BANK OF MONTREAL BRANCHES: FRONT AND CENTRE - Verdict
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July 2015 Issue 715 www.retailbankerinternational.com
BANK OF MONTREAL
BRANCHES:
FRONT AND CENTRE
● DIGITAL BANKING CLUB: Legacy Infrastructure
● MARKETING: Social Media
● STRATEGY: Digital roundtable
● ANALYSIS: Big Data
RBI 715 July.indd 1 29/07/2015 11:48:06
Retail Banker International COMMENT: EDITOR’S LETTER
CONTENTS
6 DISTRIBUTION: BMO BRANCH STRATEGY
Robin Arnfield talks to Paul Dilda of
Bank of Montreal about its seven year
plan to improve its branches. Not only UK banks failing to reward loyalty, but
are they making more available in a
smaller space through digitisation, but scoring well for innovation and digital
it has launched a new mega-branch in
the heart of Toronto
I
8 COMMENT: THOMSON REUTERS
Banking has made many footsteps into f you have not yet had a chance to look ing rewards programmes with personalised,
the digital realm, but how far can it through the FIS Consumer Banking customised banking products to meet cus-
go? John Manwaring, head of mobile
and search, fianncial & risk at Thomson PACE Index, it is worth a glance. tomer needs.
Reuters considers the next steps for The survey, conducted by TNS for This suggests that while the financial
financial institutions FIS, tracks how financial institutions are industry as a whole is successfully delivering
9 DIGITAL BANKING CLUB: LEGACY performing against customer expectations digital access solutions, there are significant
INFRASTRUCTURE in nine markets: the US, UK, Brazil, Canada, opportunities to reset the foundation for
In its latest debate, the Digital banking France, Germany, India, Netherlands and consumer relationships.
Club brought together a panel of experts
to discuss the prevailing issue of legacy Thailand, using data compiled from more In addition, the results indicate financial
systems hindering progress. There is a than 9,000 banking consumers. institutions can forge deeper relationships
wealth of digital opportunity, but with Among a number of key takeaways: via the digital experience by integrating with
legacy systems bogging down banking
infrastructure, can the banks manage • 28% of banked UK consumers consumers’ lives through insight-driven
this? Franchesca Hashemi writes perceive that their financial institutions meet alerts, advisory services, planning tools and
12 MARKETING: SOCIAL MEDIA their expectations. The UK score ranks the more.
Innovalue and Locke Lord have released country third of the nine markets surveyed; Retail banking in the UK is dominated by the
their joint report on financial services • The UK ranks bottom of the 9 four main domestic High Street banks, plus
and their social media foresight. countries in rewarding customers for their a large global bank. These five hold 85% of
Franchesca Hashemi reports
business and helping them manage their the market share for current accounts. Those
14 STRATEGY: DIGITAL finances; banks rate very highly amongst consumers,
Are the technological changes within • UK consumers view fairness (no perhaps because they offer many different
banking for the banks or for the
consumers? Is it about convenience or hidden charges or fees) as second in impor- access points and quick responses. However,
is it about profit? Patrick Brusnahan tance only to security; 30% of consumers reported themselves as
writes on the highlights of a roundtable, • UK banks outperform almost all self-sufficient money managers.
hosted by Assurant, on this very topic
others in providing in-person service, and Despite such self-sufficiency amongst their
18 ANALYSIS: BIG DATA • UK banks are excelling at innova- consumers, UK banks fared well below aver-
The chief executive of the British tion and digital access. age for the simplicity of the products they
Bankers Association at a roundtable in
London talked about where the future Results of the study show that, worldwide, provide. With new market entrants offering
of retail banking lies. Big Data was put banked consumers say financial institutions accounts, lending and insurance at advanta-
in the spotlight in a very big way. Anna excel at providing digital access and conveni- geous rates, this could be a challenge for the
Milne reports
ence. However, in basic banking areas such largest banks going forward.
20 COMMENT: COLLINSON GROUP as fair and transparent pricing, banks fall As the report concludes, falling short of
The middle class is constantly below consumer expectations. expectations in meeting many basic banking
expanding. This is just not in developed
economies, but across Asia, Latin In fact, only one in four respondents requirements represents an obstacle in build-
America and Africa as well. How can believes a financial institution meets his or ing deeper, more relevant relationships. <
banks take advatnage of this growing her needs in these basic trust and relation-
mass affluent sector. Mark Roper writes
ship areas.
In addition, there is great opportunity for Douglas Blakey
banks to win consumer support by packag- Douglas.Blakey@retailbankerinternational.com
Editor: Douglas Blakey Sub-editors: Nick Midgley, Kev Walsh For more information on Timetric, visit
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www.retailbankerinternational.com July 2015 y 1
RBI 715 July.indd 1 29/07/2015 11:48:08
NEWS: COMMENT Retail Banker International
When did I last visit a bank branch?
As each month passes by, concern for the survival of the traditional brick-and-mortar bank branch
increases. While statistics can prove either death or rebirth for this side of distribution on a large scale, on
a more personal level, when was the last time I entered a branch? Patrick Brusnahan writes
While the death of the bank branch is announced nearly as frequently bar two members of staff, either of whom could be seen dressing as
as Bitcoin (which has died 71 times since 2010), one can wonder how a ghost to scare off meddling Millennials.
much life is left in the most public face of banking. Personally, I have only been into a bank branch to purchase a prod-
Community banking campaigners state that half of the UK’s bank uct once, a product I still have to this day, despite account switching
branches have shut down since 1989. In 2014, approximately 479 being easier than it has ever been in the United Kingdom.
branches were shut down with over 2,000 of Britain’s bank branches If I need to transfer money, I can do it via phone. If I need cash,
discontinued over the last decade. there are ATMs everywhere, from supermarkets to petrol stations to
The lobby group The Campaign for Community Banking Services just outside that pub that nobody goes to.
(CCBS) has claimed that bank branch closures could exceed the near- However, despite my lack of usage, I find the bank branch strange-
500 last year as already 399 have been announced, partly due to ly assuring. Seeing my bank’s logo still on a building ten minutes
HSBC’s plans to cut down staff in an attempt to sell its UK business. from my house makes me think: “If that’s still there, it can’t be doing
Even the Knott End branch of NatWest, featured in the bank’s that badly.”
advert claiming that “We will continue to provide banking services If something were ever to go wrong, be it a lost card or, heaven
wherever we’re the last bank in town,” has shut down in a move that forbid, fraud, a bank branch would be my first port of call to sort
can only be described as depressingly inevitable irony. everything out.
In comparison to other countries within Europe, the situation The human touch cannot be neglected. It actually feels good to talk
seems even dimmer. The UK has 150 branches per million inhabitants, through a situation with a member of staff without typing in several
compared to Spain and Italy, which have 720 and 520 respectively. random assortments of numbers and waiting on hold.
It’s hard to blame banks for shutting down branches as consumers Hopefully, I am not the only one who feels this way. If so, then the
move further towards digital solutions and further away from the bank branch still has a few strings left to its bow. If not, then I may
physical. Looking into a branch on my local high street feels like have to get used to typing in random assortments of numbers and
watching an old episode of Scooby Doo, the setting completely empty waiting on hold. <
Atom Bank to deploy Intelligent Environments’ Interact software
So. Now we know. In one of the most interesting and eagerly awaited UK banking supplier deals of this or
recent years, Atom Bank has plumped for Intelligent Environments’ Interact software to underpin their
customers’ digital experience. Douglas Blakey writes
This digital only solution is unique within the UK banking market Co-founded by Mullen, ex CEO of First Direct and Anthony
and Atom will implement Interact across iOS, Android and Windows. Thomson, co-founder of Metro Bank, Atom is the first bank in the
And for the writer’s part putting to one side for a second edito- UK focused on a mobile app to be awarded a banking licence.
rial independence, it is especially agreeable to see the good guys at The Atom app will feature face and voice recognition biometric
Intelligent Environments - the founders of The Digital Banking Club security and will be available on wearable devices as well as online,
with whom we work closely on the DBC web platform and quarterly tablet and smartphone.
debates - have picked up this deal. Based in Durham in the North East of England, the start-up has
Atom Bank CEO Mark Mullen said: “This partnership with Intel- identified six key values: respectful, sharing, pioneering, courageous,
ligent Environments is a critical part of our infrastructure and our energetic and joyful.
offer to customers. The Interact platform allows us to fully customise Thomson has spoken of the potential for Atom to target a cost-
and evolve our app. income ratio of below 30% with savings passed on to customers via
“This collaboration brings together two highly compatible organi- attractively priced products.
sations that are both determined to provide the very best of app based Notwithstanding the success of the seven-day current account
technology and security to customers. switching initiative launched in late 2013, switching rates in the UK
“It has been a great experience working with Intelligent Environ- remain stubbornly low.
ments in the early part of our journey and I know that they are going In the 12 months to April, only 1.2m of 46m current account hold-
to be great partners going forward.” ers switched banks, a switching-rate barely above 2%.
David Webber, MD at Intelligent Environments said: “Atom is Atom has now recruited around 100 staff as it gears up to go live
leading the way amongst a new wave of disruptive and innovative with Lisa Wood, the distinguished former head of marketing at First
players coming into the UK financial services industry. It has a deter- Direct, among a number of high profile hires.
mined focus on customer security and user experience. Atom has selected Mother, the world’s largest independent market-
“By implementing Interact with us, Atom will promptly establish a ing agency, to be its strategic creative partner across all activity from
reputation for secure and swift data handling for its customers across developing brand strategy to producing a full, integrated creative
any channel. We are incredibly excited about working with Atom.” platform. <
2 y July 2015 www.retailbankerinternational.com
RBI 715 July.indd 2 29/07/2015 11:48:09
Retail Banker International NEWS: ROUND-UP
STRATEGY
Banco INVEX renews payments accord with TSYS
Mexican banking company Banco INVEX and risk management tools. been a valued client for more than 10 years,
has renewed its payments agreement with INVEX head of the card business Jean and this renewal is an example of our ongo-
TSYS, a US-based credit card processor. Marc Mercier said: "We look forward to ing commitment to the Latin American
The new multi-year agreement will cover continuing our business relationship with market as we move forward and look for
processing services for INVEX's consumer TSYS, and are excited about consolidating ways to continue our growth in the region
and commercial credit card portfolios. our consumer line of business onto the more as well as the support of our existing client
Under the extended deal, TSYS will robust TS2 platform." base."
continue to provide INVEX with services TSYS president of the North America ser- Financial terms of the transaction have
including data analytics, fraud prevention vices segment Bill Pruett said: "INVEX has not been disclosed. <
DIGITAL STRATEGY
US retail banks to invest $16.6bn Mitsubishi UFJ eyeing
further retail bank
on digital transformation initiatives acquisition in Asia
In order to develop and implement digital ing growth as well, forecast to grow at 8.5% Japanese banking giant Mitsubishi UFJ
transformation initiatives, retail banks in the year over year in 2016. Only hardware is Financial Group is looking to acquire
US will spend about $16.6bn on hardware, keeping pace with total IT spending growth. another bank in Asia, two years after it
software, services, and internal IT staff in The growth of spending on digital trans- bought Thailand's Bank of Ayudhya for
2015, according to new report from IDC formation is outpacing aggregate IT spend- $5bn.
Financial Insights. ing by more than 2.5 to 1. As per IDC Finan- The lender is considering acquiring a
This spending will increase at a compound cial Insights’ estimates fully one third of the bank that has expertise in consumer bank-
annual growth rate (CAGR) of 10.4% into IT budget at the US banks will be dedicated ing in Indonesia, the Philippines or India,
2019. This compares to a growth rate of to achieving digital transformation in five according to a Bloomb-
3.9% for an overall IT spending by the US years. erg report.
banks. IDC Financial Insights global bank- In an interview
The study found that highest growth in ing research director Jerry Silva said: “It’s with the publication,
digital transformation spending comes from like two teams of diggers making their M itsubishi U FJ
software and internal IT. way through a mountain to build a tunnel. Asia-Oceania arm
According to the report, spending on IT They’re hoping they’ll be aligned when they CEO Go Watanabe
services for digital transformation is a small- meet in the middle and it’s a $16.6 billion said: "We're look-
er, but not inconsequential, source of spend- bet.” < ing for a bank that
is very strong in both
corporate and retail consumer finance akin
DISTRIBUTION to Bangkok-based Bank of Ayudhya Pcl.
US fund Apollo and EBRD acquire Slovenian The bank ideally wants a majority stake
in a "relatively big-sized bank," he said.
bank NKBM for €250m "Doing business with corporates isn't
enough. Having a retail business is some-
Slovenian Sovereign Holding (SSH), which customers, its employees, the local commu- thing we want, to capture the high growth
is coordinating the privatization process in nity and the State. of the Asian economy," said Watanabe,
the country, has signed a deal to sell Slo- "We believe that NKBM has tremendous who moved to Singapore in July 2013 to
venia's second-largest bank Nova KBM growth potential and we remain commit- take up his current role.
(NKBM) to US buyout fund Apollo Glob- ted to cooperating with all stakeholders to Currently, regulators in Indonesia, Phil-
al Management and EBRD for €250m deliver excellence in services to current and ippines and India are at various stages of
($279m). future clients." easing rules on ownership of their banks
Under the deal, certain Apollo affiliated EBRD managing director Nick Tessey- by foreign lenders. While India now allows
funds will acquire 80% of NKBM, while man said the EBRD will work closely with a foreign entity to hold around 74% stake,
EBRD will own the remaining 20%. the new majority owner to support the up from previous 49%; Indonesia is at 40%
Gernot Lohr, senior partner at Apollo, restructuring of the bank which was res- limit and Philippines allows complete for-
said: "We believe NKBM is a franchise cued by the state in 2013. eign ownership.
asset, with a challenging recent history, that Established in 1862, Nova KBM was However, Indonesia recently made an
under the guidance of an experienced and bailed out by the Slovenian government exception when it permitted South Korea's
committed owner such as Apollo can return alongside peers NLB and Abanka in late Shinhan Bank to acquire two lenders and
to its past glory, delivering stability for all 2013. It currently employs more than 1,700 merge them that exceeded the prescribed
stakeholders, namely NKBM's clients and employees. < 40% foreign ownership limit. <
www.retailbankerinternational.com July 2015 y 3
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NEWS: ROUND-UP Retail Banker International
M&A
Hungary pays GE Capital $700m for Budapest Bank
Hungary’s state-owned investment firm statement. tive management.
Corvinus has signed a deal to acquire 100% Payment of the purchase price was calcu- GE Capital put Budapest Bank up for sale
stake in Budapest Bank, the local unit of GE lated using a HUF/USD cross rate of 279.64, after it decided to divest its financial services
Capital, for $700m. “which is more favourable than market rates segment globally.
The interests include Budapest Fund Man- at present”, the statement read. The government of Hungary inked a pre-
agement, Budapest Car Leasing and car fleet The statement added that the new owner liminary deal with GE to buy the bank in
management company Budapest Flotta, does not plan to make any big changes to the late 2014, and it received the regulatory
Hungary’s Prime Minister Office said in a bank’s operation, business policy or opera- approval in the middle of June 2015. <
DISTRIBUTION STRATEGY
Santander partners with Monitise to launch
State Bank of India to overhaul fintech JV
Spanish banking giant Banco Santander and
branch formats in digital push British mobile money vendor Monitise have
formed a joint venture that looks to invest in the
disruptive financial technology sector.
State Bank of India (SBI) is planning to launch around 250 Intouch Lite branches Both partners will provide up to £10m of capital
undertake a major overhaul in branch for- in the fiscal year 2016 as a part of its digi- each over the next two years depending on the
mats and open new digital branches to tar- tal push. opportunities are identified.
get young customers. Intouch Lite is a lighter version of the Monitise and Santander will each take a 50:50
SBI chairperson Arundhati Bhattacha- bank’s full-fledged digital branch, differ- share in the new business, which will be based in
rya said: “We are going to convert quite ing only by way of a smaller screen size. London.
It will be led by Santander’s head of R&D and
a lot of our branches. The entire branch These digital outlets offer multiple ser-
innovation Julio Faura, and chaired by Monitise
network is undergoing a transformation. vices like instant account opening, instant
founder Alastair Lukies.
So, there will be changes to the branch issuance of debit card, live interaction with In addition to its 50% ownership, Monitise says
format, changes in the branch location as experts, opportunities to buy financial it will also benefit from a multi-million pound
well depending on the need and where the products and home loans under a single upfront licence fee, as well as the generation of
habitation is moving. roof, Bhattacharya added. further ongoing revenues.
“It will be well-thought-out approach, The bank commenced its digital journey Investee businesses will also have the
based on the clientele in that segment and in July 2014, launching a large number of opportunity to become partners with Santander
their needs.” online products, collaborations and MoUs and gain access to Monitise’s new cloud-based
She revealed that the bank is planning to with e-commerce players. < platform.
M&A
Wintrust Financial completes North Bank acquisition
Wintrust Financial has completed its previous- branches of Wintrust Bank. ket presence in downtown Chicago. We look
ly announced acquisition of North Bank by its As of 31 March 2015, North Bank had forward to continuing with the community
wholly-owned subsidiary, Wintrust Bank. approximately $106m in assets, approxi- banking approach that North Bank has estab-
Wintrust Financial agreed to acquire Illi- mately $55m in loans and approximately lished while providing its customer base with
nois-based North Bank for about $17m in $94m in deposits. an expanded array of products and services.”
March this year. Wintrust president and CEO Edward Wintrust said that the transaction will not
Following the deal, two downtown-Chica- Wehmer said: “This transaction allows us to have a material effect on its 2015 earnings
go locations of North Bank will operate as expand and complement our growing mar- per share. <
M&A
Vietnamese lender BIDV may sell 15-20% stake to foreign investor
Vietnamese bank BIDV is in talks to sell a However, he did not disclose name of any to have a foreign shareholding of up to 30%,
15-20% stake in its business to a long-term investors BIDV has been in talks with or a with a single strategic partner allowed a
foreign investor in the banking sector, and date in 2016 when the stake sales would be maximum 20%.
10% to another overseas investor in 2016, completed. BIDV’s registered capital has increased by
the chairman of the bank said. It would depend on the performances of 12% to nearly $1.44bn after completing a
“State ownership would be kept at 65%,” Vietnam’s stock market and BIDV shares, merger with state-owned Mekong Housing
Reuters quoted BIDV chairman Tran Bac Ha Bac Ha told Reuters. Bank in May 2015, the banks’ senior execu-
as saying. Currently, Vietnamese banks are allowed tive vice-president Tran Phuong said. <
4 y July 2015 www.retailbankerinternational.com
RBI 715 July.indd 4 29/07/2015 11:48:10
Retail Banker International NEWS: ROUND-UP
DISTRIBUTION
Shinhan Card opens new credit arm in Kazakhstan
Korean credit card company Shinhan Card The company has invested KRW5bn other financial services.
has expanded its overseas presence by open- ($4.4m) into Shinhan Finance and plans to “In recent years, Kazakhstan has shown
ing a new branch in Almaty, Kazakhstan. double to KRW10bn by early 2016. the highest growth among the Common
Dubbed ‘Shinhan Finance’, the new Shinhan Card CEO and president Wi Wealth of Independent State (CIS) countries.
branch plans to focus its attention on auto, Sung-ho said that the company must get Its retail banking market has seen double-
heavy machinery and home appliance approval from the local financial authori- digit growth each year; and the country’s
financing and leasing services. ties to run a credit and debit card business per-capita gross domestic product has
As part of the move, the company has in Kazakhstan. reached $14,000,” he added.
formed strategic partnerships with sev- He added that Shinhan Card has forayed Additionally, Shinhan Card is planning to
eral automobile dealerships in Kazakhstan, into the central Asian country as it foresaw expand its footprint to emerging markets in
including Astana Motors and Allur Auto. great potential for growth in banking and Southeast Asia. <
STRATEGY M&A
ING emerges as frontrunner to buy HSBC’s
Deutsche Bank extends IT outsourcing Turkish operations
contract with Accenture Dutch bank ING Group has reportedly left behind
Bahrain’s Arab Banking Corp (ABC) and France’s
Deutsche Bank has extended its existing platform to an on demand procurement BNP Paribas to emerge as a leading bidder for the
information technology (IT) outsourcing solution from Ariba, an SAP company. acquisition of HSBC’s Turkish unit.
contract with Accenture for an additional Through the IT outsourcing deal, Three persons familiar with the development
five-years. Deutsche Bank aims to reduce operational told Reuters that HSBC had narrowed down the
The new contract will exceed the initial costs, enhance spending control and stream- field to one suitor, and it was ING.
agreement, which was scheduled to expire line sourcing and procurement services. In May 2015, HSBC revealed its intentions to
in December 2016, through the end of 2021. Mark Loring, head of source-to-pay and sell its operations in Brazil and Turkey, shrink
Under the original contract signed in 2004, travel operations, and John Goyanes, head its investment bank and cut up to 25,000 jobs
Deutsche Bank outsourced its procurement of purchasing at Deutsche Bank said: "We globally in a bid to slash costs and bolster returns
operations and accounts payable processing extended our relationship because Accen-
to shareholders.
to Accenture, as well as the maintenance of ture understands how to derive real financial
According to Reuters, currently ING Turkey
its procurement IT system. benefits and business value from sourcing
has 319 branches employs over 6,250 people,
Accenture said that in addition to con- and procurement.
whereas HSBC Turkey employs 5,536 people in
tinuing to provide Deutsche Bank with pro- "The contract extension positions Accen-
curement operations and accounts payable ture as one of our few strategic business 291 branches. The two lenders total assets are
processing services, it will further automate partners, and we can now leverage their $15bn and $12bn respectively.
the source-to-pay process, including invoice enhanced sourcing capabilities to accelerate In case the deal materialises, the combined
processing and contract compliance man- the source-to-pay process with strong com- entity may outperform Turkish affiliate of French
agement. pliance, and ultimately work towards meet- BNP Paribas, Türkiye Ekonomi Bankasi (TEB), and
Accenture will also migrate Deutsche ing our clear business objectives, including Denizbank, Turkish affiliate of Russian Sberbank,
Bank's current on premise procurement IT sustainable cost savings targets." < the publication added.
REGULATION
ANZ receives full banking license in Thailand
Australian banking giant ANZ has received said ANZ Thai will be an important addi- Vietnam, Cambodia, Myanmar and Laos.
a full banking licence in Thailand, which tion to its Asia network and its activities in ANZ CEO International and Institutional
will allow it to upgrade its presence from the GMS that already include operations in Banking Andrew Géczy said: “This is an
a representative office to a subsidiary and important milestone for our super regional
transact in local currency. strategy and means we can now better con-
The bank, which opened the representa- nect our multi- national customers to the
tive office in Bangkok in 1985, has appoint- growing trade and investment flows across
ed Panadda Manoleehakul - former chief Asia with the Greater Mekong.
executive of ANZ Philippines - as CEO of “Panadda built a strong, growing franchise
ANZ Thai. for ANZ in The Philippines and has been
Prior to joining ANZ in 2008, she held instrumental in the process to gain our bank-
senior banking roles across Asia with HSBC, ing licence in Thailand. I’m pleased ANZ
JP Morgan Chase, Chase Manhattan Bank will continue to benefit from her experience
and Standard Chartered Bank. and leadership as she continues to drive our
The Australian lender in a press release expansion into Thailand,” Géczy added. <
www.retailbankerinternational.com July 2015 y 5
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DISTRIBUTION: BMO BRANCH STRATEGY Retail Banker International
BMO ramps up branch transformation
BMO Bank of Montreal has been on a seven-year journey to transform its branches for the new era of
digital banking. The outcome has been smaller branches that make innovative use of technology, Paul
Dilda, head of BMO’s North American branch and ATM channels, tells Robin Arnfield
P
aul Dilda, head of BMO’s North and is being augmented with interactive local market. Our base format for neigh-
American branch and ATM channels kiosks offering videoconferencing with bourhood branches is now 2,500 square
says: “Branch transformation has remote tellers and experts. As you remove feet, but the design is really scalable and
been a journey for BMO”. simple transactions as much as you can from we can optimise the size of the neighbour-
“We started to review our branch strategy branches, they become places where staff hood branch for individual markets. Using
in 2008-2009, and had two primary objec- help customers with more complex transac- our smaller footprint branch model, we can
tives: improving the brand-aligned customer tions and with services.” go into places where we couldn’t have gone
experience, which involved looking at our “Looking forward 10 years, we will still with a larger branch.”
branch format, and increasing staff produc- have branches, but, because of the growth Customer response to the neighbourhood
tivity. Traditionally, we had a cookie-cutter of digital banking, we won’t need long teller branch design has been very positive, Dilda
approach to branch format and would go lines,” says Dilda. says. “Customers using our first neighbour-
into a new market and build a 5,000-square- hood branch in Toronto told us that it was
foot branch with a big teller line and lots of Neighbourhood branches set up for delivering service, which was
financial advisers.” The initial outcome of BMO’s work with exactly our goal,” he says.
However, BMO noticed that European Figure 3 was the launch of the bank’s first
banks were deploying smaller footprints for smaller-footprint neighbourhood branch in First Canadian Place
their branches. “So we started to ask our- Toronto in 2009. As of May 2015, BMO has The open, transparent design of BMO’s
selves whether there was a smarter way of opened 30 neighbourhood branches in Can- neighbourhood branches is at the core of its
doing branch banking,” Dilda says. “We ada, with several more in the pipeline, plus totally remodelled 21,000-square-foot flag-
carried out a review of everything we did three neighbourhood branches operated by ship branch at First Canadian Place, Toronto.
in our branches to see how we could make its US subsidiary, BMO Harris Bank. “We apply the look and feel of our neigh-
the branches more productive and save Neighbourhood branches are the next bourhood branches across all our branch
ourselves time, space, and staffing and rent size down from BMO’s Metro branches, formats,” says Dilda. “So we took the neigh-
costs.” 4,000 square foot branches which BMO bourhood branch core design principles –
BMO engaged Toronto-based design con- still builds in markets which are appropriate open, accessible, human and intuitive - and
sultancy Figure 3 to help it with its branch for this format, says Dilda. The next size up scaled them up to apply them to the First
transformation programme. “We wanted is BMO’s Universal branches, larger, legacy Canadian Place branch.”
to create a smaller footprint where we used branches which BMO no longer builds. The First Canadian Place branch includes
space more efficiently and deployed technol- “We looked at the idea of just cramming digital signage, tablets for use by customers,
ogy to help staff become optimally efficient,” all the standard elements of a branch into meeting pods, and open, accessible worksta-
says Dilda. a smaller location along the lines of ‘honey, tions for use by staff. “We provide a secure
I just shrunk the branch,’” says Dilda. “In wireless network for the staff at First Cana-
Trends in Canada the end, we decided to redesign the branch dian Place so that they can move around the
BMO’s branch transformation programme format and do things differently. We noticed branch with laptops to open meeting areas
is part of a wider trend which has seen all that the layout of our traditional branches, or private meeting rooms,” says Dilda. “We
the major Canadian banks deploying smaller with staff enclosed behind walls, was a bar- also created a dedicated wealth management
branches and making greater use of technol- rier to achieving our service values, which centre at First Canadian Place with wealth
ogy (see “CIBC elevates its branches into the require branch staff to provide a friendly, advisors and planners plus private banking
modern era,” RBI 712, April 2015), says welcoming environment for customers.” staff.”
Mark Smith, national industry leader in The design of BMO’s neighbourhood
KPMG Canada’s financial services practice. branches has an open, transparent layout, Flexibility
“North American banks are moving from where staff are more accessible than in its BMO has a flexible approach to its neigh-
having full-service branches everywhere to a traditional branches. “Our neighbourhood bourhood branch design. Initially, BMO
variety of different sizes of branches,” Smith branches are intended to be intimate and had a policy of not providing safety deposit
says. “Branches are becoming a multi-func- inviting,” Dilda says. boxes in its neighbourhood branches, in
tional space with meeting rooms and with “The first neighbourhood branch was order to save space. “But we found that in
very few, if any, designated offices. Also, the 2,200 square feet, but we can go to 2,500 markets where there is a demand for safety
role of the branch workforce has changed to 3,000 feet, depending on the needs of the deposit boxes, for example in ethnic neigh-
6 y July 2015 www.retailbankerinternational.com
RBI 715 July.indd 6 29/07/2015 11:48:15
Retail Banker International DISTRIBUTION: BMO BRANCH STRATEGY
bourhoods, we needed to include a safety ers. Staff are also able to instantly issue debit technology than neighbourhood branches,”
deposit vault in the neighbourhood branch- cards to customers at the smart branch.” says Dilda.
es,” Dilda says. “We also use cash-recycler In addition to Interactive Teller machines, BMO opened its first studio branch, an
technology for our tellers, so the neighbour- the smart branch includes advanced ATMs 800 square foot branch located in a condo
hood branches don’t need a cash vault, as which allow customers to set their transac- block, in Montreal in May 2013, with a sec-
cash is stored in a customised safe.” tion preferences, and withdraw cash using ond studio branch opening in July 2013 in a
Instead of having financial advisors based smartphones instead of debit cards. mall in Port Colborne, Ontario.
permanently in its neighbourhood branches, The universal bankers can help custom- “Studio branches don’t represent a large
BMO decided that these staff should visit the ers perform self-service transactions at market for us,” says Dilda. “We see them
branches to meet with customers by appoint- the ATMs and the NCR Interactive Teller as a very specific application and as more of
ment. “This meant that we could replace machines. “For example, they can over-ride a convenience centre which is more transac-
permanently-owned individual offices with cash withdrawal limits or print out certified tional than our other branches. We opened
client meeting rooms,” Dilda says. “Also, cheques, and they can also provide informa- our Montreal studio branch because it rep-
our neighbourhood branch bankers work in tion on products and services,” says Dilda. resented an opportunity for us to be the first
an open environment, and can hold conver- “The design of the smart branch is intend- bank to get into a developing area.”
sations with customers at a banker’s desk or ed to facilitate good sales conversations The studio branches’ features include:
in a meeting room.” between bankers and customers.”
“In some markets, our high-net-worth BMO Harris is piloting high-definition • Open banker workstations: tradi-
clients may have a high demand for wealth videoconferencing with remote product tional enclosed office spaces have been
management services,” says Dilda. “So we experts such as mortgage advisors at its replaced with an open layout to allow
can add permanent office facilities for invest- smart branch in a dedicated room. “We’ve customers greater visibility and access
ment advisors in neighbourhood branches seen tremendous uptake by customers of to branch staff;
in these markets instead of using visiting our video expert service,” says Dilda. “Cus-
experts.” tomers don’t need to book an appointment • Shared customer meeting spaces which
to speak to a remote expert. They can just allow for more comfortable, collabora-
Videoconferencing walk into the smart branch, and, within a tive and private conversations between
Initially, BMO offered a videoconferencing few minutes, if the expert is available, hold customers and BMO staff;
service in its Canadian urban neighbour- a videoconference with them.”
hood branches enabling customers to speak Currently, BMO has no firm plans to • Customer connectivity: BMO’s Wi-Fi
to remote financial advisors via desktop open smart branches in Canada. However, network provides free Internet access
videoconferencing units. But after piloting it is revisiting its earlier decision to stop pro- for branch customers for their banking
the service, BMO discontinued it. viding video links to remote experts at its and other personal needs.
“What we found was that, in an urban urban Canadian branches, and is looking at
environment, customers really wanted to options to offer this service again, Dilda says. Although, as a general principle, BMO
meet their advisors face to face, not by video “But, right now, we’re concentrating on scal- believes in keeping the roles of its Cana-
link,” Dilda says. “It turned out that urban ing up our plans to roll out smart branches dian tellers and bankers separate, its studio
customers were happy to make an appoint- in the US,” he says. branch staff are able to handle both sales
ment to come into a neighbourhood branch Branch transactions volumes differ and service depending on a customer’s needs.
and meet their advisor, rather than carry out between Canada and the US BMO has
a videoconference. For relationship-based found. “There is enough regular transaction ATMs
services like financial planning, we are in and sales volume in our Canadian branch- In March 2015, BMO Harris Bank launched
favour of face-to-face meetings, at least in es to justify keeping the roles of teller and Mobile Cash, a QR code-based service ena-
the initial stage of the relationship.” banker separate,” says Dilda. “So we don’t bling customers to withdraw cash from
However, BMO does provide videoconfer- intend to remove traditional tellers from our ATMs using smartphones without need-
encing at 50 of its branches in rural parts of Canadian branches, or to deploy universal ing debit cards. As of March 2015, 750 of
Canada, where financial advisors cover large bankers who handle both sales and service BMO Harris Bank’s ATMs were enabled for
geographical areas. “Because of the great in Canada.” Mobile Cash, with a further 150 ATMs due
distances and the harsh winters in these to offer the service by June 2015.
regions, it makes sense for local advisors to Studio branches “In the US, all our ATMs are image-
use videoconferencing,” Dilda says. In August 2011, BMO opened a scaled- enabled so they can accept envelope-free
down version of its neighbourhood branch deposits,” says Dilda. “We’re also working
Smart branch in the Oakridge Center shopping mall in on offering mixed-media cash and cheque
BMO Harris Bank opened its first “smart Vancouver. The 1,200 square foot Oakridge deposits at our U.S. ATMs, and letting cus-
branch” in March 2015 in a Chicago suburb. Center branch, which features self-service tomers withdraw different denominations of
“The smart branch leverages the learnings technologies such as a foreign currency notes.”
we got from the neighbourhood branch, but, ATM and an online banking kiosk, replaced BMO is currently in the process of
unlike the neighbourhood branch, it doesn’t BMO’s previous branch in a local Safeway upgrading its network of 2,200 ATMs in
have a teller line,” says Dilda. “Instead, cus- supermarket. Canada. “Mobile Cash is definitely on the
tomers use video feeds at NCR Interactive “The Oakridge Center branch was a pro- roadmap for our Canadian ATMs,” adds
Teller machines to speak to remote tellers. totype of our smallest branch format, the Dilda. “Right now, we’re focusing on adding
The smart branch is an open space where the studio branch, which is designed for loca- envelope-free deposits as well as the ability
staff, whom we describe as ‘universal bank- tions where people live and work such as to deposit cheques and cash simultaneously
ers,’ use tablets and laptops to help custom- real-estate developments, and uses more in Canada.” <
www.retailbankerinternational.com July 2015 y 7
RBI 715 July.indd 7 29/07/2015 11:48:16
COMMENT: THOMSON REUTERS Retail Banker International
What can the next stage of digitisation
offer the financial sector?
Banks have been utilising the digital experience to their advantage, but every time they catch up,
technology has moved on. John Manwaring considers the steps needed by financial institutions to fully
consider themselves digital and the infinite possiblities that this creates for the firms
T
he financial sector has changed more individuals manage their finances. building blocks in place so they can rapidly
in the past two decades than at any The threat posed by non-FS companies prototype and roll-out new services.
point previously in history. Technol- entering the banking and payment space The key to ensuring end-user or customer
ogy is the primary reason for this. hasn’t gone unnoticed. uptake of digital initiatives is marrying data
Around the world banks have spent the A recent new report from The Economist with convenience. You can have mountains
last twenty years pouring money in to IT to Intelligence Unit revealed seven out of 10 of data, or swish devices on which to pre-
deliver new digital services to a tech-savvy bankers believe consumers "expect banks to sent it, but should it be too great an effort
and demanding customer base. provide the same quality of experience big to access, people are likely to give it a miss.
While areas of the financial services indus- Internet companies provide." Indeed, the There may be many false starts before the
try have often been accused of laggardism, it study claimed some 42 per cent of banks winning products come along.
must be remembered that banks were among saw technology firms such as PayPal as a
the first organisations to embrace IT on a potential rival. Endless digital possibilities
mass scale, decades ago. Today, the picture This should act as a guiding principle for If financial firms equip themselves with a
has changed. decision makers across the financial spec- flexible digital infrastructure, capable of
The combination of mobile devices, big trum: they should see their company as a processing the high levels of data the next
data, and ubiquitous mobile internet cover- technology business as much as a financial digital evolution will generate, and deliver
age means that today’s digitisation has less services organisation. it in real-time to a range of devices, the pos-
to do with optimising existing processes However, digitisation also provides finan- sibilities are truly endless.
and much more to do with empowering end cial institutions with an opportunity as much For instance, you could set alerts to tell
users and creating brand-new paradigms. as a threat, so long as they are prepared to be you when a news story or research docu-
What’s clear is that this is only the start innovative and bold. ment on a particular stock is published,
of the financial digital revolution, with tech There are signs this is happening; the same which flow through instantly to the smart-
investment set to soar. A recent report from Economist report also revealed 71% of watch on your wrist. From there, you could
the Confederation of British Industry (CBI) banks surveyed said they considered mobile sync that content to your tablet or desktop
estimates UK financial services companies phone providers to be potential partners, to come back to and analyse later.
expect to spend 75% more on IT in 2015. and 60% said they were thinking about part- Or if you wanted, you could access addi-
The impact of this can already be seen in the nering with social media firms like Facebook. tional quote data on your watch or smart-
news, with Deutsche Bank signing a vast However, for such dynamic partnerships phone and dig deeper into what’s happening
10-year deal with HP earlier this year to re- to be effective, both logistically and finan- there and then.
engineer the IT infrastructure supporting its cially, the businesses involved will need It’s this ability to be alerted quickly to new
wholesale banking arm. to reach a certain level of digitisation, for information that helps professionals really
example, to handle the ensuing increased make sense of the markets and react quickly
Digitisation v2 flow of data and information. and confidently, turning market information
Financial services and trading firms realise While this likely wouldn’t be a problem for into actionable insight.
their sector stands to benefit more than most a social media firm, the digital infrastructure While little is certain in the financial sec-
from digital evolution and from advances in of a financial organisation would be strained tor, we can be sure the future will be more
mobile technology in particular. very quickly. global, complex, competitive and regulated.
This is an industry where the immediacy How companies use the information avail-
and availability of data is critical. New Why wearables? able to them will determine how successfully
mobile advances are providing new plat- Despite the hype and high profile launch- they navigate this progression.
forms for this information to be delivered es, wearable tech hasn’t taken off as many This explains why attitudes to IT have
more easily to both internal users and also expected it would – leading to Google sus- shifted in recent years. They must continue
to customers. pending Google Glass sales earlier this year. to do so to ensure financial institutions make
For instance, the recent high profile The same might soon be said of the Internet best use of the new technology available to
launches of the Apple Watch, Google’s of Things, which has a long way to go before them and meet the ever changing expecta-
Android Wear and Samsung’s Gear S have Gartner’s prediction of 25 billion connected tions of end users – whether they work for
heralded the wearable technology era, and devices by 2020 is realised. the institution in question or are serviced by
with it whole new ways of accessing infor- However, the core building blocks of it. <
mation. Elsewhere, new applications and the financial services of tomorrow are well
digital initiatives, such as Apple Pay and known to us: data, mobility, and speed. John Manwaring is head of mobile and
Bitcoin, are also changing the way firms and Institutions should ensure they have these search, financial & risk, Thomson Reuters
8 y July 2015 www.retailbankerinternational.com
RBI 715 July.indd 8 29/07/2015 11:48:17Retail Banker International DIGITAL BANKING CLUB: LEGACY INFRASTRUCTURE
“Get people together and invest in the future”
A panel of financial experts gathered at the Law Society to debate legacy infrastructure and the constraints
it places on digital innovation, while offering consumer-centric and efficient solutions. However, with
legacy systems bogging down banking, can the banks manage this? Franchesca Hashemi writes
T
Panel Members here is a relentless pace of change driving digital innovation in
the banking sector. However, there isn’t going to be a big bang
Simon Cadbury, head of strategy at Intelligent Environment moment and the system won’t change overnight, according to
Simon joined Intelligent Environments in November 2013 as head of strategy Simon Cadbury, head of strategy and innovation at Intelligent
and innovation. He came from Lloyds Banking Group, where he was responsible Environments.
for payment technology and sat on the leadership team for credit cards. Having Adding weight to the analysis, Cadbury said: “There are more
worked with Transport for London during the initial stage of the contactless challenger banks offering modern and competitive systems. If banks
payment project, Simon’s thorough understanding of the field has enabled
want to keep up, they have to adapt. If that goes well then big chang-
an impressive catalogue of relative ventures, including mobile contactless
payment projects with Lloyds, Visa and Samsung, product development roles
es can be made to people's lives.”
with BT, (where he helped develop Europe’s first Blackberry and public Wi-Fi While some panel members wanted to eradicate legacy infrastruc-
service, Vodafone (launching 3G in Australia) and BSKYB. tures, others preferred to modify existing IT systems on a piece-by-
piece basis.
Jake Chambers, head of insight and innovation at Nationwide The debate covered cultural modernisation from the consumer’s
Jake leads Nationwide’s digital strategy, research and innovation team. perspective and whether this will allow current banks to maintain
Alongside a deep understanding of consumer needs and unparalleled market relevance. If this doesn’t happen, traditional financial institu-
creative flair, Jake front’s Nationwide’s digital ambition and takes business tions will be picked off by challenger banks and Cloud platforms in
steps necessary to maintain and develop his bank’s customer-focused products. the next five to ten years.
At the heart of it is Jake’s commitment to helping customers get the best
A full house of members listened carefully to the straight-talking
value for money, a job he’s been doing for Nationwide since 2012. Before this,
Jake worked in strategy, customer and competitor intelligence for Vodafone.
panellists, while group editor of Timetric’s consumer finance publica-
His most recent role was head of market intelligence, where he led a team tions, Douglas Blakey, chaired the event.
responsible for analysing market trends and competitor activity. A plethora of contemporary issues soon followed, including
business to business collaboration, whether small banks versus big
Benjamin Ensor, research director at Forrester banks is a legitimate argument, product testing and the impact Apple,
Benjamin serves eBusiness and channel strategy professional, where he Google and PayPal will have on banking ecosystems.
researches the intricate nature of consumer perception, adaptation, and use Cadbury said: “There are three phenomena changing the face of
of new technologies and the impact consumer behaviour has for business British banking right now. The first is obvious, it is digital, but we
executives and their company’s goals. The information is invaluable to also have an array of new competitors which are shaking up the
Benjamin’s professional counterparts, providing stats and insight on consumer
banking system by creating principal forms of interaction that are
segmentation, business models as well managing multiple and diverse
distribution channels. During his 16 years at Forrester, Benjamin has worked in
digital only.
the company’s technographics, financial services, and eBusiness channel and The current online climate, he added, is revolutionising not only
product management professional teams. British banking, but the way we interact with each other.
This cycle, the panel agreed, impacts public expectation and in turn
Richard Fraser, managing director at Global Financial the digital experience.
Institutions, FIS Cadbury continued: “The new financial entities come from small
Richard’s career began in retail banking as a management trainee with and simple backgrounds yet are top for innovation and continue to
Northern Rock during the 1980s. He then went on to join the Nottingham change the way consumers use services. They come in the form of
Building Society and Bank of Scotland joint venture in 1984, which launched banks like Fidor and Atom who are trying to become fully accessible
the United Kingdom’s first home-banking service. A few years later, Richard in their own rights. So for example, Anthony Thompson, the co-
joined forces with FIS, first in sales and marketing roles then moving to IBM in
founder of Atom Bank, believes he can deliver a 30% lower cost-of-
1995 as its head of the newly formed core banking solutions unit.
Re-joining FIS in 2009, Richard currently leads the GFI team and supports the
income ratio in comparison to a traditional bank.”
company’s largest European clients. Presently, three of the big British banks cost income ratio stands at
RBS with 68%, Barclays at 64% and Lloyds at 47.7%.
Roy Vella managing director at V2 Yet across Europe, retail banks have digitised only 20% - 40% of
Roy is a digital entrepreneur and independent consultant to brands such as their services while 90% invest less than 0.5% on digital innovation,
Visa, Vodafone, GSMA, and small start-ups. Before offering his expertise at according to McKinsey’s figures from 2014.
large, Roy served as leader of RBS global mobile banking efforts. Before this, However, Cadbury argued: “The third and final point is that
he spent five years at PayPal, starting out as director of business development current infrastructures shouldn’t support digital debt. The legacy is
in USA merchant services before leading the mobile payments initiative across
creaking at the seams and seems Victorian in comparison to new
Europe. Prior to PayPal, Roy worked as VP of sales and marketing at 4charity,
Inc., then as partner of Quantum Technology Ventures (which is a corporate VC
competitors.
firm focused on the storage industry). “We are also seeing evidence from organisations like CEB Tower-
Group who are saying the cost of a branch telephone transaction is
www.retailbankerinternational.com July 2015 y 9
RBI 715 July.indd 9 29/07/2015 11:48:17DIGITAL BANKING CLUB: LEGACY INFRASTRUCTURE Retail Banker International
up to forty times the cost of a digital transaction, so we
are really at a very early stage in this journey.”
A low digital offering from bank to customer has serious
potential to alienate millennials, tech-savvies and busi-
ness people, who are increasingly self-directed when it
comes to money management while looking to download
apps and other interactive platforms that help prioritise
expenses.
Richard Fraser, managing director at Global Financial
Institutions and FIS, disagreed that legacy banking was
crumbling and that while digitally transforming financial
services is inevitable, he thought it difficult ‘to create real
relevance unless there is a big enough franchise’.
Fraser argued: “We've seen improvements, a few of
them have been mentioned already, but when you add it
all together the result has not revolutionised true change
in the way people make everyday transactions.”
When pressed on whether legacy infrastructure was
holding back digital innovation, in relation to the recent
IT system failure at RBS, Fraser suggested that modern
life is now so reliant on timely payments that as soon as
one system outs, the cost to the consumer is drastic. This,
he argued, detracted from successful ‘layers of integra-
tive applications’ which have seen legacy and new systems
work comprehensively.
Echoing this view, albeit from a different perspective,
Benjamin Ensor, director of research at Forrester, added
to the RBS system failure topic by suggesting the cost of
replacing certain, big institutions legacy infrastructures
‘is greater than your royalties or profit’.
On closer examination, Ensor said: “Regulations are
pushing down markets, plus banks are losing competition.
So your margins are gradually squeezed. This leaves the
bank’s ability to invest and make statutory system pay-
ments diminishable yet. In light of RBS, however, legacy
infrastructure cannot be ignored for much longer.”
Roy Vella, managing director and consultant for V2,
offered a solution to the banking sector’s legacy-to-digital
transition. His thinking effectively removed the middle
person from any financial equation, while instead focus-
ing attention on remote brand loyalty.
Vella said: “There is a modern and alternative system,
which doesn’t have to be built in house or be stored on
servers. The result is a platform that crosses between
mobile, online and finance.
The digital entrepreneur and independent advisor went
on to explain the benefits of running a modest banking
IT system.
He added: “Interoperability and coherent relationships
with different providers will create a superior and manage-
able route forward. This is exactly the reason why Ama-
zon is so successful.
“It’s an old mentality that hypothesises on the inability
to run legacy structures as they are, but we don’t need to
think that way. In the modern world, everything is open
and you only lock away items which need to stay secure
- the question of whether a thirty year old legacy system
should stay in place is ridiculous.”
Pitting old technology against new creates a valuable
opportunity. The grey area between both issues can be
filled with five key areas, according to Cadbury, that will
help ‘incumbent and struggling banks’ seize the day.
He continued: “The first is mobile, and the fact there
10 y July 2015 www.retailbankerinternational.com
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