Transforming the branch for sales and lower cost
The results of our 2015 FMSI Teller Line Study are in and they support widespread perceptions about declining branch transactions and staff productivity and rising labor costs.
Consider that the volume of transactions at community bank and credit union branches since 1992 has declined 45.3%, while the cost of employee salaries and benefits has soared 90.1% over the same period. Meanwhile, the ratio of labor cost per-transaction has risen 133.3% over the last 24 years, while the average number of transactions processed per-teller hour has declined 18.5%. That translates into labor costs for basic teller transactions increasing from an average 48 cents in 1992 to $1.12 today. Additionally, over the past five years, average volume per-bank branch has dropped about 1,000 transactions per month to 7,200.
What to do? Despite the steady downward trend in branch transactions, customers continue to expect convenient access to financial services and guidance at their neighborhood branch. Even if your organization can’t eliminate branches as a cost center, you can look for ways to transform this infrastructure into sales-centric outlets and streamline staffing through more efficient scheduling.
Pursuing Higher Quality Interactions
The migration of customers to online and mobile channels has certainly contributed to declining branch traffic. According to a Pew Research Center survey, the rate of Americans using Internet banking rose from 18% in 2000 to 61% in 2013. The adoption curve for mobile services has been even steeper, nearly doubling from 18% in mid-2010 to 35% in just two years.
However, the embrace of remote access is not the only factor contributing to the decline of branch productivity and efficiency. Long after industry observers began predicting the demise of the branch with the advent of Internet banking around the turn of the century, banks continued to invest in brick and mortar. As the analysis in our teller line study shows, the ratio of U.S. population to branches declined from 9,340 in 1970 to 2,970 in 2014, reflecting a nearly 300% expansion in the number of branches during a time when population growth was only about half that rate.
The number of branches has declined nearly 5% since the peak high of 99,550 bank locations across the country in 2009. Still, the abundance of physical locations, even as customers rely increasingly on virtual branches, means that many banks may be “over-branched” at a time when operational efficiency is essential in order to permit competitive pricing of products and services.
While some might say those longstanding predictions about branchless banking are finally drawing near, our analysis suggests a different future in which sales-centric branches facilitate what we call “higher quality” interactions. With a new retail design and staffing approach, the traditional focus on deposits and withdrawals can shift to consultations between branch employees and account holders that are more likely to lead to product sales and additional cross-selling. Even technology-reliant millennials prefer to seek out face-to-face financial guidance from a trusted advisor rather than researching and performing complex transactions online.
At the same time, maintaining a branch network acknowledges the preferences of long-term customers to conduct even basic transactions in person. Check deposits continue to be the most common form of branch transaction (26%), according to our 2015 study, followed by cash withdrawals (22%) and cash deposits (11%). Some customers still stop by the teller counter to make their loan payments, accounting for 5% of total transactions. Bulk deposits (4%) round out the top five teller line transactions.
Over time, with a generational shift and increasing ubiquity of remote access, the demand for these simpler transactions in a branch will dwindle. But in the near future, the most cost-effective approach may be to reposition branches as centers of higher quality interactions, while still accepting withdrawals and deposits, even if those basic transactions are facilitated by customer-facing technology.
Technology can guide this transition by permitting your bank to compare its own branching costs to the industry benchmarks in order to set goals for improving operational efficiency and to monitor progress toward those goals as new staffing models, such as a shift to universal associates, are implemented.
Whether your organization adopts solutions available in the industry or develops its own systems, scheduling staff based on transaction volume forecasts can help improve operational efficiency by better utilizing branch employee resources. For example, a finding in our study that might be somewhat surprising is that the afternoon hours are as busy as, or busier, than lunchtime (11 a.m. to 2 p.m.) for most transaction types. Apparently, more people are taking advantage of online and mobile access to conduct routine financial transactions rather than running to the bank during their lunch breaks.
However, that hour-by-hour pattern may vary based on your branch locations and demographics served. Transaction data from core systems provides a wealth of information to guide optimal staffing schedules. We recommend the practice of time-blocking branch employees’ schedules for secondary duties and recognizing them for filling previously idle time with additional tasks, such as balancing ATMs and making outbound sales calls. This data can also help identify daily, weekly and seasonal patterns in transaction volume to guide scheduling, with the goal of enhancing productivity and customer service by ensuring adequate staffing during busy times.
Developing or implementing tools to track and manage cross-selling activity can also aid in the transition from transaction hub to sales-centric branch and monitor the impact of training staff as universal associates. Other emerging solutions can help position your bank brand alongside customers’ preferred devices. For example, an emerging technology enables customers to schedule appointments at branches to eliminate their wait time and alert branch managers to schedule employees’ availability based on their skill sets so that the right person stands ready to provide the desired services when customers walk in the door.
Mr. Scott is president/CEO of Alpharetta, Ga.-based Financial Management Solutions, Inc. (FMSI), which provides financial institutions with business intelligence and performance management systems for branch staff scheduling and lobby management. He can be reached at [email protected].