Today’s financial services environment is characterized by change. The drivers of change include consumers, technology, and delivery systems. Moreover, financial institutions must change with these elements to remain relevant and competitive in today’s economy.
In addition, balancing service to younger and older segments and their preferences for how service is delivered will define success for the financial institution in the future – and keep in mind, that the customer is the judge of service quality.
One of the biggest questions that we hear is:
“How do branches maintain their relevance in an increasingly technological age?”
Surveys underscore that 60 – 80% of new banking relationships are established through the branch network. Furthermore, a 2014 report by Ernst & Young reports 65% of sales occur in a physical location i.e. a branch.
However, once the relationships are made, regardless of the financial institution’s size, they migrate through a variety of delivery channels, with each customer seeking his or her most comfortable and effective method of interacting with the institution.
So…how does the branch fit today and tomorrow?
What we are describing is the future distribution system that financial institutions will employ (that is, if they haven’t already started) – the omni-channel distribution network. This network combines physical, automated, and virtual channels into a flexible, consistent customer experience.
Furthermore, the physical branch synchronizes these channels by establishing customer expectations and the institution’s image in the market.
The automated channel includes the institution’s ATMs and Interactive Teller Machines (ITMs). These channels are often self-service or assisted-service and can operate 24/7/365, locally. The virtual channels include the phone system, web-based, and mobile platforms. These channels may be self-service or offer some level of assistance and operate 24/7/365…globally.
Evolution of Physical Channels
In the omni-channel network, the physical channel contributes to service density by providing visibility, accessibility, and the institution’s full range of products and services. As always, convenience is a driver in the consumer’s choice of financial institution. Remember…65% of sales occur in a physical branch. So, convenience is aligned with a habitual consumer commuting pattern between where individuals live, work, and shop.
As the retail branch evolves, it will be developed with a specific target market and “business case” as the motivation. Branches will have a reduced footprint, scaled to meet market and customer demands and styled to match those same preferences. Space within the branch will be open and flexible to facilitate change as needed to respond to changing market conditions.
Scale and Purpose
The branch of the future will be scaled and styled to accomplish several purposes. Many markets will design-build a Cornerstone branch. This office is usually a large format facility staffed by universal bankers and subject matter experts (commercial lenders, wealth managers, insurance advisers, etc), and additional amenities (community rooms and space for other professional services). This office is the institution’s “statement” in the marketplace.
Community branches are smaller than the cornerstone offices, but offer a similar level of service. They are focused on customer service and sales, staffed by universal bankers, and showcase the institution’s technology and automation. They offer the ability to schedule subject matter experts either by appointment of through an automated or a virtual connection. That virtual connect could be via video conferencing in allocated space in the branch to facilitate the customer with a specialist.
Micro-branches are often found in storefront locations or leased space. These offices can be transaction focused, but are staffed with fewer employees and more technology to boost efficiency. They are heavy on technology, automation, and branding. Micro branches rely on automated channels to provide most of the transactional capacity, with employees available for sales and service as needed.
Finally the Self-service branch is fully automated and heavily branded and has no employees. You can imagine a full-service ATM installation or, more likely in today’s economy, an Interactive Teller Machine (ITM) creating an outpost of service for customers with extended hours capability. Furthermore, these self-service branches can also co-exist within the other types of branches. A great example are 24-hour vestibules for community or micro-branches that allow access for bank and credit union customers in a secure environment.
Although the role of the branch is changing, retail branches remains an important element in an institution’s omni-channel delivery strategy. As financial institutions evaluate their current networks or contemplate new branches for branch transformation, they must be keenly aware of the market they intend to serve and the business case that supports the decision.
In the future, branches will be and will focus on customer service and sale of more sophisticated products and services. The branch will work in a hub-and-spoke relationship with a variety of other delivery channels to offer the customer a wide variety of access points to the institution to deepen wallet share and long-term stickiness with the institution.Source: John Hyche