Shaping the Future

Last week I had the honor to follow Ben Rogers in speaking to a credit union board. Research director for Filene Research Institute, Ben discussed the “Future of Branching and Channel Delivery” based on a recent report. I presented “Branch Business Modeling and Prototype Development and Branch Network Optimization.” Ben’s presentation significantly enriched the board’s understanding of where financial institutions are heading and the process each credit union needs to follow to find its way through the maze of opportunities, technologies, target markets and varying opinions from pundits on all sides of the delivery issues.

As my topic was branch and network planning, I took findings from the Filene research and then presented my thinking about how the branch environment might be shaped in response. Here is a list of 10 findings with my take on each.

Thought 1: Mobile banking means less physical member connection. New payment systems could threaten our entire relationship with our members. – Branch visits are golden.

The vast majority of accounts are still opened in branches. Branches are the best place to express your brand and create the visceral impression needed to connect members to your brand when they are on their phone or tablet. Every visit needs to create a brand experience that scores a home run no matter the reason the member has visited the branch. This becomes even more true if the in-branch cash transaction is transferred to remote teller machines. The design, staff expertise, messaging and product offerings must be tuned to the market and drive a powerful brand experience that is differentiating, memorable and sticks with members when they are away.

Thought 2: Young people and merchants are quick adopters of technology. There are currently 125 million smartphones and 50 million tablets in the United States. – Demonstrate apps on site.

We know from technology acceptance studies that people are more likely to believe information presented on their own devices. If the branch is going to be the orchestrator of the omni-channel delivery array, we need to interface in the branch with member’s own technology. An effective way to do this is to have smartphones and tablets in the branch available for members to learn to use new applications. Help them migrate from in-branch cash transactions to remote capture, for example. Every staff member should understand how to use all your applications and carry his or her own smartphone with the apps. The branch manager or concierge can work the queuing line to ask members if they would like to learn how to make quick deposits. Like the Genius Bar in Apple stores, the branch should be considered a place members can learn about your technologies as their interests and needs grow and evolve.

Thought 3: Position payment tools for money management. – Offer in-branch seminars.

Money management is the new glue to help bind members to their institution. At the first two levels—monitoring accounts and tracking and segregation of expenditures—it provides a connection that becomes trusted and makes it too time consuming to change to another provider. At the third level—facilitating advisory services—money management creates an intimate connection that gets to the core of strong relationships. Every branch should have an area for holding money management seminars and other educational offerings for members. If well planned, the lobby can be converted into an after-hours seminar space. Or, a conference/community room can serve as the seminar center.

Thought 4:  Americans love their plastic cards. – Provide in-branch instant issue.

We are starting to see members expecting to be instantly issued a credit or debit card when they open an account. The machines no longer needs to be in a secure room so long as the plastic is stored in a safe at night. The machines should be placed out of public sight, but at a location that is very close to staff/member engagement areas so members are not left alone for more than a few seconds.

Thought 5: Data aggregation enhances member intimacy. – Provide tools to staff to enhance their advisory role.

Staff members need the tools to enhance their level of member knowledge in real time at the point of contact. In terms of branch accommodations, member-to-staff engagement areas must be designed for proper positioning during a conversation. Are you working together on a tablet, seated or standing? Positioned at a desk or a dialog tower? Or looking at the same screen or different screens? Is the information appropriate for members to see? What are the security issues concerning sight and sound?

Thought 6: Small branch networks suffer low penetration. – Offer shared branching to increase service presence and concentrate new branches to gain cluster advantage.

We know from our work and reports from other providers that small branch networks are less productive than large networks. There is a well-established positive correlation between branch network size and market density and market share. Many credit unions cannot provide enough branches in mid-size and large markets to compete with big banks. Shared branching can help extend the perception of a credit union’s convenience range. But we must be careful. If we want to deliver a high impact brand experience and 30 percent of the transactions in our branches are foreign, what is the effect? Is the parking lot too crowded? Are the queuing lines too long? Are non-target non-members changing the character of the branch in a negative way? Is the branch oversized so it can accommodate shared branching? Carefully weigh the pros and cons at each location.

Thought 7: “Significant positive moments of truth” in-branch. – All employees must be knowledge workers.

Every interaction with an employee must be highly positive. Employees must move from being transaction workers to knowledge workers. Umpqua Bank was one of the first to convert its employees in this way, moving them out of offices to work in the lobby with customers. Every staff member could clearly explain the branch and brand connection. They could also start a conversation about any product or service and turn it into a new relationship. If you are replacing cash transactions with remote teller machines, you have an added exposure to significant moments of truth. If your remote teller is expected to introduce products during the transaction, he or she must be highly trained in terms of communicating high value services and know how to pass the conversation along when necessary. All points of interaction and opportunity should be filtered through the lens of significant-moments-of-truth.

Thought 8: The branch is here to do certain things for certain people. – Tune each branch to the surrounding target market.

A branch prototype suggests a single solution for every branch location. We can remodel all our branches to look the same, but every market is different. A branch prototype should be a flexible business model composed of a kit of brand and operational parts that can be applied in different forms and sizes based on the characteristics of each market. Branch locations are driven by financial, demographic and psycho-demographic analysis, and so should branch sizes, configuration and product and service composition.

Thought 9: Development and operating costs must be reduced to make branches viable. – Consider micro branches.

The aggregate number of bank and credit union branches is not declining. Rather, branch networks are being re-engineered to maximize productivity and efficiency. For many financial institutions, this means smaller branches in-filling markets to increase density and drive market share growth. We are seeing the resurrection of an old banking term “hub and spoke.” For many credit unions, a network of regional centers with smaller spoke branches is most productive. This allows coverage in many target micro-markets while centralizing high value service providers. An effective array may include a regional financial center, community banking centers, and express or micro-branches. This reduces network cost while increasing branch convenience and community awareness.

Thought 10: ATMs are an important component of convenience and brand awareness. – Include ATMs in your physical network strategy.

We love our plastic and our ATMs. On the consumer side, Bank of America is betting that replacing large branches with many convenient ATM locations will reduce cost and increase market penetration. We will see how this plays out as we watch the evolution of the digital wallet and surrounding security issues. But, properly placed ATMs are still an effective way to provide convenience, increase market awareness, and generate a little income. They should be considered when mapping physical delivery locations.

The Filene report is a document that should be considered by all credit unions planning their own branch delivery evolution. The branch is not dead. In fact, it is alive and constantly evolving toward the future.

Paul Seibert, CMC, is VP/financial design at CUES Supplier member EHS Design, Seattle.