Getting Started on the Branch Transformation Journey
Mobile is all the rage right now in banking, as it steals away transactions from other channels and erodes branch traffic. But should it be getting all the attention it is?
A Celent study (registration required) found that mobile has increased significantly as a budget priority in the last couple of years, as focus on the branch channel has declined slightly. Celent asked 156 financial institutions to grade each delivery channel by budget priority on a scale of one to five, with five being the highest priority. Mobile got an average score of 3.5, up from 2.5 in 2010. The average priority score for the branch channel decreased from 3.9 in 2010 to 3.4 this year. And even though 56% of the banks in the study called branch transformation a strategic priority, it came in well behind the most popular priority -- digital channel development (84%).
The branch remains the top sales and origination channel for banks, though. Only 24% of the banks in the study offered checking or savings account opening through mobile.
[For more on the branch channel, check out: The Next Generation of Bank Branch Employees]
Despite the lack of revenue being generated, Bob Meara, senior banking analyst at Celent, said mobile demands so much focus and investment from banks because they are struggling to keep up with the pace of innovation right now. "When we were doing post-survey interviews, one mid-tier bank told us, 'We're way behind our peers in mobile. We have so much work there.'" Many other institutions shared that fear of getting left behind.
Most banks will likely continue to focus heavily on developing their digital channels while making minor changes to their branch designs, rather than taking on full-blown branch transformation projects, Meara said. Only 37% of the banks in Celent's survey said they would make "significant" changes to their branch designs, staffing, and technology over the next five years.
Most banks in the study also don't plan on closing many branches soon. Only 26% of the respondents said they expect their branch count to decrease in the next five years. After all, Meara said, if a bank closes a branch, then its sales and deposits go down.
Given the importance of branches for revenue generation and the need to invest heavily in digital channels that aren't replacing that revenue, Celent outlined a six-step model for branch transformation initiatives that takes into account the limitations that most banks have with their current branch infrastructures and budget priorities.
The first step in Celent's model is aligning branch capacity with customer demands and opportunities. Banks can start by making their branch staffing and operations more efficient, Meara said. One way to do that is to implement workforce optimization software across branch networks.
"Workforce optimization software sees all the teller logs and transactions, and that drives efficient staff scheduling. It helps align staff capacity to demand," he said. "Only about one-third of banks are using those solutions, but the ones that we see are ahead of the curve are using them."
Another way banks can start to align capacity and demand is through enabling online booking of branch appointments for customers, according to Meara. But only 8% of the banks in Celent's survey offer that service, and less than half were planning to do so.
"That's really a lost opportunity for banks," he said. "Online appointment booking -- it helps with efficiency, and you know why the customer is coming in, so it helps with engagement… I think that it will eventually become commonplace as more case studies come out" from banks that are offering it.
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio