Banks must invest in their branches, but they must do so wisely, cautions a recent study by Celent (Boston) that examines the current branch revival. The success of the branch channel depends on reshaping the services that they offer, according to Celent senior analyst Bart Narter.
The rise of Internet banking did not kill the branch, notes Narter, but it did contribute to a decrease in branch-based transactions. "Branch face-to-face transactions are definitely decreasing because of self-service functions, such as direct deposit and debit," he says.
"Banks realize today that people still like the branch for certain services, such as opening an account and getting complex service issues solved," Narter continues. As a result, banks must change the functions of branches, he asserts.
The biggest challenge is providing more high-touch service in a business environment that sometimes demands cost cutting, Narter notes. An overall change in the culture at banks is necessary, he asserts, adding that the new "sales culture" philosophy - in which operations are centered around customers, not products -- is beginning to gain steam among banks.
"In the old days, the branch was about transaction efficiency. Now, it's about helping the customer," Narter explains. But, "Today's IT is structured around products, not customers -- so are branches," he says.
To correct this, banks are investing heavily in technology to support the service/sales mentality by providing a holistic view of customers. According to Celent, banks invested $450 million in new branch technology in the past year to break down technology silos.
But technology is only half the equation. "Banks have spent so much on their branches, [but] they have to hire the right people," says Narter. "The people [in branches] aren't paid well enough - there's no incentive for service," he points out. When staffing a branch, "Hire someone who knows customer service," Narter recommends, "not someone who knows how to count out a drawer."