For years, the branch of the future was more about talk than action. While substantive branch transformation remains a rarity in North America, there appears to be a growing consensus that the status quo is unsustainable.
University Federal Credit Union of Austin, Texas, figured this out several years before Celent senior analyst Bob Meara said it this August. University had opened a stunning "green" branch in the spring of 2008, and while their new building was off the meter in terms of environmental sustainability, when it came to economic sustainability, the needle wasn't even twitching. Then came the stock market collapse in the fall of 2008.
The $1.6 billion, 155,000-member FCU had already purchased land for four additional branches, and also had plans to renovate a former Wachovia facility in an upscale neighborhood. But it was clear that before they did, they would need to come up with a vastly different business model.
Solving the sustainability dilemma
In the Nov. 8 webinar, "Meta trends, mega transformations at the branch," hosted by ATM Marketplace and sponsored by Diebold Inc., Raja Bose, senior director of branch transformation solutions at Diebold, and Steve Kubala, senior vice president of operations and COO at University Federal Credit Union described how University and Diebold worked together to deconstruct the FI's unsustainable traditional branch model and transform it into something that was not only economically viable, but also far more member friendly.
The problem University started out with is nothing unusual or new, said Bose. He outlined five realities that virtually all FIs face today:
- Exponential change in technology. "For the longest time in the industry we've been talking about online and mobile as alternate channels," Bose said. "[T]he reality is now that they are the primary channels."
- Rise of consumer power. Consumers now have many more options for conducting their financial services activities and financial institutions must figure out how to remain the primary financial relationship with their consumers.
- Transformational economy. "For the longest time, the financial institutions have been delivering a very similar experience," Bose said. But dramatic changes in retailing are causing consumers to expect more.
- Changing demographics. Within five years, 40 percent of all transactions will be made by Gen Y (aka, millennials), who gravitate toward self-service channels, Bose said. "How does that impact not only your digital channels but your branch channels?"
- The "new normal." The recession introduced a "new era" in banking that would be characterized by less growth and more pressure on profitability, Bose said.
The branch will continue to play a vital role in helping institutions "develop and deepen their relationships with customers more effectively than in any other channel," Bose said. But it can't continue to play that role in the traditional, unsustainable way.
Figuring out a new way took University on a "three-year introspective journey of sorts to develop a new branch operating model" Kubala said. "Our president was really focused on transformational versus small, incremental changes." Diebold was able to provide the technology to make that happen.
No tellers, no tills
The new branches have no teller windows. And no tellers. "Personal financial representatives" sit at bar-height computer terminals arranged in an open lobby. (A manager and an investment services representative occupy two offices off the lobby.) PFRs greet members at the front door, and provide the usual menu of teller services. Except that they don't handle money. At all.
Instead, they provide "assisted self-service," as needed, helping customers to use the branch's financial kiosks, of which there are several. "We don't call them ATMs because they're not ATMs anymore; more and more functionality is coming onto these machines," Kubala said. "We also didn't want members to think, 'Great, you did away with my tellers and you've got an ATM in the lobby. Wonderful.'
If a member has not done a particular transaction at the kiosk before, the PFR will walk that individual through the entire process, doing everything but enter the member's PIN. Kubala said that for the success of the model, it is extremely important that members "don't feel silly using these financial kiosks if they've never used the machine before."
The kiosks sit below the member's sight line to make them seem less monolithic and more welcoming. But despite their small stature, they deliver a large variety of banking functions. They also help save the CU a great deal of money — they've allowed University to reduce staff at the branch from seven tellers to four PFRs, a savings of $350,000 annually per branch.
Once a PFR has explained the new service model to them and they've used the branch a few times, members become very comfortable with setup, Kubala said. Enough so that the CU is now planning to convert a "seasoned" branch to the new model.
"The greatest surprise really is how members have adapted to the new branch model with relatively few concerns and few complaints. I was prepared for the worst and got the best."
The webinar "Meta trends, mega transformations at the branch" is now available for free viewing at the ATM Marketplace website.
For more on this topic, visit the multifunction ATMs research center.