Who Will Use the Branch of the Future?
One of the hottest banking topics these days concerns the future of the branch. Are they becoming obsolete? Will they be downsized? Will they take on a completely different look and feel? How many will be consolidated and closed? Will they be put to a different use?
Bottom line – there is a lot of uncertainty as to what to do about today’s massive number of very expensive brick and mortar branches.
Adding to the uncertainty is that while some banks, like Bank of America, are closing branches others like TD Bank are expanding into new territories by opening new branches.
One thing is certain – the correct course, or courses, of action remains unknown at this time.
In the meantime, we’ll continue seeing the occasional article where the author is offering choices and making recommendations about the future of the branch.
One that I found a bit confusing is “Investing in the Branch of the Future” penned by retail banking consultant William Weidman and posted to the BAI website on May 18.
In his article one of Weidman’s suggestions is that bankers may want to target the mass affluent and wealthier customers by focusing on mortgage and brokerage business. It would require hiring more specialized staff members experienced in selling more complex products.
Frankly, I don’t see this as a viable option for a majority of the nation’s banks and credit unions.
First of all, how many bank and credit union customers fall into the categories of the mass affluent and wealthy? I suspect it is a small percentage of overall customers. And with the lingering economic downturn the size of the mass affluent group must be shrinking.
Second, there is no shortage of companies currently offering mortgages, financial counseling, and brokerage services.
Third, it is unlikely that most banks and credit unions would be able to successfully rebrand themselves as trusted purveyors of upscale financial products and services.
Fourth, instead of reducing branch employee costs it would likely increase them dramatically. Why? Skilled, experienced financial experts demand much higher salaries and lucrative sales incentives as compared to today’s typical branch employee.
Adopting the “go upscale” strategy would be a disaster as too many banks and credit unions would be chasing too few qualified consumers.
By the way, Weidman’s May 18 article was ranked “Best of the Week” on the BAI site as it was the most read as ranked by page views. You can read it here.
I also find it interesting that a number of banks are addressing the future of the branch issue from the redesign perspective. It reminds me of the line from Kevin Costner’s baseball movie “Field of Dreams” – “If you built it they will come.”
This has been the approach of Oregon’s Umpqua Bank for over a decade and it appears to be working. Of course, they are the pioneers in downsizing branches and designing each one to fit the neighborhood in which it is located. Note to bankers: Just because it works for Umpqua doesn’t mean it’ll work for your bank. It’s a passion with Umpqua’s visionary CEO.
Seeking the “silver bullet” solution, Citibank has hired the architects that did the Apple store design. What are the chances that Citibank will have better luck emulating Apple than has JCPenny?
I seriously doubt that redesigning America’s thousands of bank and credit union branches is the ultimate solution to the costly branch problem.
Swimming against the tide when it comes to branches is TD Bank, formerly Commerce Bank of New Jersey. Instead of fretting about the future of the branch, senior management remains focused on providing the best possible service to as many customers as possible. An informative article about TD Bank is available here.
Right now the only certainty about the future of branches is that uncertainty will exist for some time to come. In the meantime, banks will continue trying different approaches, pundits and experts will continue offering their opinions and recommendations, and fewer and fewer consumers will find a need to walk into a brick and mortar branch.
What does the future hold for branch banking?
Previous blogs about the future of branches:
Read “A Bleak Future for Branch Banking?” here.