Thursday, 29 September 2011

Resignation of Deanna Oppenheimer - the end of an era for branch banking?

The announcement of the resignation of Deanna Oppenheimer as Head of UK & European Retail Banking at Barclays marks the end of an era for branch banking much as the end of shoulder pads marked the end of the Thatcher era.

Deanna Oppenheimer, ably supported by her husband, John, with his background in hospitality, fundamentally changed the world's view of what a bank branch should look like. It was Washington Mutual where the first bank branches with coffee shops inside (Starbuck's) and play areas for children were seen. It was these branches where the screens came down, the decor brightened, the lighting changed and the desks went from rectangular to free form.  It was at Wamu where branches became 'stores' and the experience of visiting the bank became pleasurable rather than a chore. Wamu became unique for a bank in winning retailing awards. In 2003 US Banker recognised Deanna as one of the top 5 most powerful women in banking. Many banks tried to copy the Wamu 'Occasio' concept design, including Abbey National (prior to being taken over by Santander) with its Costa Coffee tie-up, but none managed to match it.

Deanna was hired by Barclays to re-create that Wamu effect with the UK retail bank and has, to a very large extent, achieved that. However the bank customer has moved on from that and so Deanna bowing out now makes a lot of sense.

The era is coming to an end because customers have changed what it is they want from a bank. Almost since banking was invented the branch has been the most powerful channel for banking. This is where the investment funds have been focussed on. Where the money was came the power. Whoever was in charge of the branches was the most powerful person in the retail bank. However with a decline in the use of the branches, whatever Metro Bank might say, the power and the investment is moving away from the banch network and the branch-focussed directors and mangers are losing their influence and ability to drive the direction of retail banking. No longer does it make sense to invest millions of pounds and dollars in having the smartest and coolest branches - often a case of style over substance. There is a recognition now that the investment needs to be in the substance - providing a far better customer experience whether it is digital, contact centre or face-to-face, and recognising that increasingly the physical experience is far less important than it used to be.

Deanna Oppenheimer is just the last of the branch-centric powerful  female retail bankers to leave the UK industry. Over the last year the UK retail banking industry has seen Helen Weir (Lloyds Banking Group), Lynne Peacock (National Australia and formerly The Woolwich) and Joy Griffiths (Lloyds Banking Group, Wells Fargo and Westpac) all depart.  On top of this, with the sad premature death of  Terri Diall, formerly head of the Retail Bank at  Wells Fargo, Lloyds TSB (where she changed 'branches' to 'stores') and subsequently Citibank, it really is the end of that era.

Emerging to replace these phenomenal women are a cadre of women, and men, who really understand what it is to serve customers digitally. They will become the Deanna Oppenheimers of the digital banking world.

Monday, 26 September 2011

Is NBNK alone going to be enough for ICB?

When the Independent Commssion on Banking (ICB) Report was published earlier in September very little detail was given as to their recommendations for creating more competition in retail banking, however they did specifcially refer to the Lloyds Banking Group Verde deal (selling the 632 branches including the Lloyds TSB Scotland branches, Intelligent Finance and Cheltenham & Gloucester) and said that  'The Commission therefore recommends that the Government seek agreement with Lloyds to ensure that the divestiture leads to the emergence of a strong challenger bank.' The Commission stated that it felt that the 4.6% share of the personal current account market along with the funding challenges of the existing deal  was insuifficient to meet this criteria abd that the deal needed to change, but did not prescribe how.

When NBNK announced that they were in discussions with National Australia about buying their UK operations a solution appeared to be emerging, however following comments from NAB to the effect of why would they sell their assets as the bottom of the market, it looks increasingly likely that this opportunity to increase the share of personal current accounts and the easing of the funding requirements (by virtue of the NAB UK deposit base) has gone away.

Whilst NBNK argues that they have improved the attractiveness of their proposition by including a major IT organisation in their syndicate, it would be extraordinary if this was seen to compensate for the loss of an existing bank to their offer.

Certainly any new entrant to the retail banking market would not wish to inherit the legacy Lloyds Banking Group systems for any length of time, since they have been built over twenty to thrity years and as the often quoted Irish joke goes 'you wouldn't want to start from here'. Any new entrant in order to be competitive would be wise not to own all the infrastructure and IT applications but rather buy services from an  organisation who's core business is IT and who can manage the peaks and troughs of demand whilst ensuring the lights are kept on.

However this does not address the demands of the Independent Commission on Banking on whoever acquires Verde. Indeed this leaves the ICB's preferred option being the flotation of Verde with a different mix of current accounts and deposits. See

The question that should be generated in the minds of the general public and the Government, as shareholders in Lloyds Banking Group,  by the NAB decision to withdraw from disucssions with NBNK is whether the haste with which Verde is being pushed through is in the best interests of either the shareholders or consumers. Selling a bank at a time when bank prices are at an all time low and encumbering a new entrant with excessive debts may not be in anyone's best interests.

Thursday, 15 September 2011

Lloyds Banking Group celebrated September 11th

No Lloyds Banking Group hasn't gone to the dark side, despite what many people think about the banks. It isn't the destruction of two towers that the bank celebrated on September 11th, but the bringing together of two giants - Lloyds TSB and HBoS. For September 11th marked the formal end of the integration of the two banks three months early, below the original cost and with higher synergies achieved. However Mark Fisher, Director of Group Operations, didn't make the George W. Bush mistake of saying 'Job Done' on September 11th, even though he and his team are entitled to receive significant bonuses for delivering Integration early, as he knows that there is still Simplification (the delayering, streamlining and further platform consolidation of Lloyds Banking Group) and Verde (the separation of the 632 branches, Intelligent Finance and Cheltenham & Gloucester from the mother ship and transfer to the acquirer or floatation) still to do. However Integration is something to celebrate.

The integration of  Lloyds TSB and HBOS was the largest  banking integration in Europe. To have achieved it ahead of time, under budget and having over-delivered on the synergies is no mean feat. To give an idea of the magnitude of the task this involved bringing three brands Lloyds TSB, Halifax and Bank of Scotland (and you could argue Lloyds Bank Scotland) onto a single set of IT platforms, moving 8000 ATMs and 3200 branches onto a single coherent set of systems. Training all the staff to use these systems and new processes and to do this without interrupting service to customers represents an enormous success. When it is considered that during the period of integration Commonwealth Bank (a much smaller bank) has not still not managed to fully move onto a new banking platform nor has Nationwide Building Society, though both have been trying, gives the magnitude of the achievement some context.

This massively complex programme has been achieved at significant cost to the staff of Lloyds Banking Group, not only in terms of the long hours and weekends spent (for the window for testing much of this in the live environment is only when the banks are closed) by hundereds of staff, but also the numbers of staff who have lost or will lose their jobs as a result of the integration. However the number of staff put out of work would have been far greater if HBoS had been allowed to fail.

So should Lloyds Bankig Group  have been allowed to celebrate September 11th? Absolutely!

Footnote: Some of the gloss was taken off when some Halifax and Bank of Scotland online customers could not see the full details of their accounts following the September 11th weekend, but in the grand scheme of things this was a minor hiccup.

Monday, 5 September 2011

Should basic bank accounts be subsidised?

Nationwide, the UK's largest building society, has entered the fray about the recent announcement by RBS that basic bank account holders will only be able to use RBS ATMs. See  RBS followed Lloyds Banking Group who made a similar move for their basic account holders. Mark Renison, the Group Finance Director has said that  the company was “very concerned” by the move which will create an “unsustainable position” for cash-machine users.

Citizens Advice Scotland CEO has also commented  “This is an extremely worrying development. Basic bank accounts are used by people who have difficulty managing their money. That’s the whole point of these accounts. It is still only three years since the banks were bailed out of their own self-inflicted mess by taxpayers’ money."

The concern is that some people with basic bank accounts will have to travel some distance to find an ATM that is operated by their bank. This is, of course true, particularly those living in more rural areas. What this does bring once more into focus is the role that the banks play in society. Are they commercial organisations or are they part of the social services fabric of this country?

With all the furore following the financial crisis there is both a call for the banks to be standalone profitable businesses with no call on government funding and to have greater clarity over the fees they charge for providing services, but also to be part of the social system subsidising the low-paid and providing bank services in unprofitable rural and urban areas. Clearly these two requirements are not fully compatible.

This then leads to the vocal extreme to call for all banks to be nationalised or mutualised, which of course makes no sense, but as the Independent Commission on Banking puts the final touches to the report coming out on September 12th 2011, it would be hoped that amongst the 350 plus pages they go some way to addressing what the role of retail banks should be in the future and how this is compatible with being commerciallly attractive businesses.