Case Study Garanti / Satisfaction: Guaranteed

Contagious, 4th Quater 2013

Garanti has one foot firmly in the future. Spurred on by the dynamic and tech-savvy Turkish market, it has disrupted every aspect of the ‘traditional’ banking experience over the past two decades. Customers can now leave the house armed only with their smartphone: no cash or bankcards required. Garanti is pioneering highly personalised digital banking solutions, championing a new era of omnichannel services and transforming its branches into unique retail propositions. Increasingly powered by its sister company, Garanti Technology, the bank is a best-in-class example of streamlined business efficiency. And in a strictly regulated and hugely competitive marketplace, Garanti is using this to differentiate itself and, ultimately, maximise profit.

 By Patrick Jeffrey


In the spring of 1991, a Garanti employee risked his career by sending an extraordinarily candid letter to the bank’s owner. The handwritten document, by then executive vice-president of marketing and external relations Akin Öngör, outlined his proposal for a radical shake-up of the Turkish bank. ‘Change the concept of banking,’ urged Öngör. ‘Downsize the employees from 6,000 to around 3,000. We must change the technology and people. We have to reposition Garanti in line with the developments ahead in Turkey.’ Two weeks later, the bank’s owner, Ayhan Sahenk, accepted the plan and Öngör became chief executive. Sahenk then sent a signed copy of the letter to Garanti’s board of directors, as a mandate for change.

This bold plan laid the foundations for Garanti, now Turkey’s most profitable bank, to thrive on. Öngör’s vision was simple: reinvent the company around the customer. And being the first Garanti CEO from a marketing background, he was intent on using his expertise to understand consumer needs and design experiences around them. As a Harvard Business Review investigation later stated: ‘Öngör sought to redefine Turkish banking as financial services to meet customer needs, rather than as money management.’

A change of course

For Öngör, creating the best customer experience meant repositioning the bank as a technology leader. And so, throughout his nine-year tenure, Garanti became a company of technological ‘firsts’. Most notably, it became the first private Turkish company to launch digital banking services in 1997. At the time, national bandwidth was so slow that Garanti removed text from its webpage so transactions could process. Two years later, the bank created the first virtual POS system, enabling merchants to process payments for purchases made over the web.

After Öngör’s retirement in 2000, Garanti continued to rack up impressive technological milestones. In 2005, the bank offered SMS-based money transfers with a service called CepBank, and a year later introduced the Flexi Card, which lets people personalise credit cards by choosing the interest rates and rewards programs that suit them – both world firsts. More recently, Garanti pioneered Western Union transactions via digital banking. The list goes on.

Underpinning this tech-savvy CV is Garanti Technology, a subsidiary company that’s responsible for creating and maintaining the bank’s status as a global leader on digital platforms. The firm employs 1,000 IT experts, sector analysts and software developers. It’s located in an unassuming warehouse on the outskirts of Istanbul, away from Garanti’s 29-floor headquarters building in the financial district of Levent. ‘This is our biggest strength because it makes us more dynamic and agile,’ says Deniz Güven, senior vice-president of digital channels at Garanti Bank. ‘We can act and perform like a technology company.’

Pivotal to this agility is the tightness of integration between the two companies. An example: Garanti’s EVP, Hüsnü Erel, is also the general manager of Garanti Technology. ‘The complex technical infrastructures of large banks often mean that the product people may have visions for change, but the technology guys don’t process it quickly enough,’ says Mark Curtis, chief client officer of service design agency Fjord. ‘In Garanti’s case, the tech arm works amazingly closely with the bank and this gives them the ability to do the things they want to do.’

Market Mayheim

External market conditions also powered Garanti’s decision to invest in digital banking services.

Turkey underwent an almighty crash in 2001, and so began the most severe economic depression in its recent history. Retailers went out of business, residents lost their livelihoods, banks were crippled and the financial sector contracted. The day the crash occurred, 19 February, is still referred to as ‘Black Wednesday’. After this crisis, the Banking Regulation and Supervision Agency (BRSA) introduced strict regulations to ensure the same mistakes didn’t happen again. ‘This meant that, when the 2008 crash hit the rest of us, Turkey missed the bubble and wasn’t as badly affected,’ says David Shirreff, European business and financial correspondent for The Economist.

But regulation also makes product differentiation more difficult. ‘The BRSA controls so much, like the credit card system and banking fees, so it’s a very challenging environment to operate in,’ says Derya Guzel, senior banking analyst at Turkish financial services firm Ata Invest. ‘It’s a negative in the short term because it reduces profitability, but in the long run it gives investors confidence that the banks won’t go bust.’ Currently, 49 banks compete in Turkey’s financial sector, with the biggest four (Is Bank, Ziraat Bank, Garanti and Akbank) controlling an 80.9% share of total assets.

In this highly regulated environment, banks don’t just compete for customers with products. So Garanti’s challenge is to use its ace card, Garanti Technology, to create unrivalled customer experiences that will help it stand out from this crowd. And, of course, drive profitability.

Ant time, Anywhere

At the centre of Garanti’s vision is an omnichannel banking strategy – a commitment to provide a seamless and connected customer experience across all available channels. In 2012, 80% of transactions took place through the bank’s digital channels, a statistic that forced Garanti to move on from what was a more siloed approach. ‘We saw that our customers used whatever channel they saw fit, so we wanted to mimic their habits,’ says Ayse Demir Ozer, who heads up digital channels and business development at Garanti. The bank’s former strategy relied on channel-specific marketing efforts, which didn’t reflect this platform-agnostic attitude. And so, an omnichannel approach became a better way to serve the bank’s customers.

Garanti’s switch to omnichannel banking was also down to Turkey’s young, tech-savvy citizens. The country has the youngest population in Europe, with a median age of 29, and has surpassed 90% mobile phone penetration, according to the World Cellular Information Service. Crucially, though, Turks eagerly adopt digital channels for banking services. A 2013 report by global banking giant ING found half of all Turkish internet users bank with their mobile devices, compared with 35% in the UK and 25% in France. ‘Our young population loves technology. As soon as new platforms or gadgets are released, people use them,’ says Guzel. ‘So it’s essential for banks to keep up, and Garanti is leading the way.’

Mobile first / This omnichannel switch is the first major step in Garanti’s vision of a seamless customer experience across all channels. The bank no longer directs people to, say, internet banking, or its mobile app. Customers head to the channel that’s most convenient for them. But this doesn’t mean that Garanti views every channel with equal importance: ‘At the heart of omnichannel lies mobile,’ says Ozer. ‘It’s always on, always with you and always logged-in as you. It’s highly personal and contextual. We always think of this channel first.’

Smart Phones

Garanti’s commitment to mobile is highlighted by its newest service, iGaranti. Released in May 2013, this is a suite of 23 different banking services contained within a central smartphone app. These range from cardless transactions and money transfers to savings advice and micro-loans. It’s affectionately known by the bank as ‘the smart friend in your pocket’, and offers an unrivalled banking experience for a new type of customer.

The connected consumer / ‘Usually, banks’ segmentation models are based on demographics, but I believe we have to have a new segmentation model based on behaviours,’ said Deniz Güven during a roundtable debate hosted by trade publication The Banker in January 2013. ‘The user can be aged 80 or 18. There are no demographics.’ Güven then suggested a new type of segmentation, ‘Generation C: the connected customers’, who readily adopt technology for all banking requirements. Last year, one third of Garanti’s 12 million customers used only digital, self-service channels. They had no human interaction.

IGaranti has, then, been designed with the behaviours of tech-literate and mobile-dependent customers in mind. The bank conducted a two-day workshop with global service design agency Fjord, to better characterise consumer personas based on these tech habits, rather than typical demographics. ‘We worked out a clear value proposition: it should be about money, not banking,’ says John Oswald, business design director at Fjord, who worked on iGaranti. ‘It should help you understand what you’ve done, what you’re doing and what you’re going to do with your money. It must be useful, simple and instantly understandable.’

Seamless banking / This mantra of helpful simplicity flows throughout the app’s features. Current Garanti customers can access all 23 features, downloading only the ones they want for a highly personalised service. In a customer acquisitiondrive, non-Garanti customers can also use many of the features. And if they then wish to become a member, they can make a request via the app, and the bank will send a courier to any location in Turkey within five days. On arrival, applicants fill out a form with a digital pen that sends the information to Garanti in real time. A few hours later, the account is open. An iWallet app also lets users leave bankcards, ID cards and loyalty cards at home by creating fully functional, digital versions. The application uses technology from, which scans people’s cards, stores them securely on their phone, and lets them make transactions within the app. The startup, recently bought by PayPal, caught the attention of Garanti at a San Francisco-based venture capital firm owned by BBVA, (the multinational Spanish banking group that has a 24.89% stake in Garanti). Meanwhile, an in-built QR code reader lets users shop seamlessly via iGaranti. Customers scan a unique code at the checkout of a webpage, or on a POS machine, to process the transaction. A confirmation code is sent to their phones, ensuring it’s secure. And if they’ve lost their wallet, or left it at home, they can use QR codes to withdraw cash at any of the bank’s 3,445 ATMs across Turkey. It’s a smart solution to a common banking problem.

Contextual banking / IGaranti offers more than just a seamless, omnichannel experience. The app gets to know the customer, their spending habits and their wider interests. The Moneybar feature shows the remaining money in their account, as well as scheduled payments and bills for the coming month. It can also forecast how much money they will spend throughout the month, using an algorithm that crunches personal spending habits over the past six months.

If things look rosy, iGaranti advises customers to put some cash in a savings account. If things look tight, the app calculates how short they may be and offers a micro-loan to tide them over until payday. Crucially, these contextual services take the worry out of banking. ‘Just focus on living your life, because iGaranti will help you with all your banking concerns,’ says Ozer. It’s less banking app, more lifestyle companion.

Personalised services also extend into Garanti’s marketing. While the bank continues to deliver ‘mass’ messages via traditional channels, all digital communication is highly tailored. ‘Bulk SMS and email can be a problem in Turkey, so we provide contextual information related to the time and place that you’re in, nothing else,’ says Ozer. This is facilitated by integrating social channels: iGaranti links into users’ Twitter, Facebook and Foursquare accounts. So if someone checks in at a shopping mall, for instance, Garanti sends a push notification with relevant information or offers.

Reimagining Retail

The optimisation of Garanti’s digital banking services has enabled it to reassess the role of its network of 928 physical branches. With 80% of the bank’s transactions now happening online, it may seem strange that Garanti is investing in more high-street stores. ‘Branches exist because customers crave one-to-one interaction with good quality staff,’ says Jon Blakeney, managing director of i-am Associates, the agency that has masterminded the bank’s retail transformation. ‘So Garanti uses technology to make day-to-day transactions more efficient, freeing up time and space for quality advice.’

Branch network / ‘Too many banks look the same,’ says Emre Kuzlu, managing director of i-am, Istanbul. ‘So we look beyond the sector, at Nike, Harvey Nichols and adidas, and learn from them.’ The result is a ‘family’ of four different retail options. The most basic, a freestanding ATM or kiosk, performs 120 transactions (including bill payments and cash deposits) for Garanti and non-Garanti customers. They process more than 21 million transactions per month, and are a cost-efficient way for the bank to offer services across Turkey, particularly in rural areas. Next, a series of self-service branches are also positioned in areas of high footfall. These are smaller, run by only a handful of staff and offer extended opening hours.

At the top of the family tree are the standard branches and the flagship, based in Istanbul’s lucrative Nisantasi area. Both formats offer top-level advice and consultation for customers seeking higher value services, such as loans and mortgages. And the intelligent layout of these stores helps with upscaling. ‘The airlines deliberately give you a glimpse of different experience tiers, so you aspire to move up through these levels,’ says Blakeney. ‘That’s what we have here, an active conveyer belt of people becoming aware of the different banking opportunities.’ Garanti ensures, for example, that affluent bankers mingle in the main area, rather than being on a different floor. ‘We ensure a certain degree of privacy, but give people glimpses of different zones within the one, central space,’ he adds. This model is designed to keep customers moving along the conveyer belt, from personal banking accounts to loans and mortgages, which offer a greater financial return for the bank.

The key strength of Garanti’s ‘family of four’ model is offering the right service at the right time. Customers can take advantage of the conveniently located ATMs and selfservice branches for menial tasks, saving human interaction for when it’s needed in a consultative context. And when people seek out personal contact, they’re gently reminded about other, higher yielding products. ‘The branches are marrying technological efficiency with human interaction’ says Blakeney. ‘This helps to move Garanti from a functional retail space to a rewarding experience.’

The connected future

Garanti’s dedication to providing almost faultless customer service, pioneered in 1991 and honed ever since, has produced dramatic results for the bank. In a fiercely competitive market, where 49 banks battle for business, Garanti owns 28% of internet banking transactions and 45% of mobile. Its mobile customers increased by 227% in 2012 and its future-facing smartphone app, iGaranti, has 85,000 active users. Its branch network also continues to expand. Only 4% of the country doesn’t have access to a physical service. The company’s recent awards include an International Stevie Award for customer service and ‘The Best Bank in Turkey’ prize from The Banker. Ultimately, this success generated a net profit of $1.7bn last year, making it the most profitable bank in Turkey.

So what’s next for one of the world’s most technologically savvy companies? Intriguingly, Garanti believes it’s on the cusp of welcoming a revolution as significant as the advent of mobile.

Living services / With the market for ‘smart’ internet connected devices predicted to explode over the next few years (ABI Research estimates global shipments could reach 418 million units by 2018), Garanti is exploring the impact of this movement on the banking sector. Of particular interest is what Fjord dubs ‘living services’ – contextual and highly personal services that learn and evolve with the needs of consumers. This will rely on many devices, such as wearable technology, smartphones, connected homes and products, communicating with each other to build up a personalized profile of both the person using them and their surroundings. Early examples include Google’s pre-emptive planning tool, Google Now, and the Smart Body Analyzer from Withings, which lets users track their weight and heart rate with a set of smart scales and accompanying mobile app.

‘We’re certainly not there yet, but iGaranti’s mix of real time advice, voice recognition and QR codes that interact with ATMs is a definite step towards living services,’ says Fjord’s Curtis. And the bank’s current platforms will soon be complemented by other connected products, such as smartwatches and Google Glass. ‘We’re exploring many new platforms that users may use for financial services, and wearables are one of the key areas,’ says Güven.

This investment into cutting-edge technology should, the bank hopes, defend it against future threats from outside the banking sector. ‘Mobile has ushered in an era of renewed innovation around the products and services banks can deliver,’ says Curtis. ‘And the biggest risk when transformative technology appears is that someone in Palo Alto will create a service that suddenly sidelines your business.’ Garanti, then, ensures that it doesn’t just benchmark itself on other financial institutions: ‘We look beyond our sector, and keep track of what Apple, Google and Square are doing,’ says Ozer.

For the past three decades, Garanti has relentlessly and aggressively developed technology to streamline the customer experience and optimise its business efficiency. Unfortunately for its competitors, it’s not going to slow down any time soon.