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Kathy Burger
Kathy Burger
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Requiem For The Bank Branch?

Banks are reconsidering the role of branches, as big data insights continue to reshape bankers' understanding of their customers and the best way to serve and engage them.

That creaking sound you hear is a pendulum swinging -- the pendulum that represents how bankers think about their delivery channels, especially the branch. After a decade of aggressive branch investment and expansion, banks are scaling back the bricks and mortar. SunTrust Banks announced in March that it will close about 40 branches in the first quarter of 2013, following 43 closures in 2012. Bank of America is likely to close 750 branches in the next few years, with 16,000 related job cuts. Overall, U.S. banks closed more than 500 branches in the fourth quarter of 2012 while opening only 274, according to SNL Financial.


Digital BankingBank Systems & Technology's May issue looks at the strategies banks are using to expand their digital channels and attract a new generation of young and profitable customers. To read more, download our May 2013 digital issue now.

To some extent, the closures are cost-cutting moves, but they're also happening because digital channels no longer are alternative channels -- they're becoming dominant. How this transition is playing out and what it means for the customer experience are the focus of the May 2013 issue of Bank Systems & Technology.

The pendulum metaphor suggests that this isn't the first time that banks have reconsidered the role of branches. It wasn't all that long ago -- 15 years? -- that industry debates about the end of the branch were common. Back then, the Internet loomed as the great disintermediator. Branches were surely dead, experts declared. But things didn't play out as predicted by the most enthusiastic Web advocates (no doubt influenced by the dot-com crash at the turn of the century). Online didn't go away, of course, but branches came roaring back, and the first decade of the 21st century saw banks aggressively adding to their branch networks. Some of this activity has been through acquisitions and other deals, but a lot of it has been construction from scratch.

Now there's another retreat from branches. It's 2001 all over again, but with a twist. The multichannel tease of the late 1990s has become reality in 2013, with the online channel leading the way. Yet it's likely that it will be only a few years, at most, before mobile surpasses the Web as the consumer (and, potentially, corporate) channel of choice.

The branches that remain will likely provide a multimedia experience that would befuddle (or maybe bedazzle) the branch advocates of past eras. In fact, digital banking interactions are taking place in the branches, where advisers armed with tablets can quickly open accounts and high-net-worth clients can interact with a trust specialist via telepresence video. In a new report, Mercator Advisory Group calls this "omnichannel" banking, a shift from "traditional monochannel and multichannel views of the banking world."

It's unlikely the pendulum will ever swing back to a branch-centric model. But with big data insights reshaping bankers' understanding of their customers and cloud computing transforming operations, the conventional wisdom about the best way to serve and engage customers will continue to be a moving target.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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Nathan Golia
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Nathan Golia,
User Rank: Author
4/18/2013 | 8:28:46 PM
re: Requiem For The Bank Branch?
Fewer branches may be enough to meet the needs of today's online banker. But I hope they don't take ATMs with them. Perhaps banks can pool their resources and repurpose each others' branches as a sort of "ATM mall?"
Also, the analogy to the insurance agent is interesting. People tend to want to deal with insurance companies online G until they don't. Not sure if bank branches get floods of rare customers at the time of catastrophe like insurance agents do G but a shrinking number of live employees isn't always strictly better.
Serge Milman | Optirate
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Serge Milman | Optirate,
User Rank: Apprentice
4/18/2013 | 5:49:02 PM
re: Requiem For The Bank Branch?
Not so fast... Branch may be a billboard but it is an extremely expensive one that does not generate a return. Further, there is zero evidence to support the notion that cross-sell happens in a branch. Branch is often allocated the credit for new business simply because it is the only allocation bucket.

The reality is that Banks must transition sales & service into the digital channels, regardless of their comfort level. That is what customers are demanding and banks must respond. Those that cannot... will be relegated to an asterisk in FDIC reports.

More importantly, Banks must develop a business strategy that guides them toward success... the role of the branch and other sales & service channels, among other considerations such as product development, pricing, relationship management, marketing, etc. should be clearly spelled out along with Key Performance Indicators that enable the Bank to make adjustments.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
4/18/2013 | 5:40:53 PM
re: Requiem For The Bank Branch?
As Bryan mentioned, the branch is a good billboard for the bank, and where most cross-selling occurs. Until banks feel that they can advertise and cross-sell better through digital channels they will be hesitant to close too many branches.
Serge Milman | Optirate
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Serge Milman | Optirate,
User Rank: Apprentice
4/18/2013 | 5:01:39 PM
re: Requiem For The Bank Branch?
The traditional branch is dead. Consumers are voting with their feet... Yet, the branch will exist in a radically different format which is likely to parallel that of a wealth management office. Likely to be in an office building, likely not on the ground floor, no tellers, with a focus on addressing customers' complex financial needs.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
4/17/2013 | 4:21:35 PM
re: Requiem For The Bank Branch?
It's also worth noting that web and mobile will continue to merge. Most consumer already consider mobile and web to be the same thing, since smartphones are tiny computers with a browser. Banks need to keep this in mind -- customers don't see a difference between web and mobile.

What this mobile/web convergence means for the branch is anyone's guess. I don't think branches will go away anytime soon, but it is going to be much harder to justify keeping the costly structures open. You can already open an account and even get a mortgage (yes, a mortgage) through a bank without ever having to set foot inside a branch. Checks can be deposited remotely. ATMs dispense cash, as well as take deposits. So only maybe 5%? of bank transactions need a branch today, I would guess. And as banks further automate and as consumers demand more mobile functionality, more transactions will be able to be completed on web/mobile.
KBurger
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KBurger,
User Rank: Author
4/17/2013 | 4:04:51 PM
re: Requiem For The Bank Branch?
They definitely will not go away. They will have a somewhat different role, though, and there will be a lot fewer of them.I would imagine that in 10 years there will be a fraction of the number of branches in the US that we have today.
Byurcan
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Byurcan,
User Rank: Author
4/17/2013 | 2:30:15 PM
re: Requiem For The Bank Branch?
The branch will definitely continue to exist, albeit in a different format perhaps than currently. If nothing else, they serve as good billboards for the brand.
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