According to a trend study entitled “Banking and the Future 2007” conducted by the Fraunhofer Institute for Industrial Engineering (IAO), the retail banking industry is marked by increasing competition and faces major challenges, such as increasing price competition, the growing complexity imposed by legislation and greater demands from more knowledgeable customers on the quality of advice offered. Many retail banks are responding to these pricing pressures by increasing the level of automation at the customer interface, for example, through the use of self-service systems (Glossary) as well as telephone and Internet banking.
A study, conducted by market research firm IDC into global IT expenditure on different sales channels in the retail banking industry, forecasts increased investment across the board: in the automation of branch processes (7.1%), in call centers (5.7%), in the Internet (7.7%) and in ATMs (including networks) (6%).
The market trends identified by IDC correspond to Wincor Nixdorf’s main strategic guidelines:
Branch operations will continue to be given the same high priority.
Branches act as the banks’ personal customer interface. It is for this reason that retail banks in many developing countries are expanding their presence through branch operations or self-service systems. In established markets, such as North America, Europe and Germany, many banks have begun to invest substantial amounts in their branch networks in order to reposition them with a more pronounced focus on personal selling, in what is often referred to as a branch renaissance. Mall concepts, multipurpose branches, pure consultancy branches, etc. are also being tested as a means of attracting customers to the bank. The strong position currently enjoyed by branch networks is particularly noticeable when it comes to the sale of complex products requiring greater professional input and advice.
Banks review their processes on a regular basis in order to remain competitive.
According to a study conducted by the Process Lab of the Frankfurt School of Finance & Management, over 93% of the banks surveyed rated the importance of process optimization as high or very high (2007).
Customers are demanding an individual approach from banks.
The combination of greater transparency in banking products and more knowledgeable clients has created greater customer demands. In turn, this has led to an enhanced profile for Customer Relationship Management (CRM) for banks.
Banks’ self-service systems are often used as a vehicle to offer additional services.
In many countries, bank customers can use self-service terminals to enter into credit agreements, pay invoices and taxes and buy stamps or tickets for events. Other companies are using the screen as an advertising surface while customers wait for their cash request to be processed. Many banks are not only expanding their range of self-service solutions; they are also outsourcing (Glossary) the management and operation of their systems and applications to outside providers as a way of reducing their own operating costs.
Isolated sales channels are being replaced by multi-channel management.
In most cases, bank customers use more than one channel of contacting their bank. Sometimes this contact can take place at various levels, even as part of the same transaction (e.g. initial information from the Internet, advice and completion in the branch, service via the Internet, a call center and the ATM). More and more banks are responding to this pattern of customer behavior by integrating their channels and linking them to application systems and databases.
Standardization of IT infrastructure.
Both the opportunity to make savings by means of standardization and increasing internationalization, e.g., through mergers, are generating greater investment in more uniform IT infrastructures that span different countries.
Developments in the retail trade continue to be dominated by globalization, competition for market share and price wars. Discounting concepts are gradually approaching their maximum limits, while issues such as cost efficiency and differentiation strategies are gaining in importance. Improved customer support as well as new hardware, software and services are becoming more important for retailers.
IDC forecasts average annual growth in IT investment within the retail industry of 6.2% for the period from 2007 to 2011, with hardware sales accounting for 5.4%, software 7.4% and IT services 6.2%.
The significant trends identified within the retail industry over the fiscal year under review are as follows:
Internationalization.
The retail industry is dominated by a large number of major international groups, which compete heavily against each other. As a consequence of the intense level of competition in their established markets, they endeavor to exploit growth potential abroad. This involves securing new business opportunities, primarily in global growth regions, by exporting their tried-and-tested business models, although they are increasingly meeting competition from innovative local providers.
Standardization.
Multinational retailers are increasingly relying on uniform hardware, software and services that can be implemented in all their branches across the entire business. For the purpose of global expansion, they are opting for a standardized software platform for their branch operations that only needs to be adapted to function in a local environment. One of the fundamental requirements is that a software program has to be capable of supporting a variety of applications whether they are mobile, stationary, self-service or employee-operated. Another important consideration for retailers is that its branch software has to be capable of integration into its centralized systems.
Increasing process efficiency and automation.
Against a background of intense competition and pressure on profit margins, companies are devoting particular attention to the constant improvement of internal process efficiency, with information technology playing the key role in achieving this goal.
Replacement investment in ePOS (Glossary) systems, which are the main source of data collection, are being combined, for example, with a thorough updating of IT infrastructures and new concepts. At present, nearly all retailers are looking for new concepts that will enable them to integrate automation and self-service technology into point-of-sale areas (self-scanning or self-checkout (Glossary) ). Retailers have begun, albeit to some extent in a hesitant fashion, to install new checkout concepts such as self-service technology, staff-operated technology or a mixture of these in their branches.
Another area of automation is that of reverse vending. Automated systems have been in use in the Scandinavian countries for some time and have become widespread in Germany since 2006.
Systems can also be used to provide kiosk and “visual merchandising” solutions (promotional solutions, such as electronic advertising boards for product presentation, special offer notices or as advertising media) allowing the retailer to differentiate itself from its competitors.
