Pity the poor branch. This ubiquitous financial services channel is being maligned with frequent media headlines like these:
CNN Money, Jan. 25, “Say Goodbye to More Bank Branches.”
BAI Banking Strategies, Jan. 23, “Branch Closures Round Two?”
American Banker, Jan. 16, “Branch Closures Gaining Favor Among Small Banks.”
Is the branch really headed the way of the backroom reader sorter and proof machine? Don’t bet the farm on it.
After several decades of branch building, the United States will witness a dramatic reduction in the number of operating branches, according to a new report from Celent, a financial institution research and advisory firm. In the report, Branch Boom Gone Bust: Predicting a Steep Decline in U.S. Branch Density, Celent argues that the U.S. retail banking branch network has yet to respond to the obvious migration of customers to new digital alternatives.
Branch growth over the last 40 years has dramatically exceeded U.S. population growth, Celent reported. In 1970, there were approximately 107 branches per million individuals. By 2011, that had grown to 270 branches per million.
The numbers are indeed falling, according to an SNL Data Dispatch early this year. “According to SNL data, banks shuttered more than 500 branches during the last three months of 2012 while opening 274, for a net decrease of 229 branches. This is more than double the net decrease that the industry experienced in the third quarter of 2012,” SNL reported.
The Kafafian Group, in a recent newsletter article authored by Robert E. Kafafian, president and CEO of the firm that offers strategic management, profit and process improvement and other services to community banks, acknowledged the downward trend in branch numbers, but noted the channel’s importance as well.
“Branches are becoming more consultative centers, requiring less physical space, but often higher-quality personnel who are willing to leave the branch frequently to meet with customers on their ‘turf,’” Kafafian wrote. While acknowledging the branch’s continued key role, Kafafian also stressed the need for community banks to embrace technology. Older customers still want a branch close to where they work or live, but for those below the age of 35, “all bets are off,” he said. “The industry must adapt to this generation and future generations’ desire of how they would like to bank.”
If branches are dying, why is a leading vendor like NCR Corp. applying major resources to technology designed to make them more effective, more efficient and less costly to operate?
“Your branch network is the human face of your brand,” points out an NCR Branch Transformation Solutions White Paper. “For many customers, it is still their preferred method of reaching the many products and services you offer. With 80 percent of product sales still being closed at the branch, it is more important than ever that you offer an excellent customer experience.”
In January, NCR purchased uGenius Technology Inc., a Utah-based pioneer in video banking software. The acquisition is expected to help NCR continue to grow its APTRA Interactive Teller solution, which lets consumers conduct remote, assisted-teller transactions over an ATM — speaking with a live teller who has control of the machine.
“Remote assisted service is proving to help financial institutions grow revenues while at the same time reducing their operating and real estate costs,” said Peter Leav, NCR executive vice president.
Ironic, isn’t it? If technology is drawing customers away from bank branches, it can also help attract and retain customers by enhancing their in-branch experience.
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) June 2013 by BankNews Media