Where The Money Is

The current branch revival is evidence that the era of multichannel delivery is here to stay.

Adorned with balloons, a FleetBoston branch across from New York's Grand Central Terminal celebrated its grand opening one recent evening as commuters dashed to catch trains to the New York and Connecticut suburbs. Fleet intends this branch to be the latest in multimedia, ergonomics and environmental design. Prominent signs bearing the Fleet logo will be replaced soon by ones bearing the logo of Bank of America, which merged with Fleet this year.

The interior includes wall-mounted TV monitors displaying business and news headlines, an LCD stock ticker above the teller cages, and online banking and investment stations where customers check balances, transfer funds, pay bills and even trade stocks via Fleet's Quick & Reilly brokerage unit. Weight sensors in the floor tell the machine to automatically log off customers when they step away.

Fleet has opened five such branches in Manhattan in the past 16 months and 45 to 50 in other cities. Several hundred other branches have been given a similar design, though without the tricked-out multimedia treatment. Fleet/Bank of America plans 250 new branches this year, targeting urban areas in particular. "The amount of buildout will be substantial" in midtown Manhattan, says Jeff Barker, Fleet's executive vice president and New York regional manager.

Bank branches are blossoming as a vital part of the growth strategies of banks such as Bank of America (Charlotte, N.C.; $937 billion in assets), KeyBank (Cleveland, $84.4 billion in assets) and Washington Mutual (Seattle, $280.77 billion in assets) as they evolve into more profitable places to close customer sales.

U.S. banks will upgrade and renovate 30,000, or 26 percent, of their branches by 2006 and spend $1.4 billion on branch technology in 2006, up from $800 million last year, predicts Datamonitor, a London-based market research firm. Most of this spending will go toward enabling branch personnel to view all of a customer's relationships with a bank, connecting the bank's multiple service channels and boosting customer self-service capabilities.

KeyBank is adding 20 branches this year, the most it has ever built in a single year. But building branches does not conflict with a full embrace of the Web - it successfully encourages customers to use self-service channels such as the Web for routine transactions. Branches account for 29 percent of daily transactions, behind ATMs (37 percent) and barely ahead of the Internet (24 percent). The Internet in 2001 surpassed call centers - now just 9 percent of transactions - and it appears headed to overtake branches as the Number 2 channel within a few years.

More than 90 percent of Key's retail sales take place in branches, says Patrick Swanick, president of Key Electronic Services. But making branches into highly profitable growth engines - and not just order-takers - requires giving employees information they can use to pursue sales.

Accordingly, banks around the world spent $5 billion on CRM software last year and will spend $7 billion in 2008, predicts TowerGroup (Needham, Mass.). Key uses legacy in-house software to provide relationship managers in each of its more than 900 branches with detailed views of top-tier customers whom employees call on personally. Now it's working on delivering the same views of the other 98 percent of its customers who are engaged through branches, over the Web, on the phone or at ATMs. Key is implementing data-mining software from Siebel Systems (San Mateo, Calif.) to produce high-quality sales leads by analyzing information found in customer files and gathered via marketing surveys. The related integration challenges are tough, notes CIO Bob Rickert, but critical to a bank's competitive advantage.

Good News, Bad News

Despite these kinds of investments, for the industry as a whole, it is still a struggle to get a single view of all customers' business. Customers increasingly expect access to all of their banking relationships (e.g., checking, credit card, mortgage, etc.) via any means (e.g., ATMs, branches, telephone or the Internet). Systems for engaging a customer at the branch and on the phone "are no better than the degree to which you understand all of that customer's relationships," says analyst Richard Bell at research firm Financial Insights (Framingham, Mass.).

So as banks revitalize their branch strategies, they're taking an approach that focuses less IT spending on channel-specific systems and more on systems that organize customer data for all those channels to use. "When you compare channel-specific and multichannel spending, multichannel is becoming more and more important," Bell says.

ATB Financial, a 145-branch, $13.8 billion financial institution based in Edmonton, Alberta, integrated Siebel Systems' CRM software into its 200-person call-center system at a cost of about $6 million four years ago. Now it's bringing that same integration to bank tellers in an 18-month project. This is no small effort: about $8 million for branch-teller software from Eontec and integration with the Siebel technology, plus another $8 million for infrastructure, including all new PCs for tellers. (Last month Siebel announced plans to acquire Dublin-based Eontec.)

ATB also plans to create a customer-information file from which customers would be assigned a unique identifier, letting the bank track customer relationships across individual systems for credit cards, mortgages and checking accounts, says Ken Casey, ATB's senior vice president of retail banking. That effort, which would cost at most $5 million, would provide that single-customer view in a sort of intranet. "When customers identify themselves to a teller, the teller's screen will bring up the entire relationship," Casey says.

To support the effort, ATB is training branch personnel in cross-selling, such as inquiring whether a mortgage customer is aware of a low refinancing rate and, if the customer appears interested, referring him or her to a mortgage specialist in the branch. The customer-information file would make it easier to identify customers likely to be interested in such sales opportunities.

This article originally appeared in InformationWeek, a sibling property of Bank Systems & Technology.