Process variation as a determinant of bank performance: Evidence from the retail banking study

This paper explores the relation between retail banks' branch-based process es and financial performance. There are 11 processes included in this study , which represent the bulk of the activities performed in a typical retail branch (e.g., opening checking accounts). The first finding of this study i s that the financial performance of banks that perform be tt er across thes e processes tend to be better than that of other banks. in addition to the variation in process performance across banks, there is also substantial va riation across processes within banks. That is, banks that performed well i n one process often performed quite badly in another. We present an analyti cal model that shows that improvement in process variation can be more impo rtant than improvement in aggregate process performance when dealing with c ertain customer segments. Empirical evidence from the Wharton Financial Ins titution Center Retail Banking Study of bank holding companies in the Unite d States provides support.