Making bank branches ready for the future
The number of bank branches is gradually reducing in many developed countries. In the U.S. alone, over 3,000 bank branches were closed between 2009 and 2012. In Spain, more than 5,000 branches have been shut since 2008. At the same time, bank branches continue to be the preferred channel for deposit account opening, loan application, high-value transactions, and personalized financial advice. The branch remains the main sales channel for high value added banking products.
Let us examine the factors that are driving changes in branch banking -
- The new normal: Evolving regulations make it difficult for banks to operate branches. In addition, expensive real estate and the high cost of staffing adversely impact the profitability of banks.
- Technology: Self-service channels have reduced the need for branches. Internet banking, ATM and mobile banking have made the transaction-only model of bank branches obsolete.
- Demographics: Gen-Y, which is expected to account for almost 40% of total banking transactions by 2017, prefers self-service channels. Gen-Y customers are more likely to use online payment tools and the mobile remote deposit capture feature than transact at a branch. In the case of their financial decisions, information from the bank's website and online discussions take precedence over the advice of a manager.
- Consumer power: Customers have a wider choice and are willing to sign up with banks and non-traditional financial service institutions that provide more attractive offerings.
Banks must reinvent their branches. A few strategies to get tech-savvy customers to the branch:
- Choose a strategic location: Banks should focus on convenient placement of branches, and design the branch layout considering regional and customer demographics. The feasibility of customized branch variants must be explored. For example, a mini-branch in a grocery or convenience store, service kiosks at railway stations, bank-on-wheels, etc. Such customized branch variants can be used for bespoke services and products, while full-service branches focus on the bank's suite of products and services. Remote and small branches can be transformed into high-tech centers with skeletal onsite staff and 24-hour video conferencing facility. Further, as more and more retail customers adopt digital channels, the proportion of commercial and small business customers in bank branches will rise. Banks can consider a dedicated space at the branch for high-value commercial and small business customers. This 'business center' approach can be further enhanced with amenities such as a conference room, free Wi-Fi access, and printers.
- Ensure operational efficiency: Technology and process automation improve productivity of the branch. Advanced teller automation technology, including cash recyclers and drive-up systems with vacuum-assisted tubes, reduce the time spent by tellers and other branch staff on routine transactions. Banks must consider migrating branch transactions to self-service channels such as mobile, online, ATM, phone, etc. Moreover, self-service devices at the branch can simplify the customer onboarding process, while promoting low-cost banking channels.
- Transform customer experience: Banks should focus on personalized service at the branch. Adequate lighting and furniture as well as private space for conducting business delight customers. The branch concierge can be replaced with dedicated staff for every customer (at least high-value customers). Areas must be demarcated for functions - advice, service, etc. 'Teller pods' can be installed for an 'open' experience. A retail-oriented environment, in which the bank staff works as consultants / advisors rather than executors of basic banking tasks, improves sales effectiveness as well as the customer experience. Customers should be able to access the bank's product specialists either at the branch or through two-way video chat. Advisory services remain an integral part of branch banking. Instead of in-your-face cross-selling, banks should build customer relationships by proactively addressing the financial challenges and needs of customers. The PNC Bank is planning to roll out a sophisticated branch model with open floors and technology-enabled touch points. Bank employees will demonstrate technology, answer questions and offer financial advice, while tellers act as retail consultants. The bank's customers can conduct a majority of transactions using super-charged ATMs.
- Connect digital channels with the branch: Bank branches must integrate online and offline channels to help customers initiate a transaction at the branch and complete it through another channel later. Branch transformation should be part of a multi-channel transformation. Biometrics-secured ATMs, touch screens, video conferencing, interactive desktop computers, high-tech lounges, plug-in points for consumer devices, Wi-Fi access, and self-service kiosks are some technology advancements that bank branches must consider during transformation. Citibank's 'smart banking' branches combine customized spaces with innovative technology, including interactive kiosks, media walls and work benches. The BBVA Compass 'Virtual Banker' enables video conferencing between the customer in a branch and the bank's advisors at remote locations. Integrated scanner, printer and document sharing functionality enable easy retrieval and exchange of signed documents. Bank of America's branches have comfortable lounge areas and iPads for customers. The branch staff uses tablets to serve customers at the lounge.
- Enhance security: Continuous monitoring of branch exteriors, interiors and digital enterprise pathways is a business imperative. Difficult-to-access safes, barriers, intrusion alarm systems, and other measures ensure the safety of customers' assets.
Branch transformation should aim at enhancing the customer experience, convenience and engagement. Outsourcing partners help banks in redesigning branches, automation, security enablement, and hardware and software maintenance. First Citizens National Bank is implementing a branch transformation strategy in partnership with Diebold. Self-service and personalized digital interactions are being enabled across the bank's branch network. Deposit and teller automation will transform its branch operations. Is your branch relevant for tomorrow's customers?