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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.
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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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KBurger
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KBurger,
User Rank: Author
3/5/2014 | 5:34:08 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
You are such a traditionalist!
KBurger
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KBurger,
User Rank: Author
3/5/2014 | 5:33:52 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
That is a really interesting point and makes me think that multi/omni channel no longer just means branch/ATM/online/mobile -- it is going to be further fragmented. As you suggest there will be multiple branch models, from "traditional" to kiosk to video-based, transanctional vs consultative, etc. There won't be a monolithic type of branch, and the same probably will be true over time for the other channels, as well.
DBOONE3572
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DBOONE3572,
User Rank: Apprentice
3/5/2014 | 3:31:45 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Banks should have multiple branch models from kiosk to flagship. The concept of remote advisors for products is important as is social enterprise so the bankers can connect with the right specialists internally.
Byurcan
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Byurcan,
User Rank: Author
3/4/2014 | 10:08:55 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Good points, though there will always be a place for the branch, as some people just prefer it even though it may be less convenient. I'm one of those people!
KBurger
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KBurger,
User Rank: Author
3/4/2014 | 9:35:27 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
Good points. I guess, as with other tech movements (outsourcing, automation, etc.) -- if it's just about cutting costs, it's really not a sustainable strategy. But if it's viewed strategically as a way to change and enhance the customer relationship and improve sales & revenue -- AND, the bank really carries through on it, not just rhetoric -- then there's a much better likelihood of it really having a long-term impact. Of course we are still in the early stages of rethinking the branch, and the shift to digital, while dramatic, also is relatively young, so it will be interesting to see what marks the successful transformations -- and what the banks that didn't pull it off did wrong.
Yaldez4FSI
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Yaldez4FSI,
User Rank: Apprentice
3/3/2014 | 11:52:48 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
We are hearing similar things from all of our customers that adopting an omni-channel digital transformation approach to doing business is somethng the bank should do because it is both more cost effective and will help the bank stay engaged with their customers. The internet+ATM has surpassed the branch as the transaction channel of choice, and social and mobile are here to stay, and growing rapidly.
Byurcan
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Byurcan,
User Rank: Author
3/3/2014 | 8:16:04 PM
re: Embracing Digital: JPMorgan Chase Rethinks Delivery
This is a trend throughout the industry; it's not just abour reducing branches and promoting mobile per se, but reducing complexity and excess systems overall. RBS recently announced they were going to reduce much of their payments systems and technolgy platforms that have become obsolete.
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