The return of the branch
The move to branches is over-estimated. but this article does a pretty good job at rationalising that move. I worry that organsitons are making the move and not concurrently developing self service so that the branch focusses on revenue and only for those customers that choose the branch.
touchpoints - The return of the branch
27 October 2003
By Gillian Scott
The life of the bank branch has been turbulent over the last decade, to say the least. While the advent of online banking opened up an additional service channel for banks, often resulting in lower budgets for the retail branch, the emergence of internet-only banks provided a leaner, competitive threat to banks with traditional bricks ‘n’ mortar infrastructure for the provision of convenient financial services. Once banks looked at these channels as complementing one another, the bricks ‘n’ clicks model evolved.
But now the branch is making a comeback. According to a Finextra survey of 58 senior IT decision-makers at retail financial institutions worldwide, banks are currently looking to an investment in branch renewal and Internet activity as their delivery channel priorities, with the call center and other alternatives being relegated to a secondary supporting or experimental role. Moreover, spending on channels and customer-facing technology is expected to swallow up almost half of the IT budget in 2004.
Europe in particular looks likely to be a region that will witness considerable levels of branch renewal. According to Datamonitor’s March 2003 report Branch Renewal in European Retail Banking, spending on European banks’ branch renewal is predicted to undergo a CAGR (Compound Annual Growth Rate) of almost 10 percent in 2005.
Why are financial institutions undertaking this change in strategy? One of the main drivers it appears has been a shift in approach and understanding of the role of the branch as a revenue-generating channel. Traditionally, it has been regarded as a transaction center, but increasingly the branch is seen as a retail center. Self-service technologies are being integrated into the branch environment to service the routine (high volume, low value) transactions, so that staff time is freed up for customer relationship building. What is clear is that the needs of the customer within the branch are paramount. Key elements include:
Convenience – such as 24/7 access to personal accounts at the ATM
Comfort – designated customer areas such as sitting areas to browse through literature or have a beverage
Personal touch – through the availability of face-to-face advice, particularly for high-value products such as mortgages and insurance. Furthermore, since most of the cash tends to be housed in the ATM at the branch, it means that there is less need for physical barriers between staff and customers, thereby allowing a less ‘formal’ relationship from the start.
To become more customer-centric and accessible, new branch designs and service styles have been implemented by leading financial institutions around the world, such as Multibank in Poland, where financial seminars are held in the branches after normal banking hours, thereby extending the value of the location and the relationship of the bank to its customers.
One issue facing banks is that it is difficult to measure the collective impact of the changes that are being made within the branch. Increasingly, banks need to be able to perform operational and quantitative analysis in order to justify change, and it appears that there is an increasing awareness and movement toward achieving ‘hard results’. Over time this will result in targeted spending determined by customer behaviour and interaction with all channels available at the branch.
Banks are also using their branches to differentiate themselves from their competition. In a recent article for Bank Systems & Technology, Anjalee Davis, Banking Analyst, Celent Communications, describes this growing phenomenon:
“Pressure on banks to [distinguish] will only increase with further market concentration and as core banking products (savings, loans) become pure commodities. . . it is difficult to differentiate products and services through pricing alone. As a result, banks are redesigning their branches and building new branches. This will support continued investment in next-generation branch applications and enterprise technology for at least the next five years.”
Finally, a less obvious driver of branch renewal: Celent also predicts that a few leading banks are utilising the need to replace their obsolete branch technology as an opportunity to begin “integrating their siloed channels” (Branch Renewal & Channel Integration: A Case Study on Citizens Bank), most likely to a Web-based platform. The result is clear, as Davis concludes: “Even with a return to a bull market, banks will continue investing in their branches.”
May 27, 2004 at 08:37 PM in @ My Views @, Financial Services | Permalink
| TrackBack (24)
| Top of page
| Blog Home
