As Norwest senior vice president, strategic initiatives for Indiana and Ohio, Anat Bird is charged with creating a seamless alternative delivery system. This is crucial for a diversified financial services company which focuses on understanding the needs of each market rather than blindly relying on the latest technology.
MS: What is the most challenging aspect of devising a profitable alternative distribution strategy?
Bird: The history of alternative channels has been for them to be more expensive rather than to be money-savers. The reason is that most banks look at them as additive as opposed to substitutive. The result is that they get layers of distribution rather than a complete, integrated distribution system. So integration is the key challenge in being profitable.
MS: What do you mean by additive vs. substitutive?
Bird: For example, when you add a phone center, you need to ask: How does that affect what I offer through ATMs? Or, how does it change the goals of the branches? These are the kinds of questions we need to be asking with respect to the interdependency of all the alternative channels. If you add something, it should not simply be duplicating existing services. It has to be an integrated program. But mostly, the industry doesn't look at it that way, and that's why costs are going up.
MS: How do you achieve this kind of integration?
Bird: The key is that you don't set the goals of each distribution channel independent of each other. The important thing is that the individual distribution channels should be tied into an overall picture, and not have independent goals that operate separately from one another, which is how most of them are actually operated today.
MS: What are the technology challenges to achieving this kind of integration, and what are the business challenges?
Bird: It's not a technical issue; it's a management issue. You have to get managers to look at the whole picture. The success of the individual parts must be defined with respect to the overall system. Otherwise you could have it where each delivery channel is considered a success, but the delivery system as a whole is not. You have all kinds of managers scrutinizing each channel, but no one is looking at the overall picture.
MS: What about achieving multi-channel integration for the customer?
Bird: Few customers are willing to pay for that, and we can't afford to give it away to them. The level of technical investment to create that is huge. It is farther into the future than most people expect. The level of sophistication you're talking about is Star Trek.
There are a lot of emerging technologies that could make it cheaper, but right now we don't know which of those is the VHS system and which is the Beta system (referring to the early wars for the VCR customer market). And banks are not in the technology business; we're in the distribution business. So to invest in all of these untested technologies is cost prohibitive. I don't know any bank capable of doing that now.
MS: Where does electronic banking stand in terms of promise and demand?
Bird: Pretty soon, electronic banking services will be able to do just about everything but make a pot of coffee and wash the windows. For banks, it means transactions that used to require days are compressed into hours. That's a huge savings.
MS: What about from the customer's perspective?
Bird: This something we see as a clear need from customers. But we've also found their needs vary.
Overall, about 20 percent of electronic banking customers today want a sophisticated system like Quicken and Money. But for the rest of customers, those are too complicated. They simply don't want to be that bothered. So we are currently developing simpler methods of delivering electronic banking. Because if we don't have a simple enough product for them to use, they will eventually abandon PC banking.
MS: Norwest offers PC banking and has an Internet site. What are the advantages and disadvantages of PC vs. Internet banking?
Bird: Our research indicates that customers do not make a distinction between the two. The difference is the technology of how they are delivered. Does the customer care? No, what's important to the customer is that they can sit down and turn on their computer and do their banking.
It is true that there is a little difference between Internet customers and PC customers, in that Internet customers tend to be more sophisticated, and so they lead the way in terms of customer needs.
MS: You charge for PC banking services at Norwest. Do you have a multiple pricing strategy for that?
Bird: Yes, we do. But that's proprietary information. But it's based on the likelihood of retaining the customer.
MS: Some competitive banks offer free PC banking. Are you worried that customers might some day balk at paying for this service?
Bird: Some of our competitors are teaching customers that they can drive a Cadillac when all they're paying for is a Chevy, and that should concern everyone in the business.
MS: But aren't you worried about losing customers if competitors continue to offer it free?
Bird: It's possible, but our research indicates that, presently, price is not a major factor. But I should also say that electronic delivery is a channel, just like a branch, or a phone center. It's true that it is increasingly popular. But it is not a panacea. A lot of people are just jumping on the bandwagon because it's the latest hot technology that they perceive they have to have to compete. If banks want to be successful with it, they have to know exactly what the customer wants and how the customer will use it. That is the most important thing about electronic banking- defining what success with it really means.
-dahir tfn.com
