Linking value & process in retail banking channels

By focusing on the process as the unit of analysis, a research team led by Wharton's Patrick Harker, Lorin Hitt and Larry Hunter are examining how the interaction between technology and human resource management contributes to retail banking performance. In their research, the study team is drawing upon studies of the branch, call center and PC distribution channels. Team members are seeking ways to optimize total channel performance through process management, which includes work design, human resource policies, and information technology capabilities.

Key findings

• When financial services firms look to optimize a particular retail delivery channel, they tend to underestimate the impact of customer interactions with other channels.
  
• Given that customers of banks and other providers of financial services tend to use a wide variety of distribution channels, banks must manage the interactions among channels as rigorously as they manage each channel in isolation.
  
• Banks with more consistent process performance develop more consistent human resource policies and deploy technology more consistently.
  
• Like the ATM and call center channels before it, PC banking is actually contributing to an increase in the overall channel cost structure. In addition, PC banking is failing to generate both anticipated cost savings and early fee revenue expectations.
  
• Although PC banking customers are more valuable than regular customers with similar demographics, there is little evidence that PC banking makes such customers more valuable. Once identified as more valuable customers, leading institutions leverage this information to develop pro-active retention strategies.
  
  

Lessons learned

• Firms need to align strategy and process with technology and human resource management to achieve gains in productivity and efficiency. To achieve such alignment, banks need to invest in a cadre of "organizational architects" who can integrate these elements to form a coherent structure.
  
• When shifting from a pure-service to a sales-and-service culture, avoid placing too much emphasis on sales at the expense of service. Overemphasizing sales can lead to customer attrition due to a reduction in service quality. By separating the sales and service functions, retail banks can avoid a degradation of service levels as they seek to increase call center sales.
  
• The value proposition of the PC is retention and cross-sell, not acquisition and cost savings. Design PC banking service processes accordingly.
  
• The move toward electronic banking increases the need to take a holistic approach to channel and process management, especially with respect to integrating new channels seamlessly into existing methods of customer interaction. Although the Internet will not replace other channels of interaction, it will allow new services to be offered, further stimulating customer interactions.
  
• Consistency within and across service channels is paramount in customer service delivery processes. Resist the temptation to invest to be best in class in a single type of process; rather, make investments that will improve a set of processes to a consistent level.