The evolution of location-based and digital channels is transforming the way financial institutions think about their branch networks. While convenience is still a key factor in why consumers might choose to open an account with a particular bank, the overall concept of convenience has changed dramatically over the past few years. The rise of mobile apps and online banking means customers can easily access accounts and banking services whenever and wherever they choose, and evolving consumer preferences have helped to drive the popularity of digital-only banking.
But for many, physical branch locations still play a critical role in day-to-day banking interactions. A recent study by Accenture showed that 66% of consumers in the United States prefer branches in their neighborhood, with 71% still favoring in-person banking visits to solve specific or complicated problems. This factor is increasingly important as economic instability continues to affect the cost of living, resulting in the need for more genuine conversations between banks and customers to help navigate financial challenges. Additionally, branches can be beneficial for banks looking to maintain a presence in particular markets—acting as brick-and-mortar “billboards” to ensure continued brand familiarity.
To address the delicate balance between digital and physical, many financial services organizations are turning to data-driven location analytics to evolve traditional approaches to market coverage, changing the way in which branch networks are deployed as they seek to try and preserve market position.
The critical role of location-based insights in site selection
In the past, site selection processes often included long hours of sitting outside a competitor’s site, counting the number of cars in the parking lot at different times of day and keeping track of how many customers came and went over a particular period of time. Today, the same information can be gleaned in minutes by leveraging rich, and highly granular, location data sources.
But location intelligence goes far deeper than just understanding traffic volume. Today, analysts can combine geospatial data with powerful visualization and spatial analytics tools to reveal relationships that would otherwise be difficult to discover or analyze. It is a powerful method to bring context and insights to critical decision-making. Understanding pre- and post-visit activities of consumers, along with the demographic information of visitors, and incorporating consumer insights alongside road access, traffic data and adjacent business data, gives a much deeper comprehension of who frequents a specific area, their motivations and the factors that influence their purchasing choices.
By combining all of that information with location-based macroeconomic data like purchasing power and economic growth projections, businesses can quantify the return on investment of a proposed new location far more accurately than ever before. The result is a reliable and repeatable process for determining where to open new sites.
How location analytics helps reveal hidden insights and provide context
Location analytics can help banks optimize branch strategies in several key ways, including the following:
Evaluating competition and market saturation: Location analysis allows banks to assess the competitive landscape and determine market saturation in a given area. By mapping existing branches to competitor locations, banks can identify gaps or locate areas where competition may be limited. Using this analysis, they can identify potential locations that provide the best chance of competitive advantage or capture untapped market share.
Assessing target areas for suitability and accessibility: Location analytics can also help banks evaluate target locations for other favorable attributes to help ensure a branch’s success. Accessibility factors such as proximity to major transportation routes, public transit options or parking availability within a certain radius can help ensure that branches are conveniently located and easily available to target customers. Considering additional factors such as proximity to complementary businesses (for example, retail centers or commercial areas) can further enhance a branch’s potential success by helping to ensure footfall. These are just a few examples of why location-based context plays a crucial role in guiding large-scale investments in branch expansion.
Understanding customer preferences: A fundamental aspect of site selection is understanding the local market and potential customer base. Banks can use location analytics to analyze demographic and socioeconomic data to identify areas where target customer segments are concentrated. This analysis may include factors such as population density, income level, age distribution, education level and other relevant data points. By pinpointing locations that are demographically advantageous, banks can enhance their prospects of establishing thriving branches. Understanding local customer segments can also help identify the types of banking services that are most likely to be in demand at a particular location and help inform what specific branch facilities may be required.
Even as digital banking continues to rise in popularity, physical branch locations will remain important in how customers interact with banks. Data-driven decision-making based on location intelligence and insights will be essential for banks seeking to strike the right balance between physical locations and digital channels, helping them achieve optimum market coverage, inform branch expansion efforts, improve customer satisfaction and stay ahead of the competition.
Tony Evans is the Head of Financials Services, North America at Precisely
Over 6,000 financial services customers were surveyed to discover why they switch institutions, what they look for in digital and in-person experiences, and how they feel about technologies like artificial intelligence....