Making More from Less
Five ways banks can enhance the value of their branch network
Between products like mobile and online banking, ATMs, fintech solutions and digital wallets like PayPal, it's no wonder some people are questioning whether brick-and-mortar bank branches are still relevant. However, consumers still crave the trust and assurance that comes with human interaction, especially when it comes to their finances. Bank branches aren't on the brink of extinction; they're evolving. Here are five key actions banks can take to transform their branch networks and enhance their value:
1. Focus on Customer Needs and Behaviors
Consumer demands will drive nearly every aspect of branch transformation in the future, so identifying exactly what your customers want and need is critical. "Branch transformation is not up to us, it is up to the customers," explained Darren Dewing, senior vice president, director of retail distribution at Associated Bank, Milwaukee. "Their behavior will determine the future of the branch network." Dewing noted that while direct customer feedback is important, it's also essential to measure their actions. With the current upheaval in the financial services industry, bank branches will need to transform in order to survive; it will be the customers, not the banks, who ultimately define what they turn into. "It comes down to what customers demand of us and adapting accordingly," said Jeff McCarthy, vice president - marketing director at First Bank Financial Centre, Oconomowoc and a member of the 2016-2017 WBA Marketing Committee.
2. Re-Think Technology
Many bank executives still consider technology to be a threat to the banking business model, either because of its potential for security gaps or because it eliminates many traditional customer touchpoints. However, customers who utilize digital banking products typically develop a deeper relationship with the bank, and technology can also greatly reduce a branch's cost per transaction. "Transactions are cheaper without employees handling them," explained Jennie Sobecki, owner of Focused Results, LLC and a speaker at the recent WBA Branch Manager series. "In order to leverage your investment in your branches, you need to also invest in technology to make those branches more efficient." When reconsidering how your branch network leverages technology, keep the customer (and customer service) front-and-center. "We view technology as another way of serving the customer," said McCarthy. "We want them to be able to bank with us when and where they want to."
However, while technology allows banks to expand their markets well beyond their branches, most institutions will find they cannot bolster one at the expense of the other. "Customers don't want either technology or branches," said Sobecki. "They want both." The best way to ensure that your branch network gets the most value possible out of any technology investments is to constantly encourage customer adoption. "Make sure your customers are using the technology!" said Dewing. "You've spent the money, so make sure you're optimizing your investment by showing the customers the value you've created for them." That can be as simple as training front-line staff to demonstrate online or mobile transactions for customers when they come into the branch, or as complex as remodeling the branch to include tech stations and teller pods.
3. Leverage the Value of Physical Space
One of the most valuable elements of any branch network is the physical branch buildings. Even with today's real estate market, that is a tangible value that banks can enhance in a variety of ways. Some banks choose to purchase their branch spaces, rather than lease them. "Our philosophy is to find great real estate and own it if we can," said Dewing. "That is not always possible or practical, but it's preferred." Whether you own or lease, many of today's bank branches are larger than they need to be to support current foot traffic. Sobecki suggests "right sizing" existing branches by walling off unused space and either leasing it out or converting it into a community room for the bank's commercial customers to use as meeting space. Make sure your branch buildings do a good job of promoting your brand, as well. Signage and décor both make a difference. "Potential customers don't walk in the front door if they don't know you're there," Dewing pointed out. Seeing the branch also keeps the bank top-of-mind for customers. "There's a real sense of strength and security for customers when they see a physical branch," said McCarthy. "There's still a sense of reassurance when you drive by the branch and know, that's where my money is."
4. Update your Metrics
Before making any changes to your branch network, it is important for bank management to update the metrics that will be used to measure the success of those changed branches. Some of the traditional measures are not as valuable as they once were. "Sometimes we spend too much time on lagging indicators, like transactions and/or net income, and not enough time on leading indicators of future value," said Dewing, specifying that branches that add or deepen quality household relationships will provide that future value. Sobecki recommends measuring wallet share, product penetration by branch - that is, identifying which branches are the top sellers for the most profitable products - and revenue per square foot. "Retail bankers need to think of themselves as retailers," she said. "Revenue per square foot is how retailers evaluate their space." She also recommended measuring your mobile banking platform as a branch in addition to physical locations.
5. Recognize Each Branch is Unique
When planning changes to your branch network, it is crucial to recognize that every branch is as unique as the community and clientele it serves. "There isn't one silver bullet to make this work," Sobecki said. "Each individual bank needs to find out what works for them and their culture." Market research is an essential tool here, but so is individual involvement. "You have to understand the needs of the community if you're working there every day," said McCarthy. "We encourage our branch staff to be involved in the community, so we make sure that we have the right people in the right place." Ultimately, each branch within the network will operate according to the needs of its community and customers. Some will focus on wealth management and host community events, while another will primarily serve commercial customers and drive online usage. "The most important thing a community bank can do is make sure they have the right type of branch in the right market," Sobecki explained.
No matter what you may have read on the internet, rumors of the Bank Branch's death have been greatly exaggerated. "When people are going through major life changes, whether it's buying a house, getting married, or retiring, they still want to come in and talk to an expert face-to-face," said McCarthy. "Branches are still alive and well, and still serve a purpose for customers."