Changing Customer Preferences: Branch Impact

Customer transaction behavior is changing. But how should your delivery strategy change in response?

 

By Branch Development Group

 

A Dilemma  

Surveys reveal that customers are increasingly open to using a wider variety of channels. When asked to identify a preference, more customers than ever before choose online, mobile, or other non-branch options for routine transactions. Most institutions have experienced a measurable decline in teller transaction volume during the last few years. 

Naturally, financial institutions want to ensure that their delivery strategies reflect these evolving realities. Increased demand for direct channels, including the anticipated consumer interest in mobile banking, will require the commitment of additional capital and operating expenses. It is likely that institutions will seek to redirect resources from the branch channel as demand in other channels grows. 

Yet, noteworthy changes in customer behavior are evident only in routine transactions not customer acquisition and sales. Regardless of how customers choose to transact on any given day, you cannot capture the benefits of their lower-cost behavior unless they become customers in the first place. And for this, branches are, and will continue to be, crucial. 

Branches exist for the purpose of attracting customers, and there is ample evidence that branch location holds powerful influence in customer decision-making. A reduction in the volume of teller transactions per branch does nothing to diminish the value of this revenue-generating role. 


A new approach explicitly aimed at supporting the needs of a small team of cross-trained "universal" staff

As the industry learned from "the branch is dead" hysteria of the 1990’s, the embrace by consumers of new channels does not equate to their rejection of existing ones. The proliferation of options is seen as positive, whereas the exchange of one option for another is resisted. Since "convenience" is continually cited by consumers as the primary factor in institution selection, restricting choice leads to revenue loss.

Customers always value more. But financial institutions cannot blindly pile cost on top of cost. Pruning the branch network can reduce cost but not without unacceptable collateral damage to market share and revenue.

An Elegant Solution

A sustainable multi-channel delivery strategy must reduce branch expenditures without reducing branch presence. This can only be achieved by driving down costs per branch

A new generation of branches has been developed specifically for this purpose. The conventional practice of segmenting the branch into discrete activity zones for transactions, service, and sales has been replaced by a new approach explicitly aimed at supporting the needs of a small team of cross-trained "universal" staff. The facilities, often located in retail lease spaces, are designed to be smaller, less costly to build, and more efficient to operate. Designed to maximize the flexibility of staff members to respond to various customer needs, these new branches can adapt easily to changes in customer behavior over time and continue their primary sales and service mission.


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Designed to maximize the flexibility of staff members to respond to various customer needs

Long term success in an increasingly multi-channel world will depend on allocating costs among a wide array of delivery options to maximize customer convenience. Liberated from the cost of high teller transaction volume, branches can be operated at a cost that is in line with their value as revenue generators. But this can only be achieved if outdated assumptions about branch economics and obsolete models of branch design are allowed to be replaced by new thinking based on new and emerging realities

Since branch networks require careful planning and meticulous execution, capitalizing on this opportunity will require a shift in how branches are designed and built beginning today.

Tim Ryan, an architect and designer, has been advising and consulting on branch design for over 25 years. Considered a vanguard of thought leadership in branches, branching, and the future of branches, the development of branch prototypes based on new operational models has been a particular focus of Tim's work. Tim has been a speaker at numerous banking conferences in the United States and abroad and has contributed to a number of publications on topics related to delivery system planning and branch design. As managing partner of Branch Development Group, Tim is responsible for the company's branch design work and client consulting.

 

 

 

 

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July 18, 2011


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