When Carlos Hank González took over as Banorte chairman in 2015, he made clear the bank needed to move at a faster pace to keep up with technological advances roiling the world’s financial markets.
That’s when he established Banorte’s Analytics Business Unit (ABU) spearheaded by José Antonio Murillo, economist with over 15 years of experience, with an ambitious directive – use the bank’s mobile app to provide more convenient services and find new ways to build lasting loyalty among customers.
“While the ABU’s product placement in this channel had yielded extraordinary results, the app still had to get clients more engaged,” he said.
Within four years, Banorte had become the largest Mexican financial institution, thanks in part to its increased efforts transforming from a product and client volume-focused bank to a customer-centric, technology and data-driven organization.
Those were among the main findings by Harvard University’s Ayelet Israeli, an associate professor in the Business School Marketing Unit, who led a research team in a case study that analyzed the launch and financial results of the Banorte Mobile program and related services.
Beyond investing in the mobile app and deploying new digital channels during that period, Banorte also pushed to develop more of its internal capacities and convert data intelligence into profits, the researchers said in their report.
The turnabout was so significant that Harvard’s examination of Banorte’s business practices has been used as a teaching tool here and by other universities worldwide.
Because “clients are no longer attached to a particular bank,” Banorte excelled in delivering “personalization and immediacy,” offering “the right product, at the right time and channel and really bet on their customer lifetime value,” Carlos Hank González told the researchers.
That included doubling its ATM network between 2009 and 2018 and invested significantly in “intelligent” ATMs, which were able to receive cash deposits and offer a more complete set of financial services.
As another example, under an ABU initiative to increase credit card adoption, bank representatives even went to customers’ homes to hand-deliver the card and help them activate it, which turned out to be cost-effective due to the high conversion rates, according to the study.
The transformation was internal as well. Among the advances the study highlighted:
- Banorte learned to adapt and evolve to a proactive organizational structure by assigning staff to “cells” that actively listened to “customer needs,” “watched competitors’ moves” and followed current trends.
- Breaking out of product silos, Banorte focused on customers, making it easier to measure the relationship they had with all bank products and evaluate the potential value that could be generated from them.
- Once consumers adopted and used the mobile app, the ABU team was able to leverage data and research to improve value for Banorte and its clients. Banorte could target and sell financial products, such as payroll loans, insurance and investment products and credit line raises, through the mobile channel with higher conversion rates than traditional channels.
This transformation was possible thanks to the support of Hank´s directive team focused on Digital Innovation, leaded by Francisco Martha and supported by many other leaders such as Guillermo Güemez.
Over four years, Banorte invested $280 million to build a centralized data platform that would streamline all channels – physical and digital – under one single structure. The ABU achieved quick wins, yielding on its first-year net revenue equivalent to 46 times its cost ratio. By 2018, results were at 197 times cost, the study said.
The ABU also began to integrate the concept of customer lifetime value within its models and strategy.
Before, in the bank’s legacy product structure, incentives were volume-driven. Power was measured by how many credit cards an individual sold, or how many employees someone supervised, which in some cases could be thousands, the researchers said.
Under the new program, the customer’s needs and overall profitability were at the center of the equation.
Banorte told the Harvard team it may offer a product that actually generates a loss at an individual level, but overall it may increase customer lifetime value and equity.
“By 2018, Banorte could serve clients and offer products through a variety of channels, including ATMs, branches, websites, a mobile application and a call center – complemented by SMS and push notifications. The bank’s technological and back-end processes had significantly improved to ensure that transactions carried out by clients in any of these channels unfolded seamlessly, with all operations streamlined under the same platform,” according to the Harvard case study released last year.
As of mid-2021, the mobile app has 4 million active users, and the chairman told the researchers there’s plenty more opportunities head.
“We are just starting to scratch the potential of our client base,” he said.