Article

For the self-service branch, the future is now

The continuing recognition of the importance of the branch is reflected by the willingness of financial institutions across the world to invest at record levels in the development of new retail concepts.

September 8, 2014

by David Cavell, retail banking consultant

The global network of branches has been growing steadily over recent years and there are now around one million outlets across the primary markets. This pattern has also been reflected in the United States where FDIC figures show a 10-year increase of more than 10 percent to reach 95,400 — notwithstanding a major economic downturn and industry consolidation.

The continuing recognition of the importance of the branch is also reflected by the willingness of financial institutions across the world to invest at record levels in the development of new retail concepts.

Equally importantly, we know that the branch continues to be valued by all segments of the market. This includes the much-vaunted millennials. In 2013, Javelin Research published findings in the United States that showed the significant use of the branch made by this market segment. In Singapore, both DBS Bank and OCBC have enjoyed success with branch-delivered propositions targeting the younger members of the community.

Paradoxically, the branch has not only emerged from a period when its demise was seen as a natural consequence of digital developments, but also it has gained increased effectiveness through the contributions to the new channels.

We have now entered a new era in retail banking, so what does the digital branch look like?

The digital branch model

The principal digital branch can be categorized in three ways.

The first typically has a futuristic new design but with some reference to the parent bank. The objective is to roll it out as part of a major program. Leading designs offer attractive and interesting environments, often with a much-reduced footprint.

A limited number of digital branch formats also have been produced for the purposes of brand enhancement and customer education. It is not envisaged that these models will be rolled out, but their new practices and technologies might be deployed in the mainstream network when proven.

The third group are arguably upgrades to traditional branches, but represent a major rethink about the role and operation of the branch.

The Commerzbank and Nedbank flagships are current examples of this approach. Again, all aspects of their new design and equipment could be deployed elsewhere once proven.

Equipment in this first generation of digital branches includes pads, tablets and video booths with which customers are readily engaging. Tablets are also playing an increasing portable role, supporting floor-walking staff. All these devices are typically supplemented by high-function ATMs, other traditional self-service facilities, and video teller machines.

Originally conceived as advertising channels, digital screens are now delivering promotional, educational, and service communications. They offer browsing and discovery, and might include a welcoming avatar.

Customer relationship management software and channel integration will play critical roles. Examples of other important new technologies include biometric authentication.

Looking to the future, the ATM is evolving quickly, with Caixabank recently announcing another large-scale investment in upgrading its already advanced fleet. The high-function video teller machine will provide the core technology for small outlets, perhaps sub-branches, which might or might not have staff.

All branch monetary and non-monetary transactions will be undertaken on what we now call a pad or tablet, with an extensive range of features that will include relationship data and graphics, high quality video links and television connections. Other functionality will offer services including access to the Internet, social media, news, markets, and community information.

The digital branch: Strategically significant benefits

Over the last ten years the 15,000 branches of the German Sparkassen (or community banks) have led the market in the use of self-service and created a global showcase.

Their achievements have been not only to migrate transactions, but also to enable better-designed branches and greater staff focus on customer service and relationship development. These are two critical strategic dividends that the industry must now seek from the new generation of self-service.

We also know that there is no longer any need for costly, large footprint outlets. The Wells Fargo Neighborhood Bank concept is a fine current example of how digital channels will play a critical role in ensuring the viability of the next generation of branches — through transaction handling, relationship development and better sizing.

Banks that fail to engage adequately with the digital branch in a timely manner risk the possibility of missing out on strategically significant benefits.

David Cavell (www.davidcavell.com) is a retail banking consultant who specializes in the development of profitable delivery channel strategies. He is the author of the report, “Digital Branches: Best Practice and Case Studies,” published by Retail Banking Research Ltd. in August 2014.

cover photo courtesy of san_drino | flicker