Page 1: Introduction
This case study focuses on the recent process of change in the banking industry. Ten years ago, nearly all personal banking operations were carried out in High Street branches. If customers wanted to talk to a bank official about their financial arrangements, they had to queue or make an appointment. In terms of the customer/seller relationship, the power was very much in the hands of the ‘big banks’.
During the 1980s, ‘marketing’ became a major driving force for change in the way organisations operated. The new emphasis was to be on the customer and meeting customer needs. Organisations needed to re-organise in order to place the customer in the driving seat.
This case study examines how First Direct became the catalyst for change in the banking industry. From the beginning, First Direct has been breaking the mould of traditional banking and maintains a philosophy of providing and anticipating the financial services people require.
After carrying out market research, First Direct created telephone banking as the logical step to meeting customer requirements for personal service. This was to be the major breakthrough in marketing orientation that shook up the banking industry in the 1990s. Then, like other successful organisations, First Direct went on to introduce further changes in ever more sophisticated ways - most recently PC Banking.
Starting the revolution - 1989
When First Direct was launched on 1st October, 1989, 24-hour person to person telephone banking was untested and a completely new idea for the vast majority of the banking public. By offering people a full range of banking and financial services, normally only available from High Street branches, telephone banking sparked off a revolution in the banking world that has been growing ever since. It has now become the preferred method of banking for an increasing number of the UK’s 36 million banking customers.
At first, it was the ‘early adopters’, i.e. people who always like to try out new products or new ways of doing things, who joined First Direct, but as telephone banking became more established, the ‘followers’ joined. Telephone banking became an accepted, alternative way of carrying out day-to-day transactions.
Many banks initially thought that a purely telephone-based operation would never work because customers would be reluctant to organise their finances with someone they could not see. Now however, the majority of High Street Banks and Building Societies have recognised the need to introduce this service - in order to continue winning new customers and retain those customers who want to change to telephone banking.
The telephone has now been accepted as a convenient and effective delivery channel for personal banking by both the banks and the public who use them. Whilst this will continue to be the case for the foreseeable future, the market for alternative channels is developing rapidly. People’s attitudes have changed towards the way they carry out banking. Banks once had a very staid, old fashioned image, with restrictive opening hours and a reputation for poor customer service. Customers accepted this because there was no viable alternative on offer to them. With the advent of First Direct’s new telephone banking service however, people are now aware that an alternative banking method exists.
Nowadays, the technology available to people in their own homes is becoming increasingly sophisticated. The modern consumer has access to an increasing number of delivery channels, including the PC. First Direct’s PC Banking service allows customers to access their account via their PC providing they have Windows 95 and a modem. First Direct then sends the software that needs to be installed.