expand into new geographies? Is your future focus on attracting/
retaining more of the same segments, or do you need to attract
new segments? Analyzing data to uncover greatest opportunities
may lead you to add experts to deepen existing relationships. Or
it may lead you to expand your branch network into markets
with higher concentrations of new target segments. We find that,
typically, 80 to 90 percent of revenues are generated by 50 to 65
percent of branches in a given network, creating considerable
opportunity for rationalization,” T’Serclaes continues.
“One bank’s analysis may lead it to withdraw from a market,
but, as we’ve seen, this may create an investment opportunity for
banks seeking to expand their presence in a high-opportunity
market. For example, Huntington Bank took over 37 former
Chase branches in Meijer (grocery) stores in various parts of
Michigan. And Huntington plans to add branches in six additional Meijer locations. Washington Federal has acquired 74
Bank of America branches in Nevada, Arizona, New Mexico,
Washington, Idaho and Oregon. Ameris Bank acquired 18 Bank
of America branches located in North Florida and South Georgia.
Optimization is about reallocating capital to the areas of greatest opportunity not just shuttering branches,” Kierstein adds.
“Reconfiguring branches to address a reduced consumer
preference for in-branch servicing and to enhance productivity
is another important piece of the optimization puzzle. Chase is
reconfiguring 1,200 branches this year. Most of these have not
involved complete redesign of the branch. Rather they have
kept one or two teller windows open in their existing teller lines
and put ATMs in the other windows. Many community banks
have been less aggressive about making these changes than they
should be, thinking that the investment will take a long time to
recoup,” says Kierstein. “That is not necessarily the case.”
The universal concept
PNC has shown that the optimization process can be approached
one step at a time. After closing 240 branches since 2014, Bill
Demchak, CEO and president, described the bank’s approach
at a 2014 Goldman Sachs Financial Services Conference, saying
that 2015 will be less focused on closing branches and more
on converting 300 locations to a teller-less, universal concept
by the end of the first quarter. Universal branches require,
on average, one less person to staff and are more productive,
Demchak said. PNC has stated that by 2019, two-thirds of PNC
branches will be teller-less with staff focus on customer service
and selling products.
PwC’s study notes that leading banks are moving away from
“managing branches” and instead are “managing distribution”
across all the bank’s channels including evolving branch models
to balance local-customer needs with the high cost of branch
delivery. They are designing their branch strategies to deliver a
differentiated experience, based on customer needs, the competitive landscape, brand promise and internal capabilities.
Banks choose an appropriate mix of branch models to
support their desired customer experience. PwC sees various
models being experimented with today—assisted self-service,
in-store branches, full-service branches, community centers
and flagship stores.
In Accenture’s study, “Banking 2016: Accelerating Growth
and Optimizing Costs in Distribution and Marketing,” it states
that networks composed solely of full-service branches with du-
plicate services and skills are no longer sustainable. “The branch
network model must be designed with careful consideration to
differentiated formats and integrated in a multichannels views
that is able to maintain territorial coverage, react to local cus-
tomer needs and optimize skills and capabilities. This extends
beyond full-service branches and hubs to include light branches
(with an average of four to five employees), kiosks and cashless
branches. By migrating low-value activities to digital channels
and retail-based formats, banks can satisfy new customer seg-
ments and further overall branch network transformation.”
The Accenture study goes on to state: “An efficient ‘hub and
spoke’ branch model can help enable a bank to decrease the
branches in its overall network by 15 percent to 20 percent and
reduce average branch staff by 25 percent with the proper mix
of flagship, full-service light and kiosk branches.”
A potential mix of differentiated branch types are summa-
rized in the study as follows:
m;Cashless, kiosks: maintain for service; 50 percent of network;
100 percent service.
m;Light branches: maintain for sales; 30 percent of network;
m;Full-service, hubs: maintain for advanced banking; 15 percent
of network; 40/60 transactions/sales.
m;Flagships: innovate, attract; 5 percent of network; 30/70
5. Repeat—consumer behavior is going to continue
to evolve—optimization needs to be approached as
an iterative process.
Hopson reminds us, “History is irrelevant as you approach
optimization—make sure you are closely tracking how cus-
tomers are interacting through different channels. Behavior
has changed fast and is going to continue to change. You can’t
put this project on the shelf.”
Boston Consulting adds that two of key factors in successful
optimization are test and learn. “As behaviors continue to change
banks need to be continuously evolving their delivery model.
Test and learns at the branch, market and region level must
become a way of life for banks moving forward. Be humble.
This is going to be an iterative process.” n
ABOUT THE AUTHOR
DEB STEWART of Charlotte, N.C., is an independent consultant working for the financial service industry. Telephone:
(704) 759-1633; email: firstname.lastname@example.org.
As behaviors continue to change, banks need to be
continuously evolving their delivery model.