Reduction of Branch Hours Emerging as Cost-Cutting Opportunity?

Profit margins remain a considerable challenge for retail banks, driven largely by regulatory pressures, low interest rates and the decline of fee-related revenue streams. In response to this, banks are continuously looking for cost-cutting opportunities.

Data from the first three fielding waves of the 2015 J.D. Power Retail Banking Satisfaction Study suggests that reducing branch operating hours could be an attractive option for banks looking to trim operating costs. For starters, branch traffic has been declining the past several years, driven mainly by the digital functionality now available via Mobile, ATM and Website interaction channels.

Analysis of study data also finds that the positive impact of providing extended weekday or weekend hours has declined significantly since 2010. For banks looking to reduce operating hours, the chart below may help prioritize their options. For example, data suggests that offering extended weekday hours is considerably more impactful than offering either Saturday or Sunday hours, so banks should likely consider cutting Saturday and Sunday hours before reducing extended weekday hours. Additionally, the positive impact of Sunday hours has declined the most since 2010, potentially making it the first option for banks to cut.

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It is also important to note, however, that the negative impact of providing only standard operating hours (9:00-5:00 Mondays through Fridays) remains significant, although the negative impact has decreased over the past five years. This seems to suggest that banks should still consider offering either extended weekday OR weekend operating hours, but that they no longer need to offer both.

Lastly, as with any cost-cutting decision, banks must be strategic in their approach to reducing hours of operation. Some customers will likely react negatively to the change in routine, particularly certain demographic segments that rely more heavily on branch interaction. Data also finds that customer needs and expectations regarding branch hours varies widely by geography. In turn, banks must consider the unique needs of their different markets to help prioritize options for reducing branch hours.

Additional ideas for banks to consider may include:

Analyze traffic patterns across entire branch network to help identify branches that are the best candidates for reduction of hours and/or what types of reductions should be considered (should I trim extended weekday hours, Saturday hours, or Sunday hours??).

Develop a detailed marketing strategy to communicate any planned reductions in-advance of implementation, while also promoting any digital functionality that customers can use in-place of the branch (i.e., deposits via ATM or Mobile).

Use multiple channels (emails, direct mail and branch signage) to deliver the message.

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