Article

Bank branch rebirth turns to tech

Leaving an old, broken model behind, FIs are learning how to serve the customer better at less cost.

April 3, 2013

By Brian Bailey, vice president and general manager of branch transformation at NCR

The Wall Street Journal's first-rate banking reporter, Robin Sidel, examined the state of the bank branch in Monday's print edition. To sum up the article: Bank branches are closing — a lot of them.

Certainly, no one in the industry would dispute that point. In fact, consider this paragraph from Robin's coverage:

"Following years of nearly unchecked expansion, financial institutions across the U.S. are closing thousands of outposts, as pressures mount to cut costs and more customers embrace online and mobile banking."

This is an important point, made with subtlety in this paragraph. When the news media talk about branch closures, there is an overriding focus on the negatives: job reductions; reduced banking access in the community; and the premise that consumers are not interested in the value and services that banker interaction can provide.

During the banking "bubble" of branch expansion over the past decade, not enough attention was paid to consumer and technology trends occurring in other industries. Despite activities in other sectors ranging from mobile integration in airline boarding to self-service checkout in grocery, banks continued to roll out branches in styles and formats similar to their legacy environments. This has created a network of branches that are neither productive, nor fit for the service and consumer interaction that is needed moving forward. 

All bubbles burst eventually, ending in a reckoning period where hard decisions must be made. But the advantage the retail banking industry may have is that it can still leverage the lessons from other industries to transform the business and redefine the next generation of profitable network distribution. That is, a network closer to the customer with a radically more efficient expense structure.

Thanks to new technology platforms, financial institutions do not have to remove completely from a community. While the old model of a one-size-fits-all physical branch does not work, technology does afford financial institutions new methods for diversifying their physical footprints and serving their communities in new ways.

For example, traditionally a bank would rely on same-size branches throughout a town, augmented with a handful of multi-function and cash dispense ATMs.

Today, NCR is working with financial institutions to build a more sophisticated distribution network, including the design of "light" branches where branch-reliant customers are still served by a modern, centrally located facility, but at a cost that is 40 to 50 percent of the operating expense of a traditional branch.

Bank staff in these locations can focus on higher level sales and service, while a new breed of assisted service technologies can accommodate up to 90 percent of all transactional banking. At one-third the size and half the cost, this new branch footprint can underpin a new network of retail banking. This new network model is supported by new technology platforms such as video teller ATMs that can unlock a new range of consumer convenience. 

This new, effective retail branch distribution model offers consumers dramatically increased physical access to the bank and its brand, with more points of contact located closer to the places where consumers work and live.

While yesterday's branch designs made it difficult financially for banks to invest in smaller communities, exciting new technology platforms can unlock even greater levels of consumer convenience and local availability. 

New technologies, particularly remote assisted service solutions, allow banks to offer significantly expanded personal service hours to support their customers' time and location demands, and do so much more cost effectively. 

As the Wall Street Journalstory implies, change is necessary. Thanks to technology, in the process of change, everyone can win.

Banks do need to examine their digital and physical service distribution and align it to market priorities. Their response, though, doesn't have to be to cut, then cut, then cut some more. Through automation technology, banks can improve their physical distribution economics.

Using capital-friendly network models, banks can deliver a complete range of financial services to their customers — where they prefer to do their banking — while radically altering branch cost and revenue models. And they can synchronize their channels to create an informed sales platform that makes each customer interaction count.

This is the future of the bank branch. And it's an exciting future for financial institutions and their communities.

photo: roberto41144