3rd BANKSETA International Conference

1. 3rd BANKSETAInternational Conference Retail Renaissance: Bonding with Customers Wednesday 11 October 2006

2. Retail Renaissance: Bonding with Customers • Retail banking is back in favour, with banks expanding their retail franchises. Banks reduce costs while at the same time providing great customer service by re-engineering the way we do business. • Legislation has been introduced to protect the consumer and to address the needs of specific markets such as rural communities, retailers and cell phone customer bases that have previously been excluded. Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control." • To what extent will these variables in the banking environment lead to product innovations?

3. Backdrop • Findings show that “the core value of consumer financial management has shifted from responsible abdication to knowledgeable control." Resonance - The Money Report compiled by Illuminology, an independent research consultancy • ‘Investors are no longer prepared to unquestioningly accept advice of financial experts - they want to take control of their financial destiny”

4. Proposed Approach Shift • Consider that shift • Evaluate where the banks are now • See if there's a gap between that and where they should be (opportunity)

5. Where the banks were In 2000 the environment was quite different • Financial institutions not yet fully on the government radar screen- self-regulation • 80-20 rule i.e. on assumption that 20% of clients were responsible for 80% of sales volume and conversely that 20% of the clients were responsible for 80% of the hassle, one didn't bother with low revenue/high maintenance clients.

6. Where the banks were • Complaints are often viewed as a nuisance rather than an opportunity Annual Report 2000, Brian Hartzer, MD ANZ Bank Australia • Manner of banks’ approach: • Senior bankers: “ What do wrong?” • Personal attack on complainant • Spin out a complaint out for as long as possible • Resist any admission of liability. • Fobbed off by the CEOs

8. Headlines you don’t often see • “Consumers strike fear into heart of business” • April 18 2001 • British business leaders are more frightened of the Consumers' Association and the environmental group Greenpeace than they are of ministers and trade unionists.

9. The quantum leap • King Report – Corporate Governance • Departure of the old guard • The new order willing to apply progressive business school thinking to banking • Attitude towards customers: - value of retaining customers - understanding acquisition costs

10. The quantum leap Realization that • Banking has become a commodity, people more willing to switch • Most people are already serviced • Although consolidation, new entrants • Reputation important in customer's decision to try the business for the first time & continued commitment to doing business

11. The quantum leap Truly loyal clients are more likely to spend additional funds, resist competitive offers and recommend the banks’ services = significant financial gains and long-term stability

13. In the spotlight • The government has introduced new legislation such as FAIS, FSOS and National Credit Act • The Consumer Protection Act is in the pipeline

14. International consumer rights • The right to Information • The right to Consumer Education • The right to Redress -fair settlement of just claims, including compensation for misrepresentation, or shabby goods or services. Need to: • Set up fair, inexpensive and accessible avenues for redress • Resolve disputes in a fair, efficient and informal manner

15. Redress- improvements • Complainants informed of right to complain • Centralised complaint handling mechanisms • Internal ombudsmen • Banks settle earlier • 2000, 14% of cases resolved in step 2 2005, 50% of cases resolved in step 2 • On average close file within 67 days • Most close≤ 4 months

16. The Money Report • Many consumers feel they are being treated like criminals by banks..… When dealing with banks, consumers are required to negotiate a maze of invisible, misunderstood and arbitrary rules and regulations. • For many consumers, a bank is unfriendly and intimidating - and they feel enormously resentful about the rudeness and indifference shown to them by abrupt and busy staff.

17. The Money Report While making a fuss about poor service is not a South African characteristic, the normally accepting consumer will increasingly select a bank on the basis of the quality of customer service http://www.btimes.co.za/97/1116/btmoney/btmoney.htm

18. Customers themselves will tell you where the gaps are • Vast sums of money spent on surveys • Even more important source of information- customer complaints • Only one in 20 people who experience a problem complaint • Each complaint representative of a number of other similar instances of a problem

19. Communication or lack of 46 communication from bank 34 Errors, mistakes or admin problems Pricing, charges of fees 29 Waiting time or delays 25 24 Attitude of staff/way you were treated Other (single mentions) 23 Product offering 11 Credit lending (bounced cheques, 9 loans not approved, overdraft Electronic systems not working 7 Victim of crime 2 Total

20. Customer feedback Those people who complain are often motivated by a genuine desire to restore and continue the relationship with the bank or a desire to ensure that changes are brought about that will save other customers from having to experience what the customer complaining went through

21. Markinor survey • More feedback is needed/ get back to the customer, follow-up 14% • Put customers in touch with the correct people, have only one contact person 9% • Have better trained staff 9% • Better problem solving 8%

22. Feedback from complaints • Customer complaints = pick up problems with service delivery that other mechanisms miss • E.g. bank picked up a systems problem re under recovery of mortgage insurance premiums (problem around for years) • Extend period of the loan for year or more • Inquiry desk merely put through correction for that particular account without alerting anyone to major systemic problem • R 200 million to make the problem go away.

23. Customer’s expectations • To be heard/ listened to • To have things explained to them in simple terms • To be treated fairly and honestly • For the bank to own up/confront the issue, if it makes a mistake • Not to be sent from pillar to post/messed around

24. The payoff "A retail bank with 10 million customers could gain £ 65,000,000 per annum by improving the fairness of its complaints -handling." Fairness in Complaint Handling ( Ernst and Young , London) In local terms that translates as R 780 000 000.

25. 3rd BANKSETAInternational Conference Thank you