A new era of customer expectations means adjusting to the new norm.
By Bob Gibson
It’s a time of transition for community banks as they modernize their core systems and physical branch locations to improve profitability and better serve customers. The ubiquity of mobile technology and all that can be done “virtually” has forced these banks to rethink how they interact with customers and design their physical branches.
Branch transformation is about adjusting to this new norm and finding the balance between cost, customer service and growth. It’s not easy, and it’s different for every bank. Technology can play a vital role in helping community banks meet these challenges. When branches shift their focus from high-volume, time-consuming transactions, they can reallocate resources to high-value, consultative services that better support customers. This shift toward automation results in making the branch as immersive, meaningful and efficient as possible.
The Bank Branch: a Cornerstone of Customer Service
Despite the growth of digital channels, the traditional bank branch still holds significant value with customers by building trust and credibility, providing financial advice, offering convenience and even easing the transition to digital channels. Branches also build a physical presence in local markets that is unmatched: McKinsey and Co. found that at one U.S. bank the estimated value of the physical network in just a single market was equal to millions of dollars of annual marketing.
Physical branches demand significant capital outlay and account for some of the largest operational expenses for any community bank. Addressing this high-value and high-cost dilemma demands a strategic approach to investments in order to obtain maximum value. That includes deploying a mix of customer-centric and automation technologies, such as self-service solutions and ATMs, which are designed to improve operational efficiencies and enhance the customer experience. It also means adopting new service models that can flex with when — and how — customers want to conduct their banking needs.
A More Efficient Branch That Delivers on Customer Expectations
McKinsey notes that the operating costs of a bank branch decline sharply when cash and coin handling is fully automated; ideally, all cash and coin deposits and withdrawals should be migrated to ATMs and other self-service machines. Once cash is handled by machines, banks can begin to reduce security costs, compliance costs and staffing requirements. A mix of self-service and cash automation technologies helped First National Bank of St. James, Minn., improve operational efficiencies and enhance the customer experience. According to Kimberly Johnson, chief financial officer, “This technology allows staff the opportunity to focus on the more complex needs of our customers. By automating the handling and processing of coin deposits, our tellers are no longer burdened with the time-consuming task of handling coin.”
Likewise, self-service coin machines allow branches to automate or eliminate manual coin-handling processes while processing more coin in less time. The branch benefits from increased traffic and improved teller efficiencies. For 1st Bank of Texas and Arkansas, self-service coin redemption also represents a tangible business opportunity. “One-third of our coin-machine transactions are with non-customers, who can be turned into customers. If we didn’t have the machines, we wouldn’t have the foot traffic we get from non-customers. It’s an excellent business opportunity for us,” notes Genie Clem, associate vice president, marketing, branch operations.
Migrating customers to self-service equipment also supports the goal of increasing automation and freeing up staff time for more valuable customer interactions. For example, deployment of ATMs with automated deposit functionality enables branches to move transactions from the teller line and significantly reduce the time branch personnel spend handling simple deposit and withdrawal transactions. This creates greater levels of convenience for customers while dramatically changing the branch’s operating cost model.
Keeping Pace With the Community
In recent years, with forces like online banking driving customers away from in-person banking, Citizens First State Bank in Walnut, Ill., was experiencing lower foot traffic at the bank’s branch location. “Lately, though, it’s been picking back up,” says Lisa Vick, vice president of operations. With this new increase in in-person engagement, the bank is beginning to explore a gradual approach to branch transformation. “People are becoming more engaged with the bank, so we want to offer customers a space for meeting with staff and to learn more about our services. If we can make it more enticing, we believe customers will visit our branch more often.”
One of the first steps on the bank’s branch transformation journey was to replace aging, unreliable ATMs with new technology that matched the service levels customers expect. “When you consider that your ATMs are the face of your financial institution, it’s important to have equipment you can count on,” says Vick. The ATMs also serve as a secure, self-contained, automated branch in the drive-up lane.
Deposit-enabled ATMs are another way community banks can provide a solution for flexible banking that many customers now demand. “Many of our customers work during banking hours, so we needed to provide more than a cash-dispensing ATM service,” says Glenn McMichael, president, First State Bank in Nashua, Iowa. “Customers wanted to deposit their paychecks and conduct other transactions outside the physical bank on their way to and from work.” With deposit enabled ATMs, First State Bank customers now have the convenience of depositing cash, check and bulk deposits when it meets their schedules — not on the bank’s terms.
Customer expectations for excellent service also extend beyond typical branch hours. Cheryl Wedlock, assistant vice president and bank card services manager at Hilltop National Bank in Casper, Wyo., notes that meeting growing customer expectations for 24/7 availability, while maintaining a hometown reputation, has been one of the bank’s most significant challenges in recent years. “While we’re not 24/7, we’re close to it,” says Wedlock. Two of the bank’s branches now have Saturday hours, and the bank’s website features a secure email portal where customers can send messages. “We answer every single inquiry,” she adds.
Community banks, especially, are also being challenged to provide customers with a warm and caring environment and state-of-the-art services. Hilltop is addressing this challenge head-on: “I think our level of communication with customers exceeds expectations. And, even though we are a hometown bank, we have a state-of-the-art IT department that we are proud of; we have a lot of technologically advanced products,” says Wedlock.
Getting Started: Find the Right Partner
As McKinsey notes, forward-thinking bank leaders will devise a strategy for their branches that builds on their strengths and supports other channels, as well as unlocking new sources of value. Part of this strategy includes selecting a technology partner that offers the solutions your community bank needs, reliable support and services, and most importantly, has qualities in alignment with your own.
For First State Bank these qualities include reliability, trustworthiness and price. “Reliability and trustworthiness come first,” says McMichael. “After all, if you don’t like who you’re doing business with, you probably shouldn’t be doing business with them at all.”
Setting a plan for branch transformation today — as well as what will be needed in the future — is critically important. Selecting a partner that is willing to take a consultative approach will ensure that your bank is implementing the technology solutions that are best today, as well as the ones that will meet the needs of your customers — and your branch — well into the future is key to success.
Bob Gibson is vice president, branch operations, at Cummins Allison. For more information, visit www.cumminsallison.com.