Nearly 10,000 people converged on the casino-driven town of Las Vegas, Nevada, last month for Retail Delivery, the largest conference on banking and technology in the US. Conference attendees were exposed to 75 hours of keynote addresses, exhibits, concurrent sessions and a little gambling on the side.
Retail Delivery is an annual conference that first began 20 years ago as an ATM (automated teller machine) conference organised by the Bank Administration Institute of Chicago. Since then, its scope has spread to encompass all technologies in the financial services industry.
By consensus, the best session was a Thursday morning panel with author Mr Fred Wiersema, Mr David Pottruck, president and co-chief executive officer of Charles Schwab Corp and Mr Edward Horowitz, executive vice-president of Citibank.
Mr Wiersema is a business strategist who has written a best selling book called The discipline of market leaders. He said that the new paradigm facing banks was customer focus. "Customers are facing a huge supply glut with abundant choices for products."
For banks laden with assets, Mr Wiersema said, "capital scarcity is not the issue but customer scarcity". A clearer identity "will give customers a reason to put you on their shortlist".
One company that is a definite favourite among US consumers is Charles Schwab. It's a 20-year-old discount brokerage firm that increased its profile in 1992 when it launched a programme called OneSource. With OneSource, it stopped charging a transaction fee for trading mutual funds. In mid-1992 it was doing $2 billion (1.74 billion) in sales per annum, today it does $170 billion.
Last year, the San Francisco-based company merged its new generation Internet operation, e.Schwab, with its older, more expensive software-based service at a cost of $125 million, half its 1997 profits.
"You have to be willing to cannibalise yourself or someone else will do it to you," said Mr Pottruck. "You've no choice, but to bite the bullet, take the pain and make the move."
The payoff, Mr Pottruck said, is that Schwab this year expects to attract 1.2 million customers. Its stock price (on the New York Stock Exchange under the symbol SCH) is up 50 per cent from 1997.
Client assets are $433 billion, he said, of which $145 billion are online. In fact, the company now carries out 77,000 daily trades and on average 54 per cent of these are taken online. This figure can rise as high as 60 per cent to 70 per cent on any given day.
Client accounts number 5.5 million and Schwab has 282 branches in the US. Not forsaking its physical distribution system, Schwab opened 40 outlets in 1997 alone. "To our interesting discovery, branches are still working," said Mr Pottruck.
It also has a presence in Europe. It bought Sharelink - the largest discount broker in Britain three years ago - and changed its name to Charles Schwab Europe.
"We learnt that price is an enormously powerful marketing tool," said Mr Pottruck. Schwab charges $29.95 a trade in the US. "We started out as the lowest discount broker, now we're the highest-priced discount broker," he said, referring to the hundreds of other entrants in the market. "The real opportunity for us was to go after the banks and full-commission brokerages and customers who wanted more service."
Mr Pottruck, a former Citibank executive, participated in a panel discussion with current Citibank technology executive Mr Edward Horowitz.
Banks should be spurred on by competition, Mr Horowitz said. "The electronic commerce revolution is ours to make and ours to deliver to the world."
Who wants the $1 trillion of electronic commerce business estimated to take place on the Internet over the next 10 years? he asked. "Bill Gates (of Microsoft) wants it. Lou Gerstner (of IBM) wants it. And the triumvirate of Scott McNealy (of Sun Microsystems), Jim Barksdale (of Netscape) and Steve Case (of America Online) want it," he said. He added "and then there are the start-ups. If we let them all take our business, we're dead. This is our opportunity to lose".
Mr Horowitz likened the arrival of the Internet to cable television. Twenty-five years ago, the three national television networks in the US - ABC, CBS and NBC - had 98 per cent of the television viewing audience. Today that figure has dropped to 45 per cent and is heading south. "Cable and satellite did to television what the Internet will do to financial services," said Mr Horowitz.
On a more optimistic note, Mr Pottruck said that television didn't put radio out of business and video rentals didn't put films out of business. "Things can co-exist and sharpen their focus. The same is true of the Internet."
