TSB Bank gives rivals run for their money

TSB Bank in Brief

• 158-year-old institution based in New Plymouth
• 15 branches in Taranaki and service centres in Auckland, Hamilton, Tauranga, Hastings, Wellington and Christchurch, with three to four centres being added each year
• 320 staff, 18 in IT
• Owned by the TSB Community Trust, to which this year's dividend was a record $8.8 million
• In the financial year to March 31, 2008 the bank recorded its 21st successive year of profit growth

"The bigger picture is our 'expect more' brand promise is centred entirely on customer service... matching the customer experience to that promise is at the heart of everything we do here - and technology plays a huge part in that."
TSB Bank technology services manager Charles Duke

In the competitive banking industry, technology innovation can come in surprising forms. For TSB Bank, it means steadfastly refusing to use one piece of technology that its rivals - and just about any other business you can think of - have flocked to.

When customers phone TSB Bank, says technology services manager Charles Duke, they will usually find a human at the other end of the line, instead of an automated system.

As an innovation, it might sound counterintuitive, but other organisations that take customer service seriously might want to follow TSB's lead. Every year since 2000, it has come out number one for customer satisfaction in the annual University of Auckland Business School retail bank survey and successive Roy Morgan customer satisfaction surveys.

"One of the reasons we do well in those surveys... is that we have no voice response or phone answering system. It is always answered by a person and that person will deal with your problem," Duke says.

"The bigger picture is our 'expect more' brand promise is centred entirely on customer service. It is market positioning that TSB Bank 'owns' and we work very hard to ensure that things stay that way. Matching the customer experience to that promise is at the heart of everything we do here - and technology plays a huge part in that."

Technology might not answer the phones, but it certainly comes into play as soon as a customer is on the line. At that point, TSB's in-house developed banking software, UniBanks, gives it an advantage no other bank in the country enjoys.

The system, written using application development platform Jade from Christchurch's Jade Software, handles every facet of the bank's operations. That contrasts with other banks, Duke says, which need up to six separate systems to carry out the same functions.

"UniBanks is a customer-centric system. We only hold a customer's records once throughout the bank."

That makes dealing with the bank simple because all of a customer's transactions - whether related to a mortgage, cheque account, term deposit, credit card or insurance - are visible to tellers in the one system. The customer can attend to whatever business they have with the bank with the one person.

From a customer view point, this has the obvious benefit of making dealings with the bank very efficient, and helps explain TSB's extraordinary customer satisfaction record.

UniBanks also incorporates TSB's internet and phone banking facilities. Remarkably, the system is kept running, and is being constantly developed, by an IT staff of 18.

Even more remarkably, the bank has more than halved its computing costs in the past 10 years. A big part of that saving can be attributed to the platform UniBanks is now running on.

When it was first written about 15 years ago, it ran on a Unisys mainframe. Five years ago, the mainframe was scrapped and the application was converted for Windows on IBM® servers.

At the end of last year, the IBM servers were upgraded to System 3890 machines, two of which are in New Plymouth, and two others that are hosted by Jade in Christchurch. TSB Bank can "switch" 100 per cent of its core computer operations between these sites in under 30 minutes (and does so multiple times a year as part of disaster recovery testing).

Duke says moving to the Windows-based IBM servers cut TSB's software licensing costs by about 90 per cent.

Nimbleness is the name of the game for the bank's IT staff, a function both of TSB's management style, and its software development platform.

"Jade is incredibly productive. We can make huge changes and updates to UniBanks literally in a matter of days and we can implement those in very small windows overnight.

"The other banks wrestle with the fact that we can do that in very quick time."

Larger institutions are burdened by bureaucracy, whereas TSB's ethos is to get on with the job, says Duke, who worked for Jade for 20 years.

"Our view of things is that people here have the skills, ability and the will to get things done and do things properly. This means that we're able to determine and implement solutions very quickly. That sort of thinking is a part of the culture here."

The bank's customers can therefore continue to expect early access to such services as POLi, an online payment system that TSB was the first institution in the country to offer this May.

Next on the horizon are text alerts to advise customers when an "oddball" transaction is detected in an account, for instance, or an automatic payment has failed because of lack of funds, or their pay has been banked.

These are the latest in a long history of IT-based innovations at TSB, going back to 1981, when it installed New Zealand's first ATMs.

"To stay in front and be a technology leader, which is where we're trying to get to, we have to be agile. We make decisions and we do it."

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Key Business Insights

TSB Bank, New Zealand-owned and competing with large foreign-owned banks, achieves outstanding results by concentrating on customer service.

The bank is expanding its bricks and mortar presence throughout the country, and regularly collects customer satisfaction awards.

Customer service leadership has given TSB Bank a sustainable competitive advantage. University of Auckland Professor Richard Brookes, on naming TSB the outstanding institution in the university's 2007 Retail Bank Customer Survey, said TSB's "stellar performance" across a range of key measures gives it a noticeable edge over all the country's other banks.

It "stands out as potentially having the most loyal customers", Brookes said.

Its small size also gives it an advantage to innovate more quickly. And its in-house developed banking software, Unibanks, means it can stay closer to customers.

That's something that hasn't gone unnoticed at other New Zealand financial institutions - two are considering licensing TSB's software to run their own operations.

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Additional Resources

How do New Zealand banks fare relative to each other? Massey University's Centre for Banking Studies does quarterly analysis of the New Zealand banking market and its latest report, for the third quarter of 2007, shows TSB to be the market leader in return on assets (see graph).

The Centre of Banking Study's latest report can be found here:

New Zealand banks in the September - Quarter 2007 (73KB)

Until the US sub-prime mortgage crisis spread its ripples throughout the banking industry worldwide, New Zealand banks were enjoying buoyant times, reported KPMG:

www.kpmg.co.nz/pages/103251.html

TSB Bank has cleaned up every year since 2000 in the University of Auckland Business School's Retail Bank Customer Survey. Here's what the university's researchers said this year:

www.auckland.ac.nz/uoa/about/news/articles/2008/04/banking-survey.cfm

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