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Key areas of commercial banking

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Where will you fit in in a commercial bank? We break it down so you can see where you might fit in as you launch your graduate career.

When referring to commercial banking, people are generally talking about a bank that provides financial services (often including wealth, financial planning and insurance products) to retail and business customers.

But how does this work and what are the areas of a bank that go into providing this? Our handy front office and corporate office categories can help illustrate some of the key areas and roles involved in the commercial banking process. Whether for retail or business customers, these roles will have similar requirements across the front and corporate office.

Who’s who in the front office

You can think of people in the front office as the door into a commercial bank. They’re part of the channel for customers to reach the bank and vice versa. Outside of just price, a lot of a bank’s success depends on the ability of its frontline staff to cater to its customers’ needs – delivering a superior customer experience compared to other banks.

With that said, commercial banks have a number of key roles and areas in the front office to cater to different customer segments.

This can include:

  • Branches: The cornerstone of a traditional commercial bank. Bank branches are the most visible and recognisable form of channel for a bank. Just like a shop’s physical store, the branch is where customers can speak to a representative face-to-face, ask questions and have a conversation about their needs. A bank’s physical footprint is usually referred to as its ‘branch’ or ‘distribution’ network.

The roles inside this network include bank tellers for transactions, customer service representatives for product discussions, home lenders for mortgages, branch managers for  overall operations and supervision, and sometimes financial planners for              discussions around wealth products (e.g. investments, insurance).

While these remain the traditional foundation of a commercial bank, many banks globally have begun to reduce their networks and transition remaining branches away from transaction activities (that can be completed through an ATM anyway). With                increasing digital capabilities and fewer customers attending branches, these are being positioned  more  for high-end conversations with customers.

  • Call centres: Love calling your bank and waiting in the queue for half an hour? As infuriating as some call centres can be, they serve as an important channel for commercial banks to communicate with customers. Undertaking banking over the phone is known as ‘direct banking.’ This is becoming increasingly important as customers transition away branches and instead engage over the phone, internet or their mobile apps.

Bank staff on the frontlines of phone calls will either receive ‘inbound’ customer calls or initiate ‘outbound’ calls. Inbound calls can include general customer enquiries, complaints, product questions or sales.Outbound calls are initiated proactively by the bank and are often undertaken by staff both in branch and call centres. These calls identify customers with potential needs that are not being met and seek to sell these services or enhance the customer experience. Outside of your classic call centre operator, there are a number of  team supervisors and team leaders that help coordinate and manage operations.

  • Relationship managers: Branches and call centres usually service small businesses or typical mum and dad retail customers. But for the big hitters – whether that’s a commercial business or a high net worth individual – they can get a specific relationship manager who handles all their banking needs. Relationship managers offer a more personalised and higher quality service, similar to a long-term family doctor that understands your ongoing situation, medical history and needs.

For individuals, relationship managers operate out of divisions usually referred to as ‘premier’ or ‘private’ banking, with certain thresholds of wealth and assets needed to qualify for this service. For commercial customers, there are similar thresholds of revenue to qualify for a relationship manager, and these will operate out of corporate or institutional banking divisions. Relationship managers act as an ongoing and trusted financial advisor for clients and are an important part of managing high-value customers.

Who’s who in the corporate or head office

The corporate office is like the engine and brain of a commercial bank that not only ensures all operations are as planned, but also that the direction and strategy of the bank are well considered and articulated.

For the corporate office, there are a plenty of analytical, stakeholder-focused, strategic and management roles.

These can span across numerous areas of the bank:

  • Product: The bread and butter of commercial banking! Product managers do exactly what their title suggests – manage banking products. This involves setting pricing, defining customer segments to target, supporting marketing campaigns, devising strategy, handling regulatory issues and managing product distribution. Product is considered a ‘profit centre’ in banking, as the actions of these staff (both in retail and business products) directly contribute to revenue generation. Their primary objective is to grow the total funds or balance within their products without sacrificing significant margin (i.e. by lowering their prices).
  • Distribution or network: With hundreds (sometimes thousands) of branches in a distribution network, someone needs to help coordinate and set their strategy! Corporate office has a number of roles that help manage and direct the branch network. There are plenty of questions that these staff need to answer. What will the future of the branch network be? How many branches will we need? How do we best communicate with our frontline staff? Are branch performance incentives appropriate? What do our customers want from our branches? Increasingly, these activities are shifting towards the future of the bank branch and how new trends will alter this current model.
  • Direct banking: Similar to the branch network, call centres and thousands of phone operators in a bank need clear direction to operate as a cohesive unit. The corporate office helps set this direction. This can involve a high-level strategy for how to target and engage customers and more detailed call operations. Ever wondered who writes some of the call centre scripts? There’s a safe bet that there was a corporate office staff member involved in that process – testing different scripts to identify the most successful language and flow.
  • Marketing: If the front office is the door for customers, then marketing is the shiny thing that gets them to stop and walk through it. It’s not all about catchphrases or jingles. Marketing teams at a bank work to understand who their key customer segments are and how to target them.

They develop and drive marketing campaigns (working with ad agencies in the process) to increase their brand recognition and promote products. In addition, they are responsible for a bank’s overall representation in the market, whether through traditional TV and print ads, online banners, social media channels, corporate and university events, sponsorships  or celebrity endorsements.

  • Pricing: These guys make sure the price is right - not only for the bank’s customers but also its own profitability. Pricing teams look at all products at a portfolio level (as a whole) to determine the best pricing construct and positioning for each. They are constantly keeping an eye on competitors and market movements to optimise their pricing strategy, and work closely with product managers for pricing changes. This is usually a fairly analytical team with a significant amount of quantitative work.
  • Strategy: How do you know where you’re going if you don’t have a clear direction and message for how to get there? Strategy teams in commercial banking work to set and articulate this direction and determine the best way forward for the bank. These teams are usually full of ex-management consultants who look to determine where the banking industry is heading, what competitors are doing and how the bank can compete.

There are normally strategy teams focused on each division of the bank – such as retail, business or wealth. However, outside of this, there is almost always a ‘group strategy’ team that considers the direction of the entire bank (and its subsidiaries), while also identifying potential mergers and acquisitions. Fun fact – the former CEO of CBA, Ian Narev, used to be the head of strategy at the bank. During this time he drove the opportunity for CBA to acquire BankWest during the Global Financial Crisis.

  • Customer experience: Nowadays, banks are recognising the increasing importance of the customer, their experience and needs. This increasing focus is commonly known as a ‘customer-centric’ approach. As a result, banks have begun setting up teams and divisions focused purely on understanding and enhancing the customer experience.

These teams will usually create ‘customer personas’ of their typical target customers, conduct customer interviews, workshop solutions and drive and champion customer needs throughout the bank to ensure a clear view of the customer’s perspective.In this process almost all banks have adopted a ‘Design Thinking’ approach to their products and services.This is a well-known methodology that puts customer needs at the heart of all product and service design.

  • Digital & analytics: Unless you’ve been living under a rock, you’ll know that digital channels and big data are becoming critical to doing business in any industry. In response, commercial banks have been building their digital capabilities with an increasing focus on mobile apps.

Digital teams work closely with IT to develop new apps, specific features, online capabilities and platforms. Most banks have adopted an ‘Agile Methodology’ for their digital teams, an approach that champions fast and iterative ‘sprints’ to push new developments out to market. In addition, banks have been building their big data and analytics capabilities to derive greater insight from a growing pool of customer data. Analytics teams will be highly quantitative and use statistics and data programs to  pull relevant data from‘warehouses’, analyse and interpret this data and present key findings to the business.

  • Risk: Last but not least, risk remains a central focus for any commercial bank globally. Risk takes many forms, including the risk of a customer defaulting, internal processes failing or security breaches. The job of risk teams is to ensure all these potential threats are sufficiently evaluated, quantified, forecasted and mitigated. The most common example of this is credit risk (particularly for business customers), where analysts will assess the ability of a client to pay back their requested loan and assign a loan amount and interest rate accordingly.

Up next, check out your future career prospects by looking at the future of commercial banking.