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The Branch Paradox: Consumers Say One Thing, Do Another

Bank customers say they value their bank branches, but nearly half visit their branch fewer than five times per year. Although 58% say they would prefer their local branch close rather than pay increased fees.

A new study of over 1,400 consumers from market research firm Chadwick Martin Bailey, suggests that when forced to choose, bank customers would prefer a further drive to another branch rather than endure fee hikes or service reductions. Once viewed as essential to banking convenience, proximity to a full service bank is the first thing consumers say they are willing to give up.

Of course, they also say having branches nearby are important to them… even if they hardly ever visit one. 45% of bank customers visit their branch fewer than five times a year. But hey, what do they know?

Consumer feelings about branch proximity don’t match their actual banking behavior

Customers say they value a full service branch near where they work or live but consumer banking behavior tells a different story– online and mobile banking options mean customers need to make fewer branch visits. Based on the low frequency of visits and how quickly consumers are willing to give up their branch when forced to choose, branch proximity has become less critical than in the past.

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When push comes to shove, consumers say they are more willing to forgo branches

Teller-less options, particularly mobile and online banking services, have reduced the need for branch visits. Sixty-seven percent of bank customers say that having a physical branch close by is very important, but even 41% of these customers visit fewer than 5 times per year.

Branches no longer have to be mere steps away

The “sweet spot” for branch convenience is relatively wide. Bank customers within ten miles of their bank branches say they are the most satisfied with branch convenience.

Teller-less branches confuse some consumers

Teller-less branches (where sales professionals are available to answer product and service questions in addition to automated services) were seen by customers as less desirable than closing their local branch altogether, this counter-intuitive finding suggests that the concept will require banks to fully explain the benefits of the teller-less branch.

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“These findings reveal that some aspects of the banking relationship, we once perceived as critical, are shifting,” says Jim Garrity, Managing Director of Chadwick Martin Bailey’s Financial Services practice. “Banks must offer alternatives to full-service branches, lower transaction costs without diminishing product sales, and at the same time educate customers by effectively messaging and communicating how these changes will affect service and behavior.”

Banks that will be successful in shifting away from the local branch model are those providing alternatives that don’t sacrifice convenience and service… and hopefully result in reduced overhead that translates to a lower cost-to-consumer.

Download the full study

The study was conducted by Chadwick Martin Bailey, a Boston-based custom market research firm. Data was collected from 1,433 U.S. residents, aged 18 to 75, via a nationally representative online survey questionnaire within the U.S. in February of 2012. The complete report with full findings from this study is available as a free PDF download from Chadwick Martin Bailey.

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Comments

  1. Nathan Hastings says:

    The critical key, as is the age-old addage with real estate, is location/location/location. However, more than just that is the branch design. I think full-service locations can be achieved with much less square-footage and staffing. The traditional 4,000 – 7,000 square-foot branch with 12-15 FTE, is just not necessary. Half the square-footage with likely 1/3 the staffing could achieve the same goal (not sacrificing key components of safety and soundness). Think Starbuck’s or any other key food service company out there in the industry. Selling a mortgage has certainly more recourse for bad advice (excluding undercooked meats) than that of ill-adviced food selection, but there is merit in the comparison.

  2. You’re right Nathan. Anyone building a 5,000+ s.f. branch these days is wasting their money. Similarly, any branch with more than 4-6 teller bays is overkill.

  3. This is an excellent study that, for once, offers realistic and logical conclusions. I agree with Nathan, branches still matter and they need to be present in markets for a bank or credit union to build its market share. Those branches don’t need to be the big, costly branches of decades past. They should have low capital cost and low opertaing costs. Markets are becoming diluted by competition and direct channel availability so designing and building a branch that makes sense for today, and tomorrow, is not only smart, it is critical for profitability. We have been designing around this model for several years now and have proven that smaller can be better. Real branches with real people will be around for a while, why not do them right?

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