Quick Thoughts – WFC Investor Day: Shift to Mobile Creates Advantage for Large Banks


Beyond financial housekeeping (increasing the target payout ratio to 55-70% from 50-65%), an expression of confidence in the economy, and an intriguing glimpse into how the configuration of a branch network (siting, density, and layout) impacts the relative share of deposits and hence fixed-cost leverage, WFC’s Investor Day yesterday highlighted four drivers of the future of retail banking and the large-bank advantage around capacity to invest as customers migrate to mobile:

Shared platforms that are available to all distribution channels making the customer experience consistent across them. WFC example: A customer initiates research on a mobile device and then “clicks to call” to contact a salesperson who is able to engage seamlessly without additional identity-authentication and with information generated from the digital interaction.

  • The reduction of variable costs through transaction processing that is digital and self-serve even if in-store. WFC example: Image (reproduced below) of a branch associate supporting a consumer with tablet in hand and other alternatives to the teller corral including a kiosk with remote-teller support and a large-screen ATM.
  • The reduction of fixed costs through partnership and outsourcing. WFC example: The partnership with American Express not only around network services (through WFC issuance of Amex-branded cards) but also rewards delivery (as WFC will use Amex’s Loyalty Edge program).
  • Channels that are “wired” to generate information around customer behavior for statistical control of service (much as manufacturing today is wired to generate information around process behavior for statistical control of quality). WFC example: Through its mobile banking app (used by 12.5mm customers with mobile transactions up over 2.5x in the last two years), WFC will personalize the customer experience around time, place, and customer history across all channels.

Our research note of April 23rd, titled “Mobile Banking will Increase Scale Economies”, outlines how the shift to mobile benefits large banks through the scale to make service-platform and data-strategy investments and the scope to optimize across branch, online, mobile, and ATM channels.

Exhibit: Digitized Transaction Processing In-Store (from WFC 2014 Investor Day)


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