The Evolving Role of Bank Branches

USA Today ran an interesting article last week entitled “Will Bank Branches Wither Away?”   It always catches my eye when someone even suggests the demise of brick-and-mortar branches, even in this day and age of iPhones, Droids, ATMs, etc.  The article does cover some interesting perspectives on how banks like Citibank are going greener by eliminating paper and other banks like Chase continue to expand branch presence into new geographies. So IS the branch going the way of the Dodo Bird and buggy whip? Not necessarily.

But the raison d’être of the branch has certainly evolved and reflects the changing needs and preferences of a more mobile and self-serving consumer population. In contrast to the ABA research quoted in the article, which reported 62% of customers prefer online versus only 20% branch, J.D. Power and Associates’ 2011 Retail Banking Study found a slightly narrower gap. In the 2011 study, preference to online was 52%, 23 percentage points higher than branch. While that still reflects a significant tilt towards online, it also shows that “…the report of the branch’s death was an exaggeration.” (our thanks to Mark Twain).

What role does the branch seem to play in today’s increasingly technological world? Similar to the advent of both ATM and IVR, the real decline in routine, simple transactions done by Tellers and Platform means a greater concentration of more complex and less routine questions, issues and transactions confronting ever-declining numbers of branch staff. For example, the 2011 study found that 80% of customers checked their balances online but only 13% did so in the branch. However, 79% reported opening an account in-person as opposed to 24% online and 54% reported a problem in person versus only 23% online. While some of these more involved activities will undoubtedly continue to grow in the alternate channels, what is clear is that branches need to be better equipped with the resources, training, empowerment, policies and information access which will enable employees to handle greater complexity at the point of customer contact. Furthermore, customer expectations in this real-time, immediate access environment expect the same type of response time and accuracy they have come to expect from online banking, ATMs, and iPhone apps. But our research also shows that when problems arise or questions are not routine, a face-to-face conversation with someone at the branch who has answers and empathy still trumps a web browser….for now, anyway.


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1 comment to The Evolving Role of Bank Branches

  • Bank branches, as currently configured, cost about $500-600 thousand per year in direct operating expenses. A little over half is compensation expense. If branches are to evolve as a place to solve problems, open accounts, develop business, and offer advice, the staffing model will have to change significantly. Are banks prepared to make the changes necessary?

    We shall see.

    ~ Jeff

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