Fine, Mercer Oliver Wyman: Why is generational shift important? According to one survey, 40 percent of total depositsthe lifeblood of retail banksis held by people over the age of 65. Even small changes in the behaviors of younger generationseither because they more actively push wealth into higher-return investments or because they have a tendency to save less than their parents didcould have big impacts on future bank earnings. If this played out, you could see banks polarizing toward transactional and lending products on the one side, and more-sophisticated and trusted investment management capability on the other.
Khirallah, TowerGroup: The goal of the bank is to meet the product and service needs of its customers. If a market area should experience changes in demographics, the bank will be caught without a viable strategy unless it has been tracking demographic, life stage and psychographic information. It's particularly important in markets that are experiencing rapid migration. If neighborhoods sustain changes in ethnicity, banks must ensure their staff is bilingual and familiar with the new customs/culture. Similarly, if older customers leave an area and an influx of young families occurs, the bank should rethink the products and services that it advertises in that area.
Holley, Capgemini: Today's seniors live almost 20 years longer than they did a century ago, and they have much more cash. This market demands a great deal in terms of proximity, easy access and service levels. On the other hand, many modern women struggle to find a balance between career and family, and face financial challenges that banks could help them solve long before starting a family. By providing segment-specific solutions with targeted value propositions, there is tremendous revenue and relationship potential for retail banks.
Q: What channels will be most important to these evolving market segments? How will this impact retail banking strategies?
Eilering, Mount Prospect National Bank: A myriad of retail and commercial customers use our online banking technology. But people in those groups also prefer to come into our branch and receive service in the traditional manner. While that is working successfully, there will be a time when we need to focus on either simply providing high-tech online services or focus on high-touch service in the branch.
Fine, Mercer Oliver Wyman: Younger generations are going to both demand and allow more remote service than their parents. But the branch will transform long before it disappears. Here, it's critical to think about small businesses, a segment that generates up to one-third of deposit profit and that demands a lot of the "fat" that some of the evolving branch models seek to trim away. Banks can't afford to let efficiency drive this segment elsewhere.
Khirallah, TowerGroup: Banks should ask their customers what their preferences are for interactions. Banks will find that their customers will use all channels; the trick is to know how each customer wants to interact with the bank and then honor that preference.
Q: How must technology support and product development evolve to meet changing customer preferences?
Fine, Mercer Oliver Wyman: Banks' technology and product innovation centers need to focus on four key capabilities: (1) Invest in data quality and the ability to aggregate information across products and customers to drive customer and profitability insights; (2) make sure the bank's application environment is agile enough to handle new products and services for target segments quickly, capitalizing on those insights; (3) mitigate operational glitches around data privacy, security and infrastructure that erode customer loyalty; and (4) empower the front line by taking IT decisions closer to the customer, and investing in front-end tools and analytics that promote sales and service, rather than back-office administration.
Khirallah, TowerGroup: A one-size-fits-all approach to serving customers simply will not be successful. Because customers are different and manifest many diverse behaviors and financial needs, banks are forced to be flexible. The technology infrastructure required to serve so many varied customers is expensive to maintain; however, the infrastructure is considered "table stakes"a cost of being in the banking business. The real challenge for many banks is the ability to adapt the technology infrastructure so that disparate customer groups are served appropriately and consistently.
Holley, Capgemini: Channel integration, mobility and event-triggered marketing based on integrated customer information will be the main themes governing the front end, while industrialization will predominate "backstage" to ensure scale and profitability. Mass customization and packaging of products will be accompanied by rigorous product portfolio/product life cycle management, which integrates not only different lines of business, but also external partners and is supported by appropriate technology. For most banks, this means investment in fundamental infrastructure renewalinvesting in flexible core-banking systems, and building sustainable and flexible service-oriented architectures and IT organizations. --Peggy Bresnick Kendler