Despite a 22 percent rise in the number of financial institution branch locations in the U.S., branch foot traffic is at an all-time low. Transactions at branches throughout the nation are dropping by approximately 5 percent per year.
Consumers around the world are gradually turning to more convenient self-service options such as online or mobile banking and ATMs. In the Netherlands, 50 percent of FI customers have not set foot in a branch in the past year.
Branches aren't just seeing a hit to customer and member visits, though. They are also seeing a loss of profits. Low interest rates and recent legislation, such as the Dodd-Frank act, have financial institutions taking a hit to the pocketbook, as former revenue streams such as overdraft fees and other charges have been outlawed or capped.
Sherief Meleis of Novantas consulting estimates that around 15 percent of current branches have been rendered unprofitable due dropping interest and legislative changes. Pedro Rodeia of McKinsey said that low interest rates, are having "a significant impact" on retail banks in Europe, as well.
While a convenient location is still a draw for most consumers, it may be time for financial institutions to begin looking for new ways to attract customers and members … outside of the branch.
TD Bank and JPMorgan Chase may be on the right track. Recent reports said that both banks are gearing up to pepper the city of Boston with standalone ATMs. This aggressive expansion from both parties is a bold move to attract more of the Boston financial market by directly addressing the drop in U.S. branch visits.
The solution? Offer more of the self-service solutions that consumers are beginning to prefer. These new ATM locations will provide heightened convenience for TD Bank and JPMorgan Chase customers as well as savings to the banks by cutting branch costs.
If used correctly, offsite ATMs have a few other benefits, as well. Fully functional standalone ATMs provide the perfect opportunity to test new markets and demographic groups.
For TD Bank and JPMorgan Chase, transaction volume at these ATMs might provide a useful gauge of the value to be gained by building a branch in the area. The ATMs can also serve as effective billboards and marketing platforms for the banks to promote new products to current customers and entice potential new ones.
The decline in branch traffic and revenue streams can put a strain on operational costs and profitability for many financial institutions. But fortunately, an expanded ATM strategy is not limited to major brands such as TD Bank and JPMorgan Chase. Many ATM management companies offer placement and branding options that open brand expansion to smaller institutions at a much lower cost than an in-house network or full branch location.
Rebecca Hellmann is the marketing manager for Welch ATM, an independent ATM company that currently manages more than 20,000 ATMs throughout the United States.