Banks, like any other business, need customers that deliver profits. Identifying and encouraging those customers while actively discouraging others that may be rather less beneficial for the business must, argues Bill Nuti, be a priority.
“You need to make a conscious choice between raising profits or driving revenue,” he says, “and in banking that can mean using differential rates to modify behaviour or move customers across channels.” And that, he says, is where information technology comes in.
Mr Nuti was appointed chief executive of NCR Corporation in August last year, having previously worked for Symbol Technologies since 2002 – initially as chief operating officer and later as CEO. Symbol specialises in barcode, hand-held technology and, increasingly, RFID [radio frequency identification]. Under Mr Nuti it moved into profit in 2003 for the first time in five years and between 2002 and 2004 its revenues increased by 24 per cent.
Bill Nuti has spent much of his time since joining NCR in “talking to our customers”. “The old 80:20 rule no longer applies,” he says. “You need to look at that long tail in the demand curve and identify the profitability of each customer, not just that top 20 per cent which contributes 80 per cent of your business.”
That profitable 20 per cent does, however, require special nurturing: “The more you move up the food chain the more personalised your communications with customers must become,” he says. “To achieve that degree of customer intimacy you need to learn more of their needs.”
He also acknowledges that consumers tend not to put an intimate relationship with their bank high on their priority lists, which means technology has to be more surreptitious in identifying trends, patterns of behaviour or interest areas, and then converting this into relevant product offers and appropriate marketing messages.
“Banks need more information to enable them to reach out to customers,” says Mr Nuti, “but technology by itself cannot do that. There has to be business process change – and that can be a stumbling block.”
Banking is increasingly a global business and, with NCR focused on key growth markets, Mr Nuti is much preoccupied with developments in India and China. Banks there, he suggests, are “not burdened with legacy systems” and may be expected to embrace some of today’s more powerful analytical technologies rather more rapidly than their European and North American counterparts.
The same, however, is unlikely to be true in consumer-facing technologies. In the west, NCR sees self-service systems as a key growth area – be that additional functionality at the “hole in the wall” banking ATM [automated teller machine], self-check-in systems at airports, ticketing machines or self-check-out devices in retail stores.
He believes consumers love self-service – and it can reduce their inhibitions: Mr Nuti points out that sales at self-service ordering systems in US fast-food outlets regularly notch up a higher proportion of large-size portions than recorded by staff at the serving counter.
“To an enlightened bank the ATM is simply an extension of the enterprise,” says Mr Nuti, “and is a method of extending services in order to attract and retain customers. Banks need to think like retailers to engage customers as otherwise retailers will simply become banks and take over this space – and we’ve been seeing growth in financial services from major retailers like Tesco for years.”
NCR’s various self-service kiosks all have the same core IT systems making cross-functionality options easy to introduce, at least in theory: the technology makes it possible for a consumer to check in for a flight, extract foreign currency, or print out theatre tickets for a performance at their destination all from the same unit stationed in the overnight hotel before they head for the airport. Commercial factors may limit such developments but the potential is there.
“I wouldn’t expect self-service devices to develop quite so quickly in markets like China,” says Mr Nuti, “as consumers are not yet so familiar with these tools and businesses do not yet see them as delivering competitive advantage.”
But – wearing his NCR hardware sales division hat – Bill Nuti would be delighted to see the penetration levels of ATMs in India or China match European levels. In future he suggests, cash could be deposited at ATMs, notes “read” and authenticated by image sensors and funds posted to accounts instantly.
What else may the future hold? Today’s “digital generation” receives a growing number of services via mobile phone. With growth in electronic payment cards there is no reason why the phone should not become a funds transfer tool for withdrawing “virtual” money to a rechargeable payment card rather than depend on an ATM spewing out notes.
“Consumers can already use ATMs to upload cash for different top-up functions, so if a secure wireless infrastructure was in place then a mobile phone could be used instead,” he acknowledges – albeit rather reluctantly.
And when might this be?
“At least 10 years ahead.”
Half an hour later he has had second thoughts: “More like 25,” he says.