Bending The Branch

How changing member preferences and technology are impacting branch strategies.

 
Callahan & Associates

By Callahan & Associates

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The financial services game has changed, so where can a modern credit union find the income it depends on? Here’s a hint: It’s still in branches.                       &n​bsp;     

Members are more inclined to use automated teller machines (ATMs) or online and mobile banking for routine banking transactions, but they still prefer to open new accounts, apply for loans, and resolve problems within the branch.

This channel is still crucial to a credit union’s overall strategy, but its role has shifted. Today’s successful branch operation is one that emphasizes sales and advisory capabilities, provides an engaging member experience, and operates more efficiently. It’s time to rethink the branch.

What’s Changed?

Members are becoming multi-channel users. They expect a consistent experience across every touchpoint and will flock to whichever method of doing business is easiest for them in relation to a specific task.

Currently, consumers prefer the online channel for basic transactions, but mobile banking usage is expected to grow at more than 25% annually over the next several years, according to research firm TowerGroup.

Call centers are still an important channel with respect to problem resolution and shopping for product information, although many traditional phone-based transactions have shifted to online and mobile.

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The Good News

Despite growing interest in self-service channels, customers still want to apply for loans, open new deposit accounts, get assistance with member service matters, and resolve complex problems inside the branch.

The interest levels vary, but all income and age groups support this trend. Every segment also reported that ATM and/or branch network density is a deciding factor in their selection of a new financial institution.

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The Bad News

Increased regulation and changing preferences mean every institution is under pressure to reduce expenses and improve engagement at the same time.

Research shows that more than 50% of branch costs are associated with salary and benefits. In addition, a majority of teller costs is attributed to high-volume, common transactions such as deposits and check cashing. A majority of this workload can be performed at a much lower cost using self-service channels.

The Solution

Given profitability pressures, credit unions need to drive costs out of the branch while generating more sales. That’s easier said than done.

Effective branch transformation programs incorporate several different elements including:

  • Understanding the member base and delivering the branch experience members expect.
  • Defining a comprehensive delivery channel strategy and channel optimization plan.
  • Assessing the performance of current branches and branch operational processes.
  • Identifying and integrating technology into the branch and designing a transaction migration plan.
  • Changing the staffing mix in the branch.
  • Measuring the impact of new programs and quantifying the return on investment in delivery channel initiatives.

Delivery Channel Strategy

It is time for credit unions to assess their branch and ATM network and determine the value of each location relative to organizational objectives and segmentation focus. Although members value branch convenience, it is no longer necessary to have branches located a few miles from one another.

Given the reduced volume of current and future branch transactions, branch size can also be much smaller. In fact, a number of institutions have built branches that are 2,500 square feet and under.

Given the pressures on earnings, it is critical for institutions to develop a delivery network optimization plan that includes the following types of actions:

  • De novo branches or off-premise ATMs to fill gaps in market coverage
  • Consolidations of overlapping locations or underperforming facilities
  • Relocations of branches to smaller facilities or higher-traffic locations
  • Remodels to improve the member experience and lower operating costs
  • Removal of unprofitable or low-value off-premise ATMs

It is also important to understand how members use various delivery channels and how channel offerings compare to primary competitors. Analyze several months of transaction data across channels to better understand member preferences. Survey members to determine how they want to conduct various transactions and customer service activities as well gauge their interest in new channel functionality.

Technology Integration And Transaction Migration

Integrating devices and kiosks into the branch will help make common transactions easy to handle via self-service methods. Equip employees with the right technology to show members how they can do the same thing at home with similar devices. Create a technology bar, like what you’d see at the Apple Store, to highlight self-service offerings and educate members. Change new account opening choreography to highlight new and exciting self-service capabilities, such as image deposits at the ATM.

Use segmentation to help identify which members may be more or less receptive to new self-service channels. Once a credit union determines who’s likely to use those channels, it can begin targeting that group with appropriate marketing messaging. Consider incentives to increase new channel adoption among those who are reluctant to change their behavior.

Experience Transformation

Think of branches like retail stores. They need to be more engaging, provide a more relevant member experience, and support sales productivity.

Transform the branch interior to better promote the products and services offered. Re-design the waiting area to be a financial education center where members can learn how to better manage their finances. Leverage touchscreen displays or tablets to provide members with an interactive shopping experience.

A New Branch Staffing Model

Now that the institution is thinking about the branch as a retail outlet for products and services, it will need the right people. Search for universal associates who can perform both sales and teller functions. Each encounter should be consultative and during that process, the representative may even uncover a hidden need for another financial product. This puts staff in a position where they can keep talking and educating the member, even as they up-sell and cross-sell various products and services.

Visit www.diebold.com/consulting for more information.
 

October 9, 2012


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