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highlights

 

Remaking the Branch

There are few topics that so engage the minds of retail bankers these days as the future of the branch. The continual migration of customer transactions from the branch to electronic channels can no longer be ignored, particularly in an era when profitability is under pressure and every expense must be scrutinized.



The Mobile Transformation

The mobile banking landscape has changed greatly in recent years as customers graduated from simply checking their account balances on the cell phone to actually making payments via the device. Increasingly, mobile banking is transmuting into mobile payments.



Rebooting the Traditional Branch Network
With customer transactions in branches declining, banks need to reboot their branch design and strategy to focus more on service. by PAUL SCHAUS
Jun 2, 2014  |  3 Comments

With an increasing number of customers, particularly Millennials, opting to bank online or via their smartphones and tablets, the purpose of today’s branch is less centered on transactions and more focused on customer service and sales of additional products and services. Accordingly, the design and strategy of the traditional branch network may need a reboot.

The footprint of most branches today needs to be reduced, not only because of declining customer traffic, but also due to rising real estate costs and declining bank margins. The days of branches with 20 teller lines are over, as teller transactions are falling by nearly double-digit rates each year. Now, both the physical design of the branch and the required skills sets of the branch personnel need to be re-examined for service effectiveness over transaction efficiencies.

Lounging in the Office

Branch design should focus on creating more interactions between customers and bank staff, with less emphasis on teller counters and more of an “office look” with desks. Many banks are also including a Starbucks-like area, replete with comfortable furniture for lounging and laptop use.

Other innovations are flatscreens and other digital signage that flash both news items and information about bank products and services. However, even low-budget tools such as featuring photos of employees participating in an event can be great conversation starters to get customers talking about their own plans – and possible financial needs.

Branches can also serve as a training base for self-service tools such as personal financial management (PFM) software or for educational purposes, such as teaching customers how to better protect themselves from identity theft or provide budgeting, financial literacy education or financial planning seminars. Branches can also be used for community educational and entertainment events, which can draw attention to the offices after hours and help attract new customers.

One-size-fits-all prototype branches don’t work anymore, and many branches, such as those in college towns, need only be 600 square feet. Bankers should thoroughly research and understand the demographics of each of their markets, what the strategy should be for each market and what type of customers they are trying to attract for each.

But, remember: just because two markets may feature the same demographics – say, a large number of upper middle-income professional customers – doesn’t mean the bank’s strategy should be the same for both branches. Professionals may stop by downtown branches on their lunch hours to get quicker service while on the weekends they might have more time to shop for additional products and services at a branch closer to their homes. To aid in branch design and strategy, banks should find ways to determine the personal channel preferences of each of their customers and how often each customer may use each channel.

Ideally, branch design should be somewhat fluid, based on changing market demographics and changing bank strategies. Ultimately, if a branch is not on the right track to deliver the necessary financial performance, then its design – and maybe even its existence – may not be viable. A bank’s retail branch strategy should be based not only on current market demographics, but also on future demographics. However, remember this too: while younger generations typically don’t use branches as their primary channel, they still value face-to-face service when their issues and/or needs are complex.

Self-service banking is all the rage now but be careful not to overly generalize. Just because urban customers in big cities may love self-service, doesn’t mean everyone in small towns will. Even so, an increasing number of customers want to do more on their own and many banks have done a great job getting their customers to use self-service devices.

In addition to automated teller machines, many banks have also installed prepaid card dispensers, self-service coin counters, cash dispensers, cash recyclers, check and deposit slip ordering services and video kiosks that enable customers to connect to back-office bankers in centralized locations for more information, to buy products or to resolve any problems. These devices might be particularly useful for afterhours, when customers might need to talk to contact center or customer care staff to resolve issues.

Full-service Options

Branches are going through an evolution right now, though the only problem is that they are changing at a snail’s pace. That’s a problem for younger generations, who are more comfortable with new technologies than are Baby Boomers.

Millennials might want to do everything on their own, but many senior citizens might still need to have their hands held and be shown how to use self-service tools. Banks can also give such customers options to use tellers if they want full service. Many customers still like the personal attention they get from their teller.

While completely self-service mini-branches can be useful for locations such as airports, particularly if the bank’s machines can exchange foreign currency, most branches should not be completely self-service. After all, customers can just log onto the bank’s website within the privacy of their own homes, even to video chat with bankers in a secure environment. Perhaps one of the best reasons to avoid over investing in self-service branches is that some type of full service gives bank staff more opportunities to cross-sell additional products and services.

So, what should banks do with older branches? Leverage the existing buildings by adapting them to modern strategies, or just sell the properties altogether and build smaller branches and even convenience-oriented kiosks in the middle of the mall? Again, it comes down to researching and understanding both the current and future demographics of each market, ideally using predictive analytics modeling to determine the strategy for handling older branches.

It all goes back to understanding the purpose of the branch for that particular community.

Mr. Schaus is president of Phoenix, Ariz.-based CCG Catalyst Consulting Group, which provides strategic direction and focused guidance for banks. He can be reached at consultant@ccg-catalyst.com.

 

 

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comments

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bill simmons
6/4/2014 2:39 PM

Let's not forget that despite all of this movement to non-physical channels, the vast majority of new customer acquisition occurs through the physical channel. Increased on-line and mobile activity is around transactions. So long as consumers of banking products and services look to location convenience as a primary determinant of who they take their business to, branches will remain relevant. Smart banks understand this and continue to adjust their branch networks to maximize sales opportunities.

sasha amini
6/3/2014 1:28 PM

I think a bit more direction could be helpful here, as it's quite high-level. The real challenge is determining what the true incremental value of any of these suggestions are for any given situation. Below is the gist of the article- 1. Branches might need to be changed to be beneficial to future growth 2. Not all branches are the same 3. Different customers will engage with the branch differently 4. There are many different features that could be added to branches to make them more valuable 5. Banks should research different combinations of branches and upgrades and use "analytics" to determine which will be profitable

manish grover
6/3/2014 6:00 AM

Excellent thoughts. Branches have to redefine. I've written my thoughts at http://manishgrover.wordpress.com/2014/04/20/stop-thinking-of-saving-the-bank-branch-redefine-it/.