Traditional transactions are on the decline for banks around the world–even though for most, the overall volume of transactions is increasing. As the role of the branch changes from the centerpiece of distribution strategies to a component part, what can banks predict about its future form and purpose?
- For the customer: Customer relationships are moving from a “convenience model” to an “activity-driven model.” Convenience required that banks pursue branch density, knowing that customers make decisions about their relationships primarily based on proximity to the branch. The new model of customer relationships will be structured around engaging with customers in their day to day lives, virtually—by timely, context-driven, product offers, refined money management tools and services, and interactive correspondence with “the branch” through virtual channels. Our recent work on product and service innovation looked at the proliferation of banking “activities” driven by technology.
- Traffic and sales: The role of the branch itself for customers will become increasingly specified as it moves from being the central channel to one piece of the channel array. Most of our members report declining branch transactions, but increasing transactions overall. The transactions that will continue to be drawn to the branch will be new account sales, complex product sales, like mortgages, and some types of problem resolution. Meanwhile, we expect cross-selling to be driven by non-branch channels. See our recent work on customer channel preferences to understand how these trends are already emerging.
- Contribution to overall distribution strategy: On the bank side, banks face the challenge of reshaping the purview of the branch. While the branch will have core strengths like those outlined above, it will also need to become a support mechanism for online and mobile channels—creating incentives for its staff to educate customers about online channel capabilities. While many banks are carrying branch networks that exceed demand, the more pressing issue is rightsizing and retraining staff to meet changing customer behavior. The need for traditional teller staff will see continued decline. Similarly, as cross-sales become more refined online, total sales from the branch will also decline. Accordingly, we expect increasingly lean staffing models, with many moving to generalist “universal bankers” supported by centralized product experts. See our recent work on right-sizing branch staffing through attrition and creating incentives for branch-supported online growth.