Bankers like to talk about shifting from a product-centric focus to a customer-centric one. But their best strategy for doing this may be to stop talking for awhile.
"To be a trusted advisor of clients, you have to look at things from the other end. You have to listen," said Jean-Yves Fillion, head of North America client coverage for BNP Paribas.
This is a difficult task for people in any line of work, but especially in banking, where the emphasis for so long has been on talking up products, often without any regard for a particular client's needs. What comes after the listening stage requires even more of an organizational change, Fillion said this week at The Buttonwood Gathering in New York. "If you listen to the needs, you then have to be able to craft solutions," he said.
In a panel on the future of banking, Fillion and Irene Dorner, president and chief executive of HSBC Bank USA, spoke about the ways in which their companies are reworking their business models to emphasize relationships instead of individual products.
"In some ways, it is going back in time," Dorner said, noting that it was only a decade or so ago that banks started seeing an explosion in revenue from specialized products such as derivatives. Now, she said, the "rocket scientists" on derivatives trading desks need to be able to work with corporate treasury services teams, so that banks can give their customers a holistic picture of their banking needs, of which derivatives trading might be one part.
"You need people now who are much more flexible than they have been in the past," Dorner said.
Banks can promote that kind of flexibility by shifting employees from project to project and, in the case of international banks like HSBC and BNP Paribas, from region to region, Fillion said. And by broadening the views of frontline staffers, banks will find it easier to check off another item on the to-do list of any company trying to focus on customers instead of just products: anticipating customers' needs.
Recognizing the growing importance of trade between China and Brazil — China last year overtook the U.S. as Brazil's largest trading partner — HSBC started stationing Chinese staff in Brazil and Brazilian staff in China, to help facilitate trade finance work that the bank does in both countries, Dorner said.
Dorner said HSBC also is preparing for a broad increase in settlements done in different currencies. An important HSBC customer in Chicago, she said, recently conducted its first Renminbi settlement, a scenario Dorner expects to see widely repeated as the Chinese currency gains influence around the world.
BNP Paribas, meanwhile, is trying to tie together specialists from different product areas to help customers manage their debt maturities, a service for which Fillion said he anticipates increased demand.
The conference, hosted by The Economist, brought together bankers, academics, regulators and government officials to discuss potential fixes to the problems that led to the financial crisis. The conference is named for the meeting of stock brokers that led to the formation of the New York Stock Exchange; that gathering, in 1792, took place under a buttonwood tree on Wall Street.
Fillion acknowledged that the process of shifting from a product focus to a customer focus would likely drag down short-term profits, as banks adjust to putting the needs of customers in a holistic sense above the need for revenue growth in particular product lines. But if the result is a stronger, stickier stable of client relationships, then "going forward, [the shift] is ensuring medium-term profitability and revenue stability," he said.
Of course, clients themselves may throw a wrench into the process, especially in cases where the employees handling the banking relationship from the client's end are incentivized to focus on short-term results.
Dorner said it is imperative that bankers attempting to remake their business models bring their clients along with them in the transition process.
Sometimes, that means having "hard talks" to explain that if the bank is to continue to provide services to a client, the relationship must be broadened so that the appropriate returns can be achieved.
At the same time, both Dorner and Fillion said it's entirely conceivable that in some instances, a bank's best course of action might be to tell a client to use a competitor for a particular product or service.
That may prove to be especially true if some banks start dropping products such as derivatives, where new regulation may make it too costly to maintain a presence in the market.
These are areas in which "you'd better have scale to be able to continue offering products to your clients," Fillion said.