Pub. 3 2012 Issue 4

www.wvbankers.org 10 The Economist recently hosted an online debate over whether or not branch banking is obsolete. Brett King, author of Bank 2.0, was assigned to argue that they are. He said, “…a place is simply no longer a vital, necessary component of day-to-day banking.” About two-thirds of voters opposed this view. 1 K ing likely lost the debate because those who weighed in understand the human psyche. Branches cultivate trust. Branches offer human interaction. Branches convey safety and security. These are the things people crave when it comes to their money. However, King’s position is not entirely without merit. Many of the banks and credit unions we work with are envision- ing a future where their branches are not a necessary component of day-to-day banking. ( “Day-to-day” being the opera- tive phrase.) In this future state, they will still have physical locations, but these locales will serve a higher purpose. They will be the place customers go for consulta- tion, advice, and high-value/high-profit products and services. The business model is designed so that more day-to-day banking tasks, such as balance inquiries, deposits, trans- fers and withdrawals are handled via ATM or through web, mobile or tablet applications. In other words, a larger percentage of banking transactions will be self-service rather than full-service. It may take some time, but these institu- tions are confident people will get used to self-service. Today we think nothing of pumping our own gas or bagging our own groceries. And the small percentage of people who want full service, well, they pay extra. With branch traffic volumes continuing to fall — as much as 20 percent an- nually for some types of transactions 2 – now may be the time to accelerate your discussions about the future role of branches in your business. Following are three concepts worth pondering with your colleagues. The Funnel of Focus If you want to focus your face-to-face activities on those that generate product sales and contribute to the bottom line, then don’t forget the funnel. This is an exercise where you take as many kinds of transactions that your customers have with you and place them (figuratively) into a funnel. The goal is to challenge your cross-functional teams to use ingenuity, innovation and technol- ogy to create viable self-service solutions to as many transactions as possible. Ultimately, the only transactions that should come through the narrow neck of the funnel and reach your front-line em- ployees are the high-value transactions that require consultation and advice. The information you glean from the out- come of the exercise, as well as from the process itself, can help you begin to deter- mine how your branches should evolve. Pattern Disruption According to the ABA, only 20 percent of banking customers currently prefer to do their banking in a branch. 3 And we can guess where this number is headed. How are you going to handle plummet- ing branch volume in the years to come? Especially when you consider that most sales occur in branches. One study goes as far as saying that as traffic drops, branches will still need to generate 80 percent of product volume. 4 To get profitable people to the branches, and to avoid completely closing the Your Bank Branches: What Role Will They Play in Your Future Business Model? By Petro Tsarehradsky, Vice President Marketing, Financial Services, Deluxe Corporation