From promising to proven: The state of branch transformation
Within just a few years, branch transformation has progressed from promising concept to common practice, as increasing numbers of financial institutions trade in their transactional hub-and-spoke branch networks for technology-enabled, consumer-centric financial centers.
We checked in with Nigel Martin, global marketing director for channel and branch transformation software at NCR Corp., on the eve of the company's 2017 Innovation Conference in Orlando, Florida, to find out how branch transformation is creating cost efficiencies for FIs while providing superior connected experiences for customers.
Q: What changes have you seen over the past few years in the way banks approach branch transformation?
A: The change in the physical branch environment is marked. We are seeing branch estates moving away from traditional hub-and-spoke strategies driven by square footage:
- In terms of mix shift in branch estates, flagship and hub branches will decline significantly by 2019.
- The growth of retail-focused branches with lower staffing and footprint is where the greatest movement occurs, with express-style branches expected to increase significantly from 5 percent of the branch network to 50 percent.
- This rise of retail-style environments will transform the physical branch layout, incorporating digital zones that offer increased self-service via multifunction ATMs that enable 90 percent of teller-based services, offer extended opening hours, lower staff headcount and operating costs, and provide embedded interactive services that allow the consumer to move seamlessly from self- to assisted-service.
The previous physical boundaries of the branch are blurring. The use of interactive technologies enables staff to connect to consumers anywhere, at any time, transforming not only the experience for the customer, but also the reach potential of branch staff.
Q: Is every FI a good candidate for branch transformation?
A: Absolutely. Retail banking is the No. 1 sector to be disrupted by 2020. The scale of the headwinds the industry is facing is substantial.
McKinsey’s Global Banking Annual Review from last year highlights perfectly the step-change the sector faces. Looking at the U.S. market as an example, in 2016 the sector was targeting $800 million of cost reduction, and in 2018 this figure is predicted to rise to $9.6 billion.
The evolution of branch needs to drive down operational costs without compromising the personalized consumer experience.
Branches must embrace self-service technologies to increase opening hours and sales reach while maintaining branch presence as a coordinated relationship asset that converts leakage from digital only channels.
Q: What are the benefits?
A: Substantial. With the change to retail-focused, smaller-footprint branches, our customers have realized up to 66 percent reduction in FTE costs without loss of capability; 50 percent reduction in the operational costs of a traditional branch.
Research clearly highlights the conversion success of the branch compared to other engagement channels — up to 85 percent conversion rate from in-branch face-to-face engagements compared with 55 percent from contact centers and 15 percent from digital or online engagements.
To highlight just one of our branch solutions – NCR Interactive Teller — in the U.S. community financial institution market, where we have more than 350 customers, the solution has driven substantial customer benefits — a 40 percent reduction in annual teller salary and back office costs; a 60 percent increase in branch sales; a 35 percent increase in member acquisition; and an 88 percent increase in customer service hours.
Q: How can an FI determine whether it's time to undertake the process?
A: The answer is simple. Branch transformation is one of the key strategic priorities for FIs today.
The branch lies at heart of delivering true customer-centricity. Recent research from Accenture highlights that 87 percent of U.S. consumers still see themselves using branches in the future, and they want human interaction when they go there.
The branch must embody the omnichannel experience, enabling consumers to move seamlessly from digital channels to an optimized in-branch experience. Placing the technology innovation at service touch points will drive significant gains in satisfaction and branch sales while reducing branch operating costs.
Q: What branch transformation solutions has NCR implemented?
A: To highlight a few …
Our CxMarketing platform launched earlier this year enables financial institutions to tailor offers and target consumers, connecting their messaging consistently across digital and physical channels.
Appointment scheduling and queue management solutions coordinate the consumer journey, improving the customer experience and the productivity of the FI’s sales advisors.
MultifunctionATMs seamlessly deliver a full range of interactive- and assisted-service transactions at any location. Our NCR SelfServ 80 Series was recently named the winner of the "Best ATM/Self-Service Experience" at the 2017 Bank Consumer Experience Summit.
Remote assisted-services such as Interactive Teller effectively lower branch operating costs without compromising the consumer experience; Interactive Expert provides consumers with instant access to expert advice and assistance, using two-way remote video engagement via their preferred channel, whether in-branch, at home or on-the-go.
Our Interactive Banker tablet solution lets FIs get closer to their customers through effective face-to-face interactions, combining the benefits of full-service with the convenience of self-service.
Q: Can you lay out a sort of step-by-step guide to branch transformation?
A: There is no “one-size-fits-all” approach to branch transformation. Ultimately, it depends on the strategy of the FI, their current network, the number of branches and locations they are present in and how they view the branch as part of an omnichannel strategy.
However, that being said, we work with more than 450 banks globally and there is a level of commonality among the strategies that have been used in successful branch transformation programs:
- Taking the branch to the customer, ensuring that branches are in the right places — including off-premises locations such as shopping centers and grocery stores — and that they offer convenient opening hours. Transactional video technology allows greater flexibility in deploying remotely-serviced locations without increased staffing.
- Realigning branch staff, moving staff away from dealing with cash and checks, which technology does far more cost-effectively. Instead, staff are completely focused on customer satisfaction, understanding customers and their specific financial needs and ultimately driving more product sales.
The whole approach to staffing the branch might have to change. Today, more and more banks are hiring people from retail backgrounds who have the sales experience and customer-focus they desire.
- Integration of technology, striking a fine balance of migrating transactions away from the counter to lower-cost channels and maintaining effective interactions with consumers.
Q: What pitfalls should FIs beware of?
A: Branch transformation needs to be incorporated into a wider omnichannel strategy, clearly setting out how the branch will be used as a strategic sales asset and how it maps to the FI's customer journey across all of its digital and physical channels.
The transformation strategy must encompass all aspects of people and process transformation, with the right technology mix to balance the requirements of improved customer satisfaction with lean operational efficiencies.
A few specific pitalls would include:
- Introducing new technology without concierge assistance. It is vital that staff are engaged, excited and ready to take customers on the journey. If consumers experience an easy and successful self-service transaction with new technology the first time they use it, they will be far more likely to adopt the technology as their channel of choice.
- Trying to be everything to everyone. When taking branches into smaller locations it may be tempting to try and offer everything that is available in the main branches. However, to be successful in a small-format branch requires different thinking. Consider the most common transactions and how to provide the most popular services. Clear branding and signage can help to differentiate small-format branches from main branch hubs.
Nigel Martin is global marketing director for channel and branch transformation software at NCR. He has more than 20 years’ experience in enterprise software marketing, and is a recognized expert in strategy and customer engagement. He is a past winner of the global information award and holds a doctorate degree in strategic brand development.
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Companies: NCR Financial Solutions