Academic journal article Review of European Studies

Reformatting of a Branch as Banking Products Sales Channel in the Context of the Changes in the Custom Requirements of the Clients

Academic journal article Review of European Studies

Reformatting of a Branch as Banking Products Sales Channel in the Context of the Changes in the Custom Requirements of the Clients

Article excerpt

Abstract

The changes witnessed by the banks have been inspired by the changes in the consumers' behavior. Some 20 years ago, a branch was nearly the sole channel and the single opportunity for a bank's brand to be introduced to the consumer. Even today, branches generate over 90% of the sales for greater part of the retail banks, despite the rapid development of alternative channels. However, the role of a branch in the mix of channels is being changed significantly. Profound changes take place in business models, technologies and scenarios of consumer banking. These transformations are reflected by the rational arrangement of the clients' flows within branches. The object of this article is to consider certain trends in the outfitting of banking branches and their analysis based on the comparison of the banking branches reformatting program adopted by Sberbank of Russia, the largest Russian bank, with the best world experience. The article contains suggestions on improving consumer banking quality, as well as recommendations that may be implemented at the level of the banking office, or at least those that do not require complete re-engineering of consumer banking processes.

Keywords: consumer experience, Sberbank of Russia, reformatting of branch network

1. Intrtoduction

Over the last ten years, banks in the entire world have seen more changes than over the past 100 years. Information technology and telecommunications have changed many businesses forever. The changes taking place at banks have been inspired by the changes in the consumers' behavior. Incredible as it may seem, but finance industry, that has spent huge resources on IT, personnel, infrastructure, and marketing, actually failed to keep pace with the consumer.

A branch, traditionally most profitable and, at the same time, most cost-intensive sales channel, has become the biggest threat for banks.

In this article, we expect to analyze the way the changes in custom requirements have changed consumer quality and the format of Russian banks' branches in general, and, particularly, those of Sberbank of Russia, the largest Russian bank (hereinafter- "Sberbank").

Some 20 years ago, a branch was nearly the sole channel and the single opportunity for a bank's brand to be introduced to the consumer.For example, by the start of 1988, the system of Sberbank of the USSR consisted of 15 republican banks, 166 regional, district and municipal departments, 4.1 thousand branches with 50.7 thousand divisions, and 22.1 thousand agencies.

1.1 Changes in the Consumer Requirements of Bank Clients

The competitive advantages of the large-scale branch and division network with regard to attracting deposits from natural persons are indicated in Table 1 below.

However, the role of a branch in the mix of channels is being changed significantly. Profound changes take place in business models, technologies and scenarios of consumer banking.

Speaking at the Next Bank Asia 2012 conference in Singapore, Brett King, a well-known innovator, the founder of American Movenbank and the author of the Bank 3.0, the Bank 2.0, and the Branch Today Gone Tomorrow bestsellers, used the word-combination "consumer's behavior" 44 times in his half hourly speech. It is the consumer's behavior and his habits that have the biggest impact on banking technologies than anything else.

Here is the quote from the interview of Richard Branson, the owner of Virgin Money bank, for BAI Banking Strategies: "A consumer wishes to have a choice of how to interact with a bank. Some want to have access to their account from any point of the world at any time of the day, and electronic channels are the ideal match for that. For other consumers, for instance, those buying property on mortgage, human contact is important. They would like to sit down by a manager and talk to a real human being. is the important thing for distribution channels is the ability to meet various needs of the clients, and branches play crucial role in that mix"(Note 2). …

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