Customers now WFH, their branch was near the office

Advertising and the strength of the overall network are among the reasons people choose to bank at one location over another. But the vast majority of clients or members live near, own a business near or work nearby the branch they use the most.

This could change with COVID-19.  For example, Google is requesting staff to work from home through June 2021.  Fewer people are going to their workplace due to early retirements, working from home or having their jobs eliminated.  There is a shift away from the traditional workplace, which impacts commercial real estate as well as branches since clients may no longer work near the branch they chose.  The impact is greatest among white-collar employees, who have a greater latitude to work from home, or are in industries hardest hit by the pandemic, such as airlines or restaurants.

We recommend a series of steps to help mitigate the loss of customers who will no longer work near branches they originally chose based on job location.

Start by sizing the risk

First, determine how many or your clients do not live near one of your branches.  Typically, a branch market size is a five to seven minute drive time or a three to four mile distance from your branch.  Much depends on population and worker densities.  For example, an urban downtown location may have a 15-minute walk time market area versus a rural location with a 15-minute drive time market.

There are several ways to size the risk. The easiest option, and available to everyone, is a zip-code analysis.  For each branch, determine the zip codes immediately around the branch.  Then, get a list of your clients who do not live or have post-office box within those zip codes. 

If you have access to mapping software, you can map each client location and the market area of each branch.  You can visually see where the customers are located compared to your branch market areas. 

Categorize clients not living near a branch

Not all clients are equal in value or potential.  Categorize the clients not near a branch to determine targets for retention and growth.  For example, single-service mortgage, CD or indirect loan clients are unlikely to leave or buy less because of distance to branch.  Some credit unions have been successful at selling other products to single-service indirect loan members, but that is unusual.  If you have household profitability or revenue data, start by rank the distant clients from best to worst, and then focus on the top quarter or top half. 

Without that data, use other options like monthly fees, debit card fees (which can be estimated from usage), overdraft fees and others. Calculate balance revenue by multiplying typical product spread by balances.  Add fees and spread together to get to a rough calculation of revenue.  An adjustment for credit risk may be made from credit score or risk grade.

Other categorization criteria include length of time as a client and number of services. The longer the client has been with the organization and the higher the number of services, the less likely they are to leave.

Concentrate on higher-value distant clients

There are two channel-based means of protecting and growing your most valuable clients not near a branch.  First, promote your online, mobile and call center channels.  Phone calls, email or snail mail should encourage distant, high-value clients to become active users of those other channels. Consider placing a deposit-taking, drive-thru ATM or IVR in areas with a concentration of valuable distant clients. This may also attract new clients.

Next, actively cross-sell more services to the distant, high-value clients.  For deposit-oriented clients, consider innovative approaches to bundle or price products or, if available, offer investment products such as annuities with income riders for these uncertain times.  For loan-oriented clients, consider flexible terms and rates for commercial clients and discounts for consumer clients. The more products a client has, the better for retention and future sales.

And a simple thank you can help, whether by phone or mail.  This may be dangerous for very long-term clients, as it may remind them to look at their accounts. Focus on high-value distant clients with a shorter history and without a single-service relationship (i.e., mortgage, CD or indirect loan).

It’s important to mitigate the risk that those clients will leave or reduce their future business.  Your management team will develop tactics beyond those discussed here.  The key is to recognize the risk and to take action.

Guenther Hartfeil is a senior consultant at Peak Performance Consulting Group.