Among the world’s most consistently successful financial institutions, Sweden’s Handelsbanken is widely praised for employing a distinctly unique decentralised business model. First adopted by the bank in the 1970s, the model operates on the premise that “the branch is the bank”, which enables each Handelsbanken branch to have considerably more autonomy—and to take on more responsibility—in order to deliver better results than is normally found at other banks.
Joining us to discuss some of the implications of this model and other key features of the bank is Mats Ernborg, the branch manager of Handelsbanken Strandvägen in Stockholm.
Mr. Ernborg, thank you for joining us.
As I understand, Handelsbanken’s decentralisation model was built on the “church spire” principle—that is, that you should not conduct banking operations over a larger area than can be seen from the top of a church spire. Do you find that this principle continues to hold today?
The “church spire” principle is a key part of our decentralised model and is as important today as it’s ever been. Of course, some spires are taller, or shorter, than others. For instance, Central Stockholm is densely populated, and there are five other branches within this relatively small neighbourhood called Östermalm. But my branch has a clearly defined territory within which we make all the decisions that count for our customers and for our business. We have had a branch here for nearly a hundred years. The customers on our patch, whether corporate or individual, recognise the additional value they get from our knowledge of the local market, our ability to take decisions and the close relationships we have worked over many years to develop.
And that “knowledge of the local market”—what are some of the specific types of local knowledge that a branch manager should ideally possess to be successful at Handelsbanken?
I would point to two areas which are particularly important. Firstly, it is vital that I know who the branch’s customers are, since this is effectively my business. Being a branch manager is a hands-on role so that I meet many customers myself, while in other cases I am discussing their goals and financial circumstances with colleagues on my team.
Secondly, it is important that I, along with my colleagues, come to know the businesses, properties, owners and key individuals that make up the community, and that we share our experience. This way we can see the many drivers of our successful local economy, but also—frankly—those that are better for our risk-averse bank to avoid. Over the years I have developed a strong network of local, like-minded professionals—we trust each other and often share insights and opportunities. These days when I walk our patch, I can say “hi” to more or less anyone.
It is well-known that each local branch manager at Handelsbanken is given a much larger amount of responsibility to run things, compared to other banks. Can you briefly describe what this extra responsibility entails in practice?
When we say that “the branch is the bank”, we really mean it. Here on the Stockholm harbour front, we are responsible for our customer’s entire relationship and experience with Handelsbanken—we make all the decisions locally that matter to our customers, from lending to pricing to product structuring.
But being a branch manager in Handelsbanken means much more than that. As well as taking overall responsibility for customer service and satisfaction, I am responsible for all business development, staffing, premises, profitability and the reputation of Handelsbanken in this community.
That’s why, as well as being passionate about customer service, and knowing banking and the local market inside out, a Handelsbanken branch manager must want to take responsibility. My team and I embrace the fact that no one else is going to build our business or good name for us.
As you just alluded to, local branch managers at Handelsbanken are renowned for being the point of contact for their customers’ needs. Does this truly mean that as a branch manager, you are there for the customer at all times? What is the normal procedure if the branch manager is unavailable, for example, on holiday?
These days customers choose to do most of their everyday banking digitally, but sometimes they have a particular need for advice or support. We don’t dictate when that should be or what it should be about; instead we encourage customers to contact the branch whenever they need us, and we make ourselves available through all channels, physical and digital. The reason is quite simple—having open access to a trusted local adviser, who will serve you as an individual and has the power to decide, leads to greater customer satisfaction and loyalty. And that leads to more business and recommendation.
We tell our customers when we are taking our vacation and ensure there will always be a good level of support available from other familiar members of their branch team. But given that our relationships rest on mutual trust and respect, if the customer still needs to speak to me on holiday, I’ll be there for them.
There clearly seems to be a close relationship between managers and customers. Given this closeness, how much autonomy are you given to run things in the way that you consider to be the most productive?
Really, it’s easier to think of that question the other way around. A branch has full responsibility for its customers’ service and satisfaction and for how the local business develops and performs. So we have all the autonomy we want, as long as we are acting within the bank’s framework of policies and core values, which as Handelsbankers we all share.
As a team, we find this responsibility invigorating. It represents a basic trust and respect in each other and is a fundamentally grown-up way to do business, which we know our customers also prefer. Of course, part of this responsibility is to recognise the need, from time to time, for support from regional office colleagues who are specialist in a particular area. They share the same strong culture and goal of providing customers with the best service, so this kind of collaboration comes quite naturally.
You’ve already mentioned customer service and customer satisfaction on several occasions. Indeed, Handelsbanken is also renowned for consistently having superior levels of both, compared to its peers. What are some of the main reasons, in your opinion, why this is the case?
There’s really no rocket science involved. We know that having more satisfied customers is a reliable route to sustainable profitability as a business. Therefore, the bank is organised to be as close as possible to our customers, providing advice, service and decisions locally across all their financial needs. We inform our head-office support teams when new services or product features are needed, so that they can create them. There are no centrally set targets for product sales, lending volumes or similar, and no financial incentives that could cloud focus on what’s best for our customers.
Our customers, young and old, tend to share our belief in financial prudence and long-term relationships, and they typically like the fact that their bank plays an active role in their local community, and in many others—for instance, where they grew up and have family, or where they may own other property.
So how exactly are branch managers able to measure customer satisfaction, then?
Since this is our tried and trusted route to commercial success, we measure customer satisfaction in a very robust way at branch level. I receive detailed independent survey findings once a quarter, and analyse them thoroughly together with my team, to identify room for improvement. For example, recent surveys have confirmed that customers appreciate our proactivity and would like us to take the initiative with them even more—so that’s one thing we’re focused on.
Of course, being directly responsible for our local customers, we’re always alive to what makes them tick and what we could do better. Often, it’s something we can do quickly and directly as a branch, and if not, we know that our colleagues elsewhere in the bank share our customer focus.
You briefly talked earlier about the increasing influence of digital banking. How big a role does technology play at Handelsbanken in terms of delivering the most cutting-edge products to customers? Do you have any examples of such products recently being launched, either within your branch or more generally throughout the bank?
Throughout the decades, Handelsbanken has used the latest technologies to support our local, relationship banking model, and today we find more potential than ever. Naturally, our customers have high expectations of the digital-banking services we should provide, which we will continue to meet with highly functional, user-friendly and secure solutions—sometimes alone but increasingly in collaboration with third parties, such as the corporate-banking and accounting service we recently launched within our online-banking portal, in partnership with Fortnox.
But above all, digitalisation is an opportunity to strengthen the local relationship banking difference that’s made our customers more satisfied over all these years. So rather than reduce focus on branches, our customers will be able to meet us within their digital-banking experience, either to do business or obtain support. Data-driven tools will help us meet our individual customers’ needs even more precisely, and back-office tasks will be automated to give my team more time to advise our customers and be active in the local community.
And how significantly, if at all, has the basic purpose of a Handelsbanken branch changed in recent years, particularly with the advent of fintech and digital banking?
The basic purpose of a Handelsbanken branch hasn’t changed—it is as relevant and effective today as it has ever been. We exist to develop long-term relationships with our customers, pool our banking and local market knowledge, take good decisions every day and develop a successful, sustainable Handelsbanken “franchise” in this community. This difference becomes more and more apparent to customers as other banks continue to centralise everything from decision-making to customer contact. Then I would add that, superficially, our branch has always changed in line with our customers’ expectations, and we continue to do so. These days, customers seldom use the branch office for their everyday banking. When they visit us here—or we visit them—it is to discuss particular needs or possibilities or to review their financial situation. As the physical meeting place becomes less prominent, we become more available through our digital channels. And we simply adapt our branch office to suit the way we work with our customers—both physically and remotely—today. Well, given the stellar results that the bank continues to generate, particularly with regards to customer satisfaction, it would appear that you are adapting sufficiently well to this changing environment. Mr. Ernborg, thank you for your time today.
The basic purpose of a Handelsbanken branch hasn’t changed—it is as relevant and effective today as it has ever been. We exist to develop long-term relationships with our customers, pool our banking and local market knowledge, take good decisions every day and develop a successful, sustainable Handelsbanken “franchise” in this community. This difference becomes more and more apparent to customers as other banks continue to centralise everything from decision-making to customer contact.
Then I would add that, superficially, our branch has always changed in line with our customers’ expectations, and we continue to do so. These days, customers seldom use the branch office for their everyday banking. When they visit us here—or we visit them—it is to discuss particular needs or possibilities or to review their financial situation. As the physical meeting place becomes less prominent, we become more available through our digital channels. And we simply adapt our branch office to suit the way we work with our customers—both physically and remotely—today.
Well, given the stellar results that the bank continues to generate, particularly with regards to customer satisfaction, it would appear that you are adapting sufficiently well to this changing environment. Mr. Ernborg, thank you for your time today.