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Embracing Digital: JPMorgan Chase Rethinks Delivery

A new approach to branches, a dynamic competitive environment and the implications of $2 billion in compliance-related investment were among the topics covered by CEO Jamie Dimon and his management team at the bank’s recent Investor Day.

It's becoming a familiar refrain in the banking industry: The expansion of digital channels, along with a growing customer preference for self-service, is rendering the traditional branch less productive -- spurring a scaling back of branches and related workforce reductions. We've already heard this message from banks such as Barclays. JPMorgan Chase is the most recent bank to sound this theme, which the company's senior management discussed at the company's Tuesday, Feb. 25, Investor Day.

[From Appliances to Apps: What Does Digital Mean for Banks' Products and Services?]

The strategy includes significant projected employee reductions. Already in the past two years the bank has reduced its overall branch staff by 7,000 (from 60,000 to 53,000), and that trend will continue as digital capabilities and consumers' embrace of self-service combine to redefine the role of branches. JPMorgan Chase confirmed that its headcount will be reduced by 5,000 people in 2014.

The staff reductions reflect not only the changing branch strategy, but also are part of a broad business simplification and expense reduction strategy -- the goals being to "reduce complexity and focus on core competencies," according to the bank's presentation -- JPMorgan Chase outlined during Investor Day. Other elements of the strategy include existing products that are non-core to customers or that are too risky (such as student lending originations, co-branded business debit cards and gift cards and identity theft protection), and discontinuation of certain business with select clients (such as lending to check cashing businesses and checking accounts for foreign politically exposed persons).

The goal, as outlined in the presentation, is to end 2015 with expenses about $2 billion lower than 2014 expenses. In addition to expansion of digital channels and self-service, key expense reduction initiatives specifically in the Consumer & Community Banking (CCB) unit include further consolidation of operating centers, consolidation and rationalization of vendors, and continued optimization of the branch network.

Branch reduction doesn't appear to be an end in and of itself -- the bank ended 2013 with 5,630 branches, slightly up from the 2012 total of 5,614. Rather, the strategy is to "optimize the branch network" with smaller branches (2,500 to 3,5000 square feet versus an average 4,400) and less density. "The Chase branch network of the future will be more efficient, automated and consultative," with less transactional staff (two tellers per branch compared to what historically has been four). But while headcount in the "branch of the future" will be less, the percentage of those workers who are considered "advisory staff" will increase from 40% to 60%.Overall branch staff has been reduced by 7,000 people over the past two years, the bank reports.

In its presentation the bank notes that a higher percentage of its branches are in a "growth phase" (11% are less than three years old, 23% are three- to 10-years old) compared to five of the largest U.S. banks (Citibank, US Bank, PNC, Wells Fargo, Bank of America). Ultimately, though, it's all about digital, and driving "digital engagement" and "[improving] customer experience by providing access through preferred channels." This also extends to the cards and mortgage business.

[The mobile employee -- as well as the mobile customer -- are here to stay. Is your bank prepared? Learn how to set up and maintain a mobile infrastructure that can support today's needs and tomorrow's expected mobile demands. Attend the From BYOD to 802.11ac: How to Build A Next-Generation Mobile Infrastructure session at Interop 2014 in Las Vegas, March 31-April 4.
You can also REGISTER FOR INTEROP HERE.]

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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Byurcan
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Byurcan,
User Rank: Author
3/10/2014 | 7:26:46 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I agree. Long live the branch!
Kelly22
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Kelly22,
User Rank: Author
3/10/2014 | 7:25:27 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I love the people who work at my local branch! Last time I went, they all waved goodbye and wished me a good weekend. ATMs aren't nearly as friendly.
KBurger
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KBurger,
User Rank: Author
3/6/2014 | 6:13:23 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Well, you guys better enjoy your time in the branches now because based on what we are seeing across the industry a) there will be many fewer branches in which to mingle and b) those that remain will offer a significantly different experience compared to what is available now. It won't be too long before your human interaction in the branch will be via video screen or kiosk, or maybe even with a robot!
Byurcan
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Byurcan,
User Rank: Author
3/6/2014 | 5:30:15 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
No. Artificial Intelligence will be the ruin of us all. didn't you see "2001: A Space Odysessy" or "Terminator 2?"
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
3/6/2014 | 5:25:37 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
So if I ask Siri to do a mobile deposit for me, that doesn't count as human interaction?
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
3/6/2014 | 5:24:28 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Citi is introducing new ATM's with increased transaction capabilities to pursue that kind of strategy with their branches. Will be interesting to see how successful they are with that, and if other major banks in the U.S. follow suit.
Byurcan
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Byurcan,
User Rank: Author
3/6/2014 | 1:40:55 AM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Agree, sometimes you just need that human touch. Everyone wants to do everything today on their blamed mobile devices. Where's the human interaction! Where's the love!
Becca L
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Becca L,
User Rank: Author
3/5/2014 | 10:41:52 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
I do this too! I don't know why, it just seems like the better option, even if it isn't the fastest or most modern. Maybe I just like the "hey, howya doing?" convo with the teller. Sorry to disappoint, Kathy :-(
KBurger
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KBurger,
User Rank: Author
3/5/2014 | 9:14:16 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
OK, now that's just sad -- even if you don't do mobile deposit you can deposit checks at ATMs now. Of course, while you're standing in line you can always check your email, texts, Twitter, etc. on your smartphone (assuming you have one).
Byurcan
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Byurcan,
User Rank: Author
3/5/2014 | 6:35:26 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Yesterday I waited on line at a branch to deposit a check, and loved it!
Page 1 / 2   >   >>
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