranchlessBanking

Asmita

Bhaskar Kash

Nikita Run

Ravi Ku

Abhinay Lak


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Article-1:

Will you survive the servicesrevolution?

By Uday Karmarkar


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Will you survive the services revolution?

Service jobs at risk in all developed countries

Transformation in service sector : Automation and Self service have a major impact

Why use a travel agent when you can book your own flight, reserve a hotel room, and rent a car online?

Trend in manufacturing sector

From 2000 to 2003, more than 2 million US manufacturing jobs lost to offshore outsourcing and global competition

Services sector is following the same trend; Major benefit to customers : low costs , greater convenience anflexibility

Service Migration

In information industry sectors, information trade occurs between countries with linguistic and cultural similarities On the other hand, manufacturing industry where work migrates from high labor costs to low labor cost countries regardless of cultu

linguistic differences In the case also, First Direct chose Leeds because of cost advantages and also Yorkshire accent was recognized as easy to understan

warm and friendly


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Choosing Industrialization strategy

Automation, self-service, end to end service, captive offshoring,selective outsourcingE.g. Retail Sales, Web Design

Insourcing, onshoring, selectivautomation, selective outsourcE.g. Medical diagnosis, relationmarketing

Offshoring, outsourcing, globalization,one-stop shop, end- to end serviceE.g. Retail banking, data management

Captive offshoring, in-houseautomation, selective outsourcglobalizationE.g. Software development, Tax

preparation

Simple Process Complex Process

CustomizedService

StandardizedService


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Realign, Redesign, Restructure

With new technology, the relationship between sources, services, channels, and customers

changes Many tasks shifts to customers as self service Service becomes commoditized, competition intensifies and differentiation grows vital

RealigningStrategy

With change in the strategy, processes needs to be more closely synchronized with the overalstrategy Overhauling a traditional service design is not a one time deal

Technological and infrastructure changes, competition, and industry restructuring are ongoservice companies need to constantly experiment and fine tune the processes

Redesigning

Processes

Automation substitutes technology for people Skill requirements for companies:

Understanding of the impact of technology change Include skilled managers in n Technology experts needed throughout the organization Learning to deal with new global allies and organizations with changing structure

Restructuringthe

Organization


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Article-2:

Welcome To The ExperienceEconomy

By B. Joseph Pine ll and James H. Gilmore


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Today, consumers seek to spend less time and money on goods and services,but they want to spend more time and money on compelling experiences.The canonical example is coffee. Coffee sold by wholesalers is a commodity.Coffee sold by the cup in a restaurant is a service, but Starbucks is an experience.


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Designing memorable experiences

Five experience design principles have been identified

Theme the experience with a concise and compelling theme which should drive allstaged events of experience towards a unified story line

Harmonise impressions with positive cues as impressions are the takeaways ofthe experience and they fulfil the theme

Eliminate negative cues which diminish, contradict or distract from the theme

Mix in memorabilia which customers would be will ing to pay for delightfulexperiences

Engage all five senses to make the experience more effective and memorable


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Introduction To The Case

Set-up in 1989, First Direct was the first bank to offer branchlessoperation; 24-hour person-to-person telephone bank

Achieved break-even by the end of the FY 1994 and reportedits first full year of profitability in 1995

By early 1996, First Direct served a customer base equivalent to200 branches

First Direct PrServ

Cheque Debit/Credit ca Saving and Inv Mortgages Loans

Insurance Travel Service

Rated several times among the Best buys by magazines consumer reports on retail banking Won the 1995 Unisys/Sunday Times Customer Championship Awards for outstanding customer service in First Direct Survey conducted between 20 Nov 1995 and 21 Jan 1996: 87% of customers was either extremely or ver

satisfied; 85% of its customer actively recommended the bank to fr iends, relatives and colleagues


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What factors enable a company to create and maintaingood relationships with its customers? Evaluate First

Directs performance relative to these factors?


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Factors and First Directs Performance relative to these factors

Factors Description First Directs performance

Products andservices

Should be based on customersneeds

Traditional banking products with personalisedservices (mail customers info only when theyneed it)

Easy to use and easily available Convenience for customers and 24X7availability of services

Reasonable/ competitive price Offered better interest rates on mortgages, etc.;

no annual charges on VISA;

Experience

Theme the experience;Harmonise impressions withpositive cues;Eliminate negative cues;Mix in memorabilia;Engage all five senses

Harmonised positive cues by relating theirconversation with prior knowledge ofcustomers thru database Eliminated negative cues by reducing the delayin receiving callsCreated a service halo


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What are relative roles of information technologyand employees in First Directs relationship building

strategy?


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Relative roles of information technology and employees in First directrelationship building strategy

ACD (Automaticcall distribution)

Managed high volume calls Never allowed caller to hear busy signal

CIT (ComputerIntegratedTelephony)

Helped BRs to access customer details quickly

Multi-MediaKiosks:

Help to communicate and build trust in the brand through various mediums like digital teaudio, video animations etc

Interactive

voicerecognition and

Response

Again it leads to the timely and error free response providing the experience to customers

Internet worldwide web and

PC based access

Provide the ease of use and accessibility of bank services to customer making bankinghassle free for them and adding to their experience

MIND(Management

InformationDatabase)

Data analytics used to predict the customer behavior and planned accordingly


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Role of people

Highly dedicated people leading to the 24x7 service of the customers

Highly trained BRs knew how to tackle calls by building personal relationship withcustomers

BRs handled more than 85% of the queries skillfully

An experience group of BRs named as Mushroom Squad to answer any type ofcustomer enquiry in any business area

BRs were flexible enough to accommodate customers complaints

BRs played important role to go overboard and recover customers in case things wentwrong

Eliminated negative cues by reducing the delay in receiving calls


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What threats and opportunities face First Direct as iseeks to both retain existing customers and attract

new ones?


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Threats

Increased competition from Banking Institutions By 1996, most banks and building societies offered their customers some form of direct access

Example: Direct Line Insurance FD did not offer online banking. Bank such as Barclays offered online banking at home by 1995

Competition from Non-Banking Institutions 1979 Banking Act opened up the mortgage market to institutions other than building societies Example: 1995, retailing chain Marks and Spencer offered life insurance

Consumer Behavior British were more likely to change their partners than their bankers Minority of the customers asking for online banking Predicament of not compromising on service and price as business was growing too quickly

Management Concern Management feared that its existing management system may not work when it grew to 4-5 sites


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Opportunity

In 1970 bank of England allowed banks to provide personal financial services, share dealing and insurancebroking. Further in 1979 Banking Act opened up mortgage market to institutions other than building societiestoo. This had helped to equip FD with multiple financial services

Other banks are trying to replicate few processes of FD. But the business of FD is based on branchless bankingwhich helps it to offer better int. rates due to low cost incurred. FD can build upon this PoD to attract customers

End-to-end information chain managed by a single point of interaction by FD. One stop solution differentiates itfrom other banks

Should initiate the online banking system so as to offer customer multichannel carry out the transaction. It wouldbe like changing and growing with the technology


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What are the pros and cons for First Direct of movininto on-line home banking services? What are theimplications for its relationships with customer?


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Pros Offering dual option to the customer for

carrying out transactions as per conveniencewithout compromising on quality and at lowcost

50% of the customers had PC so onlineservice would definitely benefit them

Consumers demanding for online banking asoffered by other banks. Thus FD had to provethat it was changing too and growing withtechnology rather than waiting and loosingcustomers

Would help to expand and open new centerswith less no. of bank reps. since load onthem would reduce

When travelling or no PC available customerswould always have a backup of telephonictransactions assuring reliability 24x7

Cons Experience of being provided cu

service would be lost by the which was the competitive advaFD (person-to person interaction)

Might be reduction in word osince similar service being provother banks

Dilution of the PoD for FDbanking more preferred by custom

Cost implications of addmaintaining additional IT infrastr

Online Home Banking Service


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Consider Kevin Newmans statement that We arenot really in banking but distribution. Do you agree?

Why (or Why not)?


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What actions should Newman take?


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Thank You !!

Documents

First Direct: Branchless Banking