The Financial Services Club's Blog

Never mind the social media, here's the *******

In an interesting challenge to my own views, James Gardner at BankerVision posts a retort to the idea that social media and social networks are important to banks, by saying it's all irrelevant ... unless I'm mistaken.

Based upon the reaction, I guess he's trying to create a storm, and has managed to do so.

In case you didn't see it, here is my response:

"For the record James, I was not recommending that banks get into social media, but that they get into social banking.

There's social media - blogs, podcasts, etc - and social networking - facebook, bebo, myspace, etc.

These are interesting but nothing to do with banking ... sure blogs and business networks are interesting, but it won't make any money.

But social banking is the Zopa, Smartypig, Prosper and related worlds. These worlds are changing financial business models and are relevant and important.

Equally, social money is PayPal, m-payments, BBVA's tu cuentas and more.  These are also changing payments business models.

Are you saying that all these latter examples are totally irrelevant to banks, as that's the bit I was talking about - not social media and social networks."

I also posted a link to my latest podcast on the subject, from an official interview at last week's BAI Show, and there are also many other comments worth reading such as Neil Robinson's reference to First Direct's new social media space, Little Black Book.

So well done James.  If your intent was to create a debate by saying "never mind the social media, here's the *******", in true Johnny Rotten stylie, you succeeded!

m-billing: a killer app?

I had a fascinating chat today with the head of payments at one of the largest British utility firms.

She was very interested in one new channel, mobile payments, and particularly the potential of m-billing.

m-billing appears to be another killer app for mobile, and seems to be far better received than eBPP or similar internet-based billing approaches.

Read more ...

Virgin’s multichannel misery

Speaking of Virgin Trains, I was subjected to an encounter with multichannel misery today which, although unrelated to banks, is worth recounting as we can always learn from good and bad service stories.

 

Virgin offers a train ticket that is cheaper if you book and prepay and print at home, than if you book and prepay and pickup at the station. So I booked this for my journey today and tried to print off the tickets last night.

 

Unfortunately, it was not possible as the internet site came up with a message: “Sorry we are unable to show your ticket. Please call the call center for further information."

I tried to print off the ticket again this morning and got the same message, so I called the call center.

The department that deals with prepaid internet booking ticket details are based in Mumbai and, sure enough, the call center was closed due to the terrorist attacks there, with no backup.

Finally, I arrive at the station and tell them of my predicament.

“Sorry sir, but we cannot deal with this here. You have to preprint your ticket or you cannot go on the train”, came the answer.

“But I can’t”, I say.

“Well find a hotspot and printer and try again”, came the response.

Admittedly, this was the British Rail ticket office talking, not the Virgin Trains representatives.

Also, with only 10 minutes left until the train was leaving, I thought “forget that” and walked to the Gate, where I was met by a swathe of ticket inspectors, all wearing Virgin Trains coats and jackets.

I showed my printed receipt for the journey, and had two interesting responses.

The first chap says, “You can’t catch this train”.

The other one says, “Let me see what I can do”.

Both work for Virgin, according to their livery, and so I was perplexed why one was being awkward and the other was not.

To make matters even more confusing, the first one says: “whatever, you can’t go in First Class, as you pre-booked. You’re now in Standard Class.”

The other one says, “Follow me”, and calls the first guy a jerk.

The second one sticks me in my seat, H8, and says, “Don’t worry, this is happening all the time. Ever since they started issuing these prepaid, preprint tickets we’ve had problems and you should have seen what happened when they introduced mobile text tickets. What a mess.”

 

I’m warming to this guy.

 

“Anyway, I’ve cleared it with the guard and you’re all set to go. Enjoy your journey sir, and have a nice day.”

 

I was thrilled.

 

The fact is that I had pre-paid around $300 for a First Class return ticket and had my identification, the card used to make the booking, as well as a receipt to prove it.

 

The fact that Virgin Train’s internet service was not working and their call centre was down, along with the station owners and ticket inspectors being mainly British Rail rather than Virgin staff, compounded an issue to create a multichannel nightmare.

 

Then the distinct and extremely different policies of two individuals on the gate, just go to show how one empowered staff member who takes the initiative can create a far warmer customer experience than any amount of procedures and protocols could ever create.

 

So simple and yet so often forgotten.

 

The fact that he put me on the wrong train, and I ended up in Birmingham instead of Manchester, just added to my experience.

 

 

No answer from Mumbai

I've been having problems printing tickets for a Virgin Train I'm travelling on today, so I called their call centre.  After going through the menu pick system, I got a message in an Indian voice stating:

"Due to technical difficulties, we are unable to answer your call at the moment."

I wondered if this is due to the unrest in Mumbai, call centre capital of the world and, if so, is anyone experiencing similar issues today?

Desperately Seeking Sultan

I’ve spent the last few weeks wondering about the fallout from the Lehman Brothers collapse and the onward losses in the stock markets.

With $2.5 trillion of losses estimated by the Bank of England amongst the banking community, and over $3 trillion pumped into the system so far, you do wonder about the long-term.

However, what everyone seems to forget is that for every loser, there’s a winner.

For every bank whose Tier 1 Capital is being raped and pillaged, there’s a hedge fund manager somewhere making a mint. For every Credit Default that’s Swapped, the Swapper is laughing whilst the Swappee is weeping.

Therefore, this disaster of Q4 2008 is going to result in some interesting anomalies in 2009 and 2010, particularly from a technology spend viewpoint.

Read more ...

One year after MiFID, where is liquidity going?

Fascinating meeting today on liquidity and where it’s all going, as I chaired a panel session with Chi-x, Equiduct, Turquoise, NYSE Euronext and Deutsche Bourse. I was  amused to find that the LSE was not there, after my comments of the other week and, instead of LSE, Baikal jumped on stage.

Yes, that’s Baikal, the LSE’s dark pool that will launch in Q3 2009 after being pushed back a quarter due to Lehman Brothers, the partner on the project, collapse.

Anyways, we started with some quiet questions about how things are looking a year after MiFID and what people are seeing.

The first part was a vote from the audience, with the buy-side saying that things are far more fragmented and confusing than they ever were, and none of them trading the bulk of their business through the new exchanges.

So liquidity hasn’t moved, has it?

Read more ...

Banking that Rocks

It was interesting watching the discussions of bank retailers at the USA’s BAI Retail Delivery show. There was little discussion of the credit crisis, the bank bailout or subprime, although this was ever prevalent as a backdrop to the Show, and it was noticeable that major groups such as WaMu, Wachovia, Citi and others were not present.

I guess Citi's absence was explicable in light of today’s announcements of the U.S. Government’s rescue plan. This rescue involves $20 billion of cash for shares from the Treasury, and a $306 billion guarantee of their mortgage book from the FDIC.  That should hopefully do the job.

Anyways, the BAI Show discussions were more about Mavericks, Innovation, Authenticity and Experiences.

Now I know everyone likes a buzz word or two, so there’s four for a start.

Mavericks: unfortunately a word tarnished by the Republican camp during their long campaign for the elections, but meant to mean 'being different'.

Innovation: no, this is not a word that means ‘being different’ but ‘being new’ – innovation is all about finding new ways to change the business model to find new markets, customers, products and services to generate future revenues.

Authenticity: a word used by Arkani of ING several times, and it’s all about believing and living the brand and the promise. Arkani’s example is that they don’t just place a motorbike outside some of the ING Cafés for a laugh or as a gimmick, but because he drives a motorbike himself and that’s part of the bank’s DNA. If you make a brand promise, it has to be believable and true. In other words, it has to be authentic.

Experiences: a big buzz for a while now, experiences and experiential marketing is all about giving customers something memorable. It’s about moving from services, where you provide customers with a smile, to experiences where you provide a totality of sensory surround.

Now I expect you’re sitting there going, ‘What a load of management consultant psycho-babble’, as a lot of this comes across that way. However, there are examples of firms that do things differently by creating new business models that they totally believe in and manage a superlative experience.

Disney was and is one of those, in their parks and approach to ‘guests’.
Build-a-bear is another. Your kids get a total experience by building their own toys rather than just buying them off the shelf.

But the one that Joe Pine and James Gilmour, who have written the management consultants guides to these things, cite more often than not is the Hard Rock Café.

Hard Rock Café is the baseline for great customer experiences that are authentic in a retail environment.

How come and what can banks learn from them?

Hard Rock invented the ‘experience’ of eating out back in 1971 in London, and succeeded for a whole range of reasons based upon rock and roll experiences.

This is a crucial point as it defines the whole ethos of Hard Rock, as I learnt last Friday from Jim Knight, who heads up the employee training for the Group.

Jim spent a morning with me and a few banking friends, talking about how to create a culture in banking where you generate banking that rocks.

Jim’s view of the world is not to serve customers through staff, but to create raving fans by giving ‘guests’ a great experience through ambassadors.

Sure, we’re into more management gobbledy-gook over terms, but the core of his message is that you should imagine everyone who walks through your front door is a ‘guest’ in your home. If you’re having a dinner party at home, how would you treat those guests? Extremely well would be the answer.

Equally, if you’re dealing with a guest, you might treat them differently if they were charged an admission fee to come in through your door. That’s a key factor – how would you treat guests if you charged them to come into your home or office?

From the employee side, you can also think of them differently.

Imagine, for example, that your staff are all volunteers. How would you treat them if they weren’t paid, but came in voluntarily because they loved your business so much? Just look at any community or charitable organisation, and you know you treat them differently if they are volunteering.

So Hard Rock’s view is that you should treat the people who work for you as though they are volunteers and your paying benefactors as guests who have been charged to visit with you.

Those two factors change the mentality fundamentally for a start.

Jim also talked about how they build an ‘experience’, and it is based upon multiple factors from the staff and menus, which are irreverent, to the music and memorabilia.

For example, how many of you know that Hard Rock Café’s are official museums to Rock and Roll?

How many of you know that Hard Rock has more original works of rock art than anywhere else?

You can find everything from Elvis Presley’s suits to Kurt Cobain’s guitar plectrum, from Kanye West’s Bling to Buddy Holly’s glasses, from Eminem’s Chain Saw to John Lennon’s piano. You name it and you can find almost anything in the Hard Rock archives, and that’s a core part of the attraction. You get to virtually experience the Rock world.

That's why half of their guests are folks who come in just to walk around with jaws dropping as they view the guitars, photographs, posters and autographs of their idols and heroes of music.

That's the experience.

And experiences create memories creates loyalty creates advocacy.

Jim had a thousand other messages about Hard Rock to share, and you can read a lot of these messages in the management consulting books, but I walked away with one clear insight.

The Hard Rock Café makes only 4% of its profits from food and beverage, and yet it’s somewhere you eat and drink, right?

So how can you run a restaurant that makes no money out of food and drink. How so?

Because they generate the rest out of retail. Selling shirts and sweaters, jackets and mugs.

So imagine a bank that thinks of customers as guests and staff as volunteers. Who sell bank memorabilia thanks to the cult following the bank generates. A bank that makes no money out of banking, which is why they can focus upon deposits and still be profitable ... they just make their profits out of retailing.

Oh, I forgot to mention that those banks exist!

In fact, I think my last two blogs about Commerce Bank and ING Direct illustrated this. For example, Arkani states that one in four of ING Direct’s customers are ING junkies who buy everything they offer.  That’s why ING Direct has a store where you can buy pens, mugs, t-shirts and hats.

So these guys are not just banks dependent upon deposits, but these are banks who retail ... or should I say they are just banks that rock?

Citigroup is dead

After announcing the lay off of 52,000 staff, Citi saw a massive 20 percent drop in share price on Friday alone, a 60 percent drop on the week and a loss of $20 billion so far this year.

The result is that it looks like Citigroup has been forced into a decision to split into pieces according to Jim Cramer, who thinks Citi Group is dead and should just be Citi Bits now.

Mind you, several folks predicted this a while back and Cramer may just be protecting his ass-ets after calling Bear Stearns wrong. On the other hand, I was talking favourably about Citigroup only three weeks ago, so I'm not going to call the kettle black.

With the U.S. Government pumping a further $20 billion into Citi's  body, can they revive this bank?  Probably ... after all, like Royal Bank of Scotland, this is another of the world's largest banks that has now effectively been nationalised with the US Treasury and FDIC protecting a further $306 billion of mortgage and mortgage-backed securities on Citi's books.

Nothing like a crisis to bring out the Government's cash, but you do wonder how GM, Chrysler and Ford are feeling as they watch all of this.

How to make money out of deposit-only strategies

So that’s the end of a week in Orlando in a Mickey Mouse conference.

Lots of great stories about the banks that are surviving who all seem to have one thing in common: put the customer at the core of the business, give them a great service experience and focus upon deposits over loans.

The last bit is counter-intuitive and has a great comment response on yesterday’s blog from Steve Audino.

However, I would resist the view that you have to focus upon getting loans over deposits as that’s been the reason for the demise of Northern Rock, Bradford & Bingley, WaMu, Wachovia, National City, IndyMac Bank … or was it selling their souls to the wholesale lending markets that did that?

For example, in 2000, the total lending from the wholesale markets to the UK banks was nothing.

By 2007, the UK Banks had borrowed £625 billion from Wall Street and the City through CDO, SIV, ABS and other junk shop derivatives.

That's why the UK Government has pumped over £600 billion into the UK banks this year.

Thanks.

And it leaves many other Americans, Britons and more in hock to the banks for a house that’s worth less their mortgages.

But 'nuff said as I want to come back to the focus on the customer, guest, participant or whatever else you call the guys who spend money with you these days.

The focus on the customer is good thing, as demonstrated by a conversation I had today during with the head of training and employee engagement at the Hard Rock Café, Jim Knight.

Jim explained how it all works.

I’ll write this up over the weekend, but here’s a challenging concept.<

The Hard Rock Café is a restaurant right?

It’s a place to go eat and drink.

Yet the Hard Rock Café makes no money out of food and beverage sales.

Nothing.

No profit from that stuff right?

But it is profitable.

So here’s the thing: if banks focus upon deposit-only strategies, they can make money out of it, in the same way as the Hard Rock Café focuses upon food and drink and makes  money out of it.

I’ll tell you more next time.<

Right now, I’m going to bed to dream nice dreams about the characters that inhabit the wonderful worlds of Disney and Universal in Orlando.

ING Direct: Rebels with a Cause

At every conference you find a few highlights, and this one is no exception as I attended a plenary keynote yesterday starring Arkadi Kuhlmann, Chairman, President and Chief Executive Officer of ING Direct USA.

In a few short years, ING Direct has become one of the largest Internet-based banks in America, and has earned a ranking on the list of top thirty U.S. banks overall.

In a candid interview with Bill Taylor, Co-founder and Founding Editor of Fast Company, Arkadi shared his business ideas and here’s my rough summary of the conversation:

Bill Taylor: how did you build this bank?

Arkadi Kuhlmann: There are 9,600 banks in the USA so who needs another one? That was the challenge we had and we thought that if you do everything like everyone else, how can you expect the results to be different? This meant that it was time to look at the business model to see if we could do things in a different way. A way that may be counter intuitive.

So we focused upon building liabilities rather than assets. 

We know that banks create assets and fund them as cheaply as possible and enjoy the margin. So we said let’s do this the other way, and grow liabilities first. So we focused on gaining deposits, and finding assets as the second step. Many say that is nuts, as you are funding liabilities and so how are you going to find the assets but, if you are going to be different and try something to see if it works, you have to change the definitions.

Bill Taylor: how did you find the innovation to be different?

Arkadi Kuhlmann: The best way to find innovation is to look at other industries.

For example, if you’re looking for innovation, why look at other banks? You just get the same old thinking. So we looked at hotels, airlines and more, and the model I liked the most was fruit and grocery stores. These stores are running a 1% margin business, with limited shelf space and trying to attract customers, and are challenged by that because they all look the same. We thought: “what if we were in that environment as bankers?"

You can then put down some key drivers, and ours were that we needed to deal with high volumes at low margin in a commodity business on a large scale.

Bill Taylor: and so you then need to advertise that message too?

Arkadi Kuhlmann: Every bank has ads with kids running through wheat fields and saying “we love our customers”, but everyone realises that that is BS. Stop advertising “we’re there for you”, and focus on delivering on the things that customers really care about. That’s why we focus upon the causes we promote, and the advertising and promotions are all about what mainstream America cares about and what customers care about, not what bankers care about.

BT: and what do customers care about?

AK: if you could build a bank just functionally or technically, people would have done that, but you need to understand how customers are technically interwoven with money. Our rates are not the highest, and we are not the best at services, so why do people stay and why do they come? It’s about the beliefs and values of our bank and how we convey that to them.

Mainstream America is looking for people to validate their beliefs and for authenticity. That is why I make a phone call every week with a customer: to understand them better. And those calls are a bit about the transaction, but mostly about money and their views about money. You must understand how customers see money, as this is powerful.

BT: so do you categorise customers based upon limits and values, as you don’t appear to?

AK: I have no minimums on our accounts, we only have maximums, and I don’t like and don’t want rich Americans. I don’t want all their bitching and moaning. They come in and say, “I’m willing to give you a million dollars, what are you going to do for me?” and I say, “Nothing”.

There’s no hierarchy here. It’s a democracy and we’re all level. I sit in the call centre. We have no titles on business cards. You have to get rid of all that hierarchy stuff to do this business model. That’s why we all sit together.

That’s why I tell the rich guys to go down the street and leave. I don’t’ want them.

BT: Do your staff get worried if you’re on the phones?

AK: We have 8 million customers, and about 5,000 customer account closures a month. But those closures are because this bank is not right for them. I actually want to get rid of those account and we do select some where we know we are just not right for them. To close someone’s account this way, you have to do it with compassion. So we call them and tell them they’re in the wrong place. Not all customers are right for ING Direct and you just happen to be one of them.

For example, 7% of Americans change their accounts every year. 3.5% of them do this because they are looking for a better deal. The other 3.5% are manic depressives. They’re unhappy people and they switch to us to say, “Make me happy”. We can’t do that.

BT: How do you get everything to work together in alignment?

AK: Do you know how easy it is to run a bank when you only have one interest rate? Ask any employee and they know the rate and 40% of customers come by word of mouth. How is that possible? Because folks say they know that they will get the same rate you got. You won’t get a better deal or a worse deal. You get the same deal. That’s why neighbours recommend us because they know they’ll all get the same deal.

And all this cross sell stuff is over hyped. It’s cheaper to get a new customer than to sell the existing customer a second product. In fact, much of the stuff banks talk about is wrong.

Folks say you cannot run a bank without fees, but customers don’t believe it. So you shouldn’t charge fees if people don’t like them. Just roll them into something else and say you’ve done away with them. That’s why one of our slogans is, “Bank fees are like sand in your bathing suit”.   Customers like that.  They understand it.

BT: I understand you’ve written $26 billion of mortgages, with only 15 foreclosures. How did you avoid the problems?

AK: Most of us know that in 2002, we needed to get assets and get mortgages. But the mortgages business in the USA I knew was just not right.

We think we’re the largest community bank in the country and, with that mentality, we also think we have to keep our mortgages on the banks’ books. Selling our mortgages on Wall Street was just nuts. I mean I don’t know anyone out there with a 30-year CD account, so why sell 30-year mortgages? That’s why we offered a five-year fixed rate mortgage. We service them for six basis points, and we do a billion dollars a month of them even now.

In fact, Bill, we now have $35 billion mortgages on the books. The average 30-year mortgage lasts for seven years and you cannot guarantee thirty years in life. We don’t know if we’ll still be healthy and married in five years, let alone thirty.

If we had kept mortgages on the bank balance sheets, we would not have the problems we have today. We need to keep mortgages on the bank balance sheet. That was our view. If we cannot cover the mortgage with deposits, we don’t take them.

I want Americans to be in their homes and to be able to keep them. A home is a place you hug your wife and raise your kids. It’s not a financial asset.

Ring fence it and stop the Wall Street guys mucking around with the American homestead.

When you talk to Main Street, we say if you want a mortgage, you have to be able to afford it. That’s why I want a down payment. If customers come in saying they want 100% loan to value, I say who’s doing the maths here?

We can change behaviours and this country but it won’t be by Wall Street, it’ll be by Main Street.

BT: On the one hand you’re a start up but you have a big parent company – how does that work?

AK: Most of the time it doesn’t work, for the reasons of the parent being a big old company. Think of Star Wars and the Empire Strikes Back. We are Luke Skywalker in the orange jumpsuit. That’s us.

The culture and the way people engage are radically different to the rest of the group, but there’s something unique about ING. They’re very long-term focused and open to new ideas. They are in an environment that tolerates differences of opinion and friction. And there’s an overall broader thinking.

BT: What about hiring staff. Do you have any criteria?

AK: We don’t hire bankers, because bankers come in with their DNA and they have their legacy which won’t fit. Instead we hire dancers, musicians and artists.  People who can deliver a great and different experience. 

On that note, I’m going to leave it as I have about another eight pages of notes, but you can read the rest in Arkadi Kuhlmann’s new book, The Orange Code: How ING Direct Succeeded by Being a Rebel with a Cause.

Resolving the credit crisis in Europe

Some friends of mine who run the European Finance Convention have lined up a great conference on 8th and 9th December in Brussels, focused upon how Europe will approach resolving the financial crisis.  Speakers include:

Joaquin Almunia, European Commissioner for Economic and Monetary Affairs

Jean-Claude Trichet, President of the European Central Bank

Didier Reynders, Belgian Minister of Finance

Klaus Schmidt-Hebbel, Chief Economist, OECD

Julian Callow, Chief Europe Economist, Barclays Capital

Ferenc Karvalits, Deputy Governor, the Central Bank of Hungary

Nükhet Hotar Göksel, Deputy Chairwoman AK Party, Member of Parliament, Turkey

Holger Schmieding, Chief Economist Europe, Bank of America

Tsvetan Manchev,  Deputy Governor, National Bank of Bulgaria

and many others.

As I'm probably going to go, I thought I'd mention it as they kindly offered to let me invite my friends for a 10% discount if you quote FSCBXL10 on the registration form.

The Hills are alive with Britain's newest Bank

The reason for my excitement yesterday about a new retail bank for Britain is because it’s a new bank, and a bank by Vernon Hill.

Vernon Hill is a bit of a legend, as he’s a guy who built a bank, Commerce Bank, from nothing into one of the most successful banks in the USofA. Commerce Bank's success is based upon their philosophy that they are retailers and not bankers, and features some unusual ideas, such as:

* Instant creation of ATM cards on the spot at the time of account opening
* Free "Penny Arcade" coin counting machines for both customers and non-customers
* No-Fee Visa Gift Cards for customers
* Lollipops and dog biscuits in the lobby and drive-thru
* Foreign ATM fee reimbursement
* "No Stupid Fees, No Stupid Hours"

Commerce Bank's business model generated what some call a cult following, by offering its customers merchandising giveaways such as coffee mugs, pens and pencils. In 2006 alone, they gave out 28 million free pens.

All of this has been attributed to the innovations created by Vernon Hill.

Vernon Hill founded Commerce Bank in 1973 and, by background, he was a fast-food restaurant franchise owner and graduate of the Wharton School of the University of Pennsylvania. Bringing his fast food convenience to banking, Vernon expanded Commerce from one location to over 435 in thirty-three years and then sold the bank to Toronto Dominion, the Canadian banking group, for $8.5 billion in October 2007, after having a run-in with the regulatory authorities which resulted in zero grounds for investigation.

That's why Mr. Hill has now entered mainstream banking again, with the launch of Metro Bank, which will operate in both the USA and UK. The more interesting aspects of Vernon’s story are some of his views on banking, which are definitely non-traditional. Here’s a synopsis of his perspectives on retailing bank products.


Delivery is our only advantage and yet most of us have this philosophy of getting customers out of the branch.

My focus is the branch.

At Commerce Bank, we had 48,000 customer visits per branch every month on average. That’s twice the number of customer visits of a McDonalds, which average 25,000 customer visits per month. I spent $40,000 per branch putting coin machines in each branch across 400 branches. These are machines where customers can bring in loose change and get it into their accounts. Everyone said I was stupid to do that, but that drives customer visits which drive customer engagement opportunities. That’s why we did it.

It’s also about the culture of the bank. For example I encourage staff to look out for anything they think is stupid and name and shame it. Let’s get rid of any stupid rules that block us from giving customers good service.

We hire our staff on one thing as well. And it’s not their banking experience. We hire them if they smile through their first interview. Hire for smiles. You can get anyone to work, but you cannot get them engaged if they’re not customer friendly in the first place.

Our branch managers are also seen to be business people. Each one of them is running a business. They are empowered to deliver our brand promise, therefore they must be able to deliver it.

By way of example, 90% of customer complaints are about $112 in fees on average, so we waive it. I would rather give the customers $112 as it means that I keep them, and the average customer is worth about $3,000 a year so to waive the fees is no big issue. And our managers and staff know this. In fact, I would rather discipline if they did not waive the fee, rather than reward for arguing with the customer.

Which brings us to rewards and remuneration.

We have no employee bonus plan, and I don’t believe in giving staff benefits for meeting financial goals.

We don’t use financial goals, customer segmentation models and cross-sell. That’s all bull. We compensate based on their performance in totality as judged by their peers and colleagues and customers. We use that feedback to reward, not some stupid goal-setting system.

People find it surprising when I say we have no segmentation model, but bring it back to retailing or running a burger chain. I have 40 burger stores and we don’t tell our staff to serve the customer who orders a Burger with a Coke better than the customer who only buys a Burger. How stupid is that? And how do you train some 18-year old that you’re better than someone else and you should treat them differently. That’s nuts.

So we don’t segment and treat folks differently. We treat everyone well, and our staff are rewarded based on the feedback from customers and colleagues.

Having said that, if a competitor closes a branch near one of ours, then each member of staff in tbat branch gets $5,000 as we believe it’s down to their service and delivery that they achieved that.

It’s all about delivery but, more than that, it’s all about deposits and account openings.

To illustrate, we opened in New York and everyone thought that was stupid. How can you take on New York, where people don’t want the sort of service you’ll offer and they won’t come into branches anyway.

Well we opened one branch in Chinatown, New York, and had over 18,000 new account openings in a month.

We design for account openings and that’s the reason.

We can complete a new account opening in just fifteen minutes. That’s from walking in, to walking out with a check book and debit or credit card. And that card is personally embossed because every one of our branches is equipped with card issuing machines.

These machines cost $10,000 each, but that means customers have the complete account process done in fifteen minutes. And if they lose a card, they can get another one from any branch in minutes.

That’s all about customer service.

More than that, it’s because we focus upon the best locations and areas.

Everyone said Commerce would fail in New York, but we succeeded by going out on a limb and invested in buying the best locations.

We were paying up to $400 per square foot for branch locations, but the location is key. I would rather pay double the rate to get the right location than the wrong one. After all, if you open a branch and it does not get accounts opened, then what’s the point of that branch? That is why location is key and why we are designed for account openings and deposits. You cannot get those if you’re in the wrong part of the main street.

Also, forget all this internet stuff.  People don’t open accounts remotely.  The main factor that determines where you open an account is whether there is branch nearby. That’s still the mentality of the young, and the general population. I mean we get more visits from our active online users, and yes we have an internet site, than we do from our non-online users. That’s because they like the branch experience.

And it’s not just giving away coffee in the branch, free pens, having money counting machines and the rest. It’s the whole package. The culture, the remuneration and rewards, the locations, the deposits and account opening focus and the way we engage with customers.

All of this together makes us unique, which is why no-one can copy the model. They give away pens, or install money counting machines, but they cannot copy the whole package.


It will be interesting to see what happens when Mr. Hill launches Metro Bank in Britain as he’s succeeded in killing the competition in America four times in the past through his retailing techniques, so I think UK banks need to watch this space.

Watch this space very carefully.

Breaking News: Britain's first new retail bank for years

For quite a while now, I’ve been keeping a secret.

The secret is that there is a brand new retail bank being launched in Britain next year.

And it’s not an internet bank.

It’s not a call centre based bank.

It’s not a bank without branches.

It’s a brand, new and shiny, branch-based bank.

A brand new bank … with branches!

How different is that?

Read more ...

A Few Mickey Mouse Marketing Ideas for Banks

This week I’m at a major retail banking conference in Orlando, USA, home of Disney and Universal Studios. Sure, I can hear you all saying, what’s Chris doing at such a Mickey Mouse Conference, but it’s got over 4,000 retail bankers here, so it’s worth my while.

Anyways, sitting around in the sunshine yesterday, I stumbled across this awesome - you can tell I’m in the USA -website called Half Bakery.  It’s all about half-baked marketing and advertising concepts, and so I wondered if there were any about banking.

And there are, especially the idea about a Dance PIN!

Read more ...

G20 roller-coaster

I loved this cartoon about the G20 summit that appeared in the Financial Times by Ingram Pinn:

 
As I'm in Orlando, I can thoroughly recommend that Disney puts up a ride called: "the Global Market Meltdown Rollercoaster" that works like this.

Wonderful!

Internet Banking by Dummies, Part One

A year ago, I talked about how unusable the Xiring terminals were and have seen loads of blogs and commentaries about how impractical these terminals are in everyday life since then. 

Thank goodness Visa has now integrated one-time passwords into their cards.  Meanwhile, I'm stuck with UK banks who insist that we use these darned things everytime we use internet banking.

So here's an interesting update about these terminals and I've called this "Part One" as I'm sure I'll have a few more parts to this series of how not to do internet banking or, if you prefer, Internet Banking by Dummies.

Just by way of background, I now have five Xiring terminals: one for my own account, one for the business account, one for the joint account, and two for my credit and debit cards.

The business account proves to be the most interesting.

This is because the bank sent me a card explicitly to use with the terminal, rather than my existing cards.

The card arrived some weeks before they sent the terminal, and it just said "Internet Banking from ABC Bank", so I threw it away thinking it was just an advert for online banking.

As it turned out, it is the card to use explicitly with my business account Xiring terminal, which was still to arrive ... not an advert for Internet Banking from ABC Bank at all.

When the terminal did arrive, I still did not think about it much. After all, how often would I need to use it?  Then I realised this little sucker has a lot of power, as the bank has made the terminal the main and only way to create and authorise new payments instructions online.

Every time I want to make a payment, it demands that I use the terminal's one-time password generator and, because I threw that silly advertising card away, I cannot make payments!

So I’ll try and keep the story as short as possible, but here’s what happened when I rang my business account relationship manager to sort it out.

First of all, he joined me in a good moan about the terminals, after all we are British. After a whinge, he said he’d send me a Business MasterCard. That should do the job.

I was a little concerned as this card has a fee of £32 per year, which would be of little interest to me as I do not use or need a MasterCard on the Business Account.

He promised that he would waive the fees.

Sure enough, the card arrived and a fee of £32 was taken from my account. So I called my relationship manager, who apologised and got the fee reimbursed as promised.

I now have a MasterCard I do not need that has been issued purely so that I can process internet banking transactions.

The next time I get to set up a new payments mandate, the system wants my one-time password generated so I enter my new Business MasterCard in the Xiring terminal … and it says ‘wrong card’.

I try it in all five Xiring terminals, but none of them like it.

I then check the number on the card with the number on the internet banking service, and they don’t match. Aha, the card has not been set up with the account.

It’s after six o’clock, so I wait till the following morning and call my relationship manager.

He’s on answerphone and says, “If you need help, please call my Support Team”, so I ring his Support Team.

“Good morning”, says Johnny in the Support Team. “How can I help?”

I explain that I cannot set up a payments mandate – in this case a standing order, where the customer creates a regular payment schedule – because the card I have does not work with the Xiring terminal.

“Well”, he says, “I’m sure our Business Card Services can sort this out for you. Here’s their number.”

So I ring the Business Card Services number, and explain that I’m trying to use the internet banking service for the creation of a standing order mandate, but the card cannot be read by the Xiring terminal.

“Oh sorry sir”, says the nice Customer Service Representative (CSR), “but that’s internet banking, not card services. Here’s their number and you need to talk with them.”

Growling starts to rumble from my stomach … oh no, it’s my throat. But it’s ok, I’m calm.

I ring the internet banking number and it’s the wrong number.

Oh well, back to square one. I ring my relationship manager’s Support Team again.

“Hi again, I’ve just telephoned Business Card Services who tell me it’s the Internet Bank’s issue. But she gave me the wrong number”, I say.

“No problem sir,” says helpful Johnny in the Support Team, “I can give you their number”.

“Actually”, I interrupt, “I don’t need to do this. I only want to set up a standing order mandate so why don’t you do that for me instead?”

“Ah”, says Johnny, “there’s a problem with that Mr. Skinner. I can cancel standing orders and direct debits, but I can’t set them up.”

“Pardon?” I ask.

“Well, I used to be able to set up standing orders sir, but the Head Office didn’t like that so now only they can do this service”, Johnny explains.

“What?” I start feeling a little John Cleese-ish.

“Sorry”, says Johnny.

“So the Support Team cannot support anyone, is that what you’re really saying?”

“Not really sir”, pleads Johnny, “because I can help you with this question.”

“OK. What do you suggest?”

“Well”, says Johnny sounding remarkably confident, “why don’t you just pop down to the branch and sign the standing order mandate down there, then they can process it for you. I know that works. Good old paper process and all that.”

My throat, stomach and body growls, rumbles and shakes into an explosion of frustration.

“Johnny”, I fume, “the branch is half an hour’s drive from my house. I’m not wasting two hours on a round trip just to set up a standing order mandate that should have taken me two minutes online. Now find someone who can sort this out.”

“Yessir!” says the erstwhile Johnny, who puts me through to the inner sanctum of the bank.

This department does not even have a name, just the letter “Q”. It sounds very James Bond, but I think “Q” is the department for customers with Questions that the front-line staff and Support Teams cannot answer.

“Yes Mr. Skinner”, says a charming lady’s voice, “I believe you need to set up a standing order mandate. Let me do that for you.”

And there you have it.

An hour of my morning wasted in frustration due to these new silly terminals.

Mind you, thanks to Judi Dench in Department Q, I discovered the root of the problem was throwing away the online banking card I received originally as, unlike personal banking, the business accounts only work with these cards.

They do not work with debit cards, credit cards or any other business cards.

Just their pure and exclusive business banking online cards.

So I didn’t need the new Business MasterCard after all.

Oh, how the internet has made life so much easier and oh, how some banks just don’t get it.

Is now the time to invest in America?

Fascinating article sent to me in the New York Times just before the election results were announced. 

According to the article, "a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years."

Two thoughts:

1. Barack Obama is a Democrat, and should therefore see the biggest gain on the stock markets based on prior Democrat performance.
2. We all talk about the last year as the worst since the Great Depression and Obama is taking over the Presidency when the markets are at their lowest levels since then.

It may be worth sticking a few dollars, pounds, euros or yen in an S&P Tracker Fund.

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BAI Retail Delivery, Orlando

Flying out to the USofA tomorrow to host a group of international CxO's from European and Asian banks at the BAI Retail Delivery Conference and Exhibition.  The BAI Show is the biggest Expo for Retail Banking in the world, with over 5,000 attendees and  Colin Powell as keynote. 

So you know what I'm going to be blogging about, I just found their video on YouTube. 

Looks good ... although the voice-over I think should have started with: "In a world where banks are collapsing every day, BAI shows you how to survive the global meltdown." 

Far more cinematic!

1802 Quote about Banks from Jefferson

A mate of mine sent me this quote from Thomas Jefferson, written in1802:

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Great quote and how prophetic was this?

Unfortunately however, Jefferson did not write it in 1802. 

Instead, it was written in 1937, just after the Great Depression, from an amalgamation of lots of other writings. 

Even so, it makes me wonder whether we really are in that stormy cycle folks last experienced seventy years ago?