Despite all the hubub about futuristic branch concepts, tomorrow's branch will likely look very similar to what we have today. Here's why.
For all the enthusiasm consumers have shown for online and mobile banking, many continue to prize the option of stopping by a neighborhood branch. Though its demise has been predicted with the launch of each new remote channel over the past 20 years, the branch continues to serve a vital purpose – and likely will for decades to come.
Branch traffic is declining, with transaction volume at U.S. bank and credit union offices down 45.3% since 1992, according to FMSI’s 2015 Teller Line Study. However, that trend seems to be leveling off: Over the past five years, teller transactions have declined a mere 1.9%, on average, at bank branches and 12.2% at credit union branches.
As the title of a 2015 report from the FDIC puts it, “Brick-and-Mortar Banking Remains Prevalent in an Increasingly Virtual World.” The fact that 6,669 banks and thrifts continue to operate 94,725 branches across the nation offers “testament to the enduring value of physical access to banking services,” the report suggests. “The available data on balance show that most bank customers continue to place value on physical offices as part of a diverse suite of retail banking options.”
Even if this forecast proves out, many customers will remain multi-channel consumers of their bank and credit union services. If consumers were intent on abandoning personal service in exclusive favor of mobile and online access, we would have seen a much more precipitous drop in branch traffic in recent years.
What seems likely is that people are taking advantage of the ease of use of remote channels to access their accounts more frequently, while still valuing the opportunity to seek out personal interactions for trustworthy advice on managing their finances.
Customizing the Customer Experience
In sum, today’s branches remain relevant for many. What may be needed in branch design over the next two decades is less revolution and more evolution in the way you serve customers in person by moving away from a one-size-fits-all approach.
In the past, a cookie-cutter technique to replicate the same style of branch staffed by a uniform mix of tellers, customer service specialists, and loan officers might have seemed a valid strategy to ensure adherence to the brand. However, data collection and analytical tools are now available to help identify the demographics and socioeconomics of each branch territory, the type of transactions currently conducted at each branch, and the potential competitive forces at play across your market territory.
From that data, you should be able to identify whether your focus at each branch should be on processing transactions or increasing sales through in-depth conversations with customers. Is the neighborhood dominated by baby boomers interested in wealth management guidance, or is your market a large population of 20- and 30-somethings looking for auto loans and advice on saving for and buying their first homes?
Aligning your service model, design, and technology at each branch with the needs and preference of your target market can help to maintain and even increase your account base. A mismatch, such as converting a transaction-heavy branch into a sales consultation center, is a surefire way to lose customers.
Identifying and implementing strategies to enhance customer engagement may entail a location-specific focus. Branch staff know their customers, and when working in partnership with specialists from marketing, business development, lending, IT, and other departments, they can better develop and deliver service tailored to their customers’ needs and preferences.
Horizontal and vertical collaboration – with input from frontline and back-office staff all the way up to the C-suite – helps ensure that customers enjoy the best possible experience via the channel of their choice and are well aware of and supported in sampling the full menu of service options.
Three Basic Branching Design Models
We foresee three primary variations in branch design dominating the financial services landscape over the next 20 years:
The personalized experience upscale model creates a comfortable, consultative environment in which accountholders expect and receive hands-on, white-glove-style treatment from experienced, knowledgeable associates. Unlike traditional branches where activities are separated by division of labor—typically, teller transactions, new account opening, and lending—this service center is most ably staffed by employees trained as universal associates. The increased cost per employee should be offset by higher sales.
The personalized experience branch combines high touch with high tech. Associates rely on tablets as they interact with customers, and these devices, along with computers with interactive touch screens, are also available for customers at self-service kiosks and technology bars. Behind the scenes, branch activity tracking software provides the data managers need to monitor and manage wait-times, assist times, and cross-sell ratios. We predict this model will become increasingly more commonplace over the next two decades.
The self-directed technology branch is probably what most people envision when they hear the term “branch of the future.” Consumers who favor this model are looking for fast, easy, and secure interactions facilitated by futuristic technologies in the form of smart ATMs, video tellers, and touch-screen access. When they need to consult with an associate, these consumers won’t want to wait; offering a branch appointment app allows these busy customers to schedule conversations with specialists who can provide the requested services without handing them off.
This type of branch is also expected to increase in popularity over the next two decades as more consumers become familiar and comfortable with the advantages of self-service technology. However, a few people who walk through the doors may need guidance from friendly and well-trained staff who can demonstrate and enthusiastically share the features and benefits of using these devices.
Even as these new types of branches become more commonplace, the traditional branch model will not disappear anytime soon. These facilities are functional, familiar, fully paid for, and already serving many markets. According to the Teller Line Study, the typical branch handles an average 6,500 transactions per month, which is still plenty of traffic to cover operational expenses.
The traditional model has the added benefit of a layout designed to process large numbers of deposits, cash withdrawals, and other routine transactions while still facilitating personal interactions to generate sales. Banks and credit unions can make the most of these branches by improving efficiency, installing cash recyclers at the teller line, and relying on staff scheduling and lobby activity tracking software to ensure that the right staff is in the right place at the right times. Using this software, you may uncover opportunities to change hours of service to simultaneously improve customer access and reduce staffing costs.
In short, the branch of the 2026 and even 2036 may have a lot in common with your current brick-and-mortar infrastructure. The personal interactions that happen in these offices will remain a critical component in cementing customer relationships and building your institution’s reputation for providing trustworthy financial guidance and service across channels.
For more information on optimizing the performance of your branch network, download our white paper, “Branch of the Future Not All That Different Than Branch of Today.”