Meredith Deen1
Meredith Deen Mar 28, 2016

Three branch models for the future

If you have only scanned the headlines from the business world, the news about bank branches seems grim, as every week brings more branch closings by banks and credit unions.

In many of those instances, managers of the financial institution cite the changing nature of customer behavior.  And yes, transactions are down dramatically, with volume dropping 45% since 1991, according to FMSI’s Teller Line Study. Banks and credit unions, in response, are consolidating branches, reducing their total branch count. They are also converting branch offices into ATM-only stations or drive-through-only facilities.

What’s the root cause behind the widespread branch closures across the country? Banks and credit unions built far more branches than needed since the early 1970s. What’s the culprit behind consumers’ recent behavioral shift? Mobile banking, of course. But is that the end of the story? Far from it.

The Customized Branch

Based on recent FMSI research, we predict that the branch will not only be alive and well in the next 20 years, but will also continue to play a critical role in both securing new account holders and growing wallet share. With a deeper understanding of the demographic and socioeconomic backgrounds of your branches’ customers, it’s possible to customize each branch with a specific purpose for your target audience.

Consider this one essential nugget of information to support the idea that branches are here to stay, despite the effects of technology. In the past five years, average branch teller transactions for banks have declined only 1.9%, according to our Teller Line Study. For credit unions, the decline was 12.2%.

Then, think about the types of retail businesses that truly have vanished, or all-but disappeared. Book stores and music retailers are no longer a significant part of the U.S. retail economy because consumers who entered those stores had little need for an expert’s advice. That couldn’t be farther from the truth when it comes to a customer’s need to manage his or her personal finances. That’s your trump card; think about the best way to create situations for face-to-face interactions between customers and the financial-service professionals you already employ.

The types of interactions vary. Some branches remain transaction-heavy – plenty of your customers still come into a branch to conduct their business. Other branches are more geared toward sales conversations. So, the best way to know how to approach your branch strategy is to know crucial details about each branch. Learn the types of demographic and socioeconomic users of the area. Who are the main nearby competitors? If a branch has a large Baby Boomer population residing nearby, for example, customize that branch’s offerings for those generational members.

To take advantage of the continuing desire of consumers to use branches, consider deploying a variety of three branch models, each with different levels of technology and staffing considerations. These are the models that we predict will be the most prevalent in the years to come:

Personalized experience upscale. This model will typically be staffed with universal associates, to maximize the potential for success in attracting and cross-selling more affluent account holders. Universal associates can do it all, from running transactions to having a conversation about a home equity line of credit. These branches will be staffed with employees who have higher levels of expertise and more extensive professional backgrounds, all of which likely equates to higher employee costs.

There are branch activity-tracking software products in the market that are especially ideal in this type of branch. They track and measure how long each worker speaks with a consumer and their cross-selling efforts, giving managers a better assessment of an employee’s revenue production.

Self-directed technology. Here is the branch model that could see the most significant growth rates over the next 20 years. This model is built to use the least amount of space, an essential consideration in an era when reducing your real estate costs is a top priority. This model also offers the potential for hiring fewer employees.

The technology embedded in this branch model will allow a bank or credit union to cater to members who want fast, easy, secure transactions. These branches will use the latest in banking technology, such as smart ATMs that are smaller and less expensive than traditional ATMs, but come with additional features like the ability to choose the denomination for cash withdrawals. Branch appointment software, which is gaining popularity in the market, now helps management reduce or eliminate teller lines and drive loan traffic to the branch.

Traditional. The traditional branch model will remain an industry standard, even in an era of branch closings. The vast majority of branches fall in this category and they handle an average of 6,500 transactions per month, according to our Teller Line Study. Many traditional branches have even experienced higher transaction volume in recent years and are typically the best fit for most account holder segments.

The traditional model utilizes the classic division of labor, such as teller windows, roped-off lines and desks and private offices throughout the building. When a customer and an employee have an in-person conversation, this branch model shows its effectiveness. Those interactions help the branch increase its deposit totals and loan activity.

While it may look traditional on the surface, this model can still be powered by technology to increase its effectiveness. Similar to the personalized experience upscale model, traditional branches can also benefit from leveraging  scheduling and tracking software to improve staffing efficiencies and customer experience by reducing wait times.

To meet the round-the-clock schedules of many consumers, some traditional branches may benefit from later weekday closing times, or extended weekend hours. Others may need to close earlier. Consider having an hours-of-operation analysis done by a third party, which can help plot the best times to keep your branches open.

Ms. Deen is president of Alpharetta, Ga.-based Financial Management Solutions, Inc. (FMSI), which provides financial institutions with business intelligence and performance management systems for efficient branch staff scheduling and lobby management. She can be reached at meredithd@fmsi.com

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