Summary: Yes, it’s snowing in the DMV… no, this picture of the White House doesn’t capture today’s totals just yet. Nonetheless, the run on gas, food and firewood started early yesterday. So what better time to post something new to About That Ratio than with the snow coming down and the power and wi-fi still on?
Recently, I’ve had the chance to talk with several of the firm’s partners about the rise of the digitally driven consumer and commensurate high-cost infrastructure of physical banking locations. I believe we’re in agreement that if the branch model stays on its current course, it will become a financial burden to banks; ultimately, cutting deep into cross-channel profitability. So today, I thought to share some information produced by PwC that looks at reinventing branch banking in a multi-channel, global environment.
Yes, the branch of the future has a critical place in banks’ overall channel strategy. However, in its December “FS Viewpoint,” the professional services firm cites the cost of a branch transaction being approximately 20x higher than a mobile transaction… and more than 40x higher than an online one. Consequently, banks are beginning to adopt a mix of the following five branch models in order to compete and improve their ROI:
- Assisted self-service branches that cater to retail and small-business customers on the go with high-function kiosks;
- In-store and corporate branches; for example, in grocery stores and corporate office buildings;
- Full-service branches that provide one-stop banking (sales and service) to retail and small-business customers who prefer privacy and face-to-face interactions;
- Community centers that have a smaller footprint than traditional branches; and
- Flagship stores that deliver sales and advisory expertise while showcasing emerging capabilities to sophisticated customers.
The logic behind a mixed approach? It increases the bank’s geographic relevance to consumers and balances customer needs, revenue opportunities and cost to achieve growth.
Anecdotally, I’ve recently talked with two CEOs, Ray Davis from Umpqua and Stephen Steinour from Huntington, about their branching strategies in advance of keynote speeches they’ve made at our Acquire or Be Acquired and Lending conferences. It strikes me that when banks like theirs assess a prospective branching opportunity, they deliberate on things like:
- How do you develop specific financial criteria for measuring branch performance;
- How do you decide whether the best path to building customers is adding branches, or operating with a more centralized marketing strategy; and
- What are the advantages — and potential pitfalls — of growing a branch network.
So as the snow continues to fall outside, I’m digging deeper into PwC’s perspectives. As a “bonus” to the white paper referenced about, let me also share a video from the firm “Look Before You Leap: Analyze Customer and Business Impact Carefully Before Implementing Product Change.” While the title is a mouthful, the message, pretty succinct.