Retail Banking


As the newly appointed Manager – Retail Banking at the Colonial Savings Bank, you have been asked to review the current process, and taking customer comments into account, redesign the process so that it is customer friendly, efficient and protective of bank assets. Your report should:

1. use the service blueprint concept to analyse the current refinancing process giving an explanation as to why the bank might have originally designed it this way.


2. Describe, from an operations management perspective, the problems that have been caused by this process.


3. use both the service-profit chain concept and service blueprinting to redesign the process so that value-adding steps are reinforced and cost-adding steps are reduced or eliminated. Construct a new service blueprint showing how the overall process can be improved.


The report should be a confidential report for the Chief Executive Officer of the bank, and be presented as a suitably professional document.

Case study: Blueprinting the service-profit chain

With the continued growth of the mining sector in Central Queensland, the Colonial Savings Bank of Queensland had experienced a strong growth in all areas of its business. One area that seemed to be booming was the refinancing of home loans. Prospective and current customers were searching for more economical loans, and the applications for refinancing were being received in ever-increasing numbers.

In order to handle the increased volume, the bank developed a new loans approval process. The process was divided into five distinct stages and departments were created for each stage.


Stage 1: Loan application

The process begins with a customer completing a loan application for a loan agent. The loan agent discusses the refinancing option with the customer and performs quick calculations based on customerreported data to see if the customer qualifies for loan approval. If the numbers work, the customer signs a few papers to allow a credit check and goes home to wait for notification of the loan’s approval.


Stage 2: Loan processing

The customer’s file is then passed on to a loan processor, who
requests a credit check, verification of loans or mortgages from other financial institutions, an appraisal of the property, and employment verification. If any problems are encountered, the loan processor goes to the loan agent for advice. If items appear on the credit report that are not on the application, or if other agencies have requested the credit report, the customer is required to explain the discrepancies in writing. If the explanation is acceptable, the letter is placed in the customer’s file and the file is sent to the loan agent (and sometimes the bank’s board) for final approval.

Stage 3: Loan closing

The customer receives a letter of loan approval and is asked to call the closing agent to schedule a closing date and to lock in a loan rate if the customer has not already done so. The closing agent requests the name of the customer’s lawyer to forward the loan packet. The lawyer is responsible for arranging a termite inspection, a survey, a title search, and insurance, as well as preparing the closing papers. The lawyer and the closing agent correspond back and forth to verify fees, payment schedules, and payoff amounts.


Stage 4: New account establishment

The loan-servicing specialist makes sure that the previous loan is paid off and the new loan is set up properly.


Stage 5: Loan payment setup

After the closing takes place, the bank’s loan-payment specialist takes care of issuing payment books or setting up the automatic withdrawal of mortgage fees and calculating the exact monthly payments. The loan-payment specialist also monitors late payment of mortgages. It is difficult to evaluate the success or failure of the process, since the volume of refinancing requests is so much greater than it has ever been before. However, customer comments solicited by the loanservicing

specialist have been disturbing to management.


Customer Comments

 I refinanced with the same bank that held my original loan, thinking erroneously that I could save time and money. You took two months longer processing my loan than the other bank would have, and the money I saved on closing costs was more than eaten up by the extra month’s higher mortgage payments.


 I just got a call from someone at your bank claiming my mortgage payment was overdue. How can it be overdue when you withdraw it automatically from my cheque account?


 How come you do everything in writing and through the mail? If you would just call and ask me these questions instead of sending forms for me to fill out, things would go much more quickly.


 If I haven’t made any additions to my house or property in the last year, you appraised it last year, and you have access to my tax assessment, why bother with another appraisal? You guys just like to pass around the business.


 I never know who to call for what. You have so many people working on my file. I know I’ve repeated the same thing to a dozen different people.


 It took so long to get my loan approved that my credit report, appraisal report, and termite inspection report expired. You should pay for the new reports, not me.


 I drove down to your office in person today to deliver the lawyer’s papers, and I hoped to return them with your signature and whatever else you add to the closing packet. The loan specialist said that the closing agent wouldn’t get to my file until the morning of the scheduled closing and that if she hit a snag, the closing could be postponed! I’m taking off half a day from work to attend the closing and “rescheduling” is not convenient. I know you have lots of business, but I don’t like being treated this



 I received a letter from one of your loan-payment specialists today, along with a stack of forms to complete specifying how I want to set up my mortgage payments. I signed all these at closing—don’t you read your own work? I’m worried that if I fill them out again you’ll withdraw the payment twice from my account!


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