Using the Branch to Sell Mobile

American Banker published an article last week describing Bank of America’s quest to bolster the ranks of its mobile banking customer base. According to the article, the bank is outfitting its teller stations with quick response (QR) codes that can be scanned by mobile devices to download the mobile app. What a great idea! For too long, most financial institutions have limited the merchandizing of mobile banking capabilities. Even after investing in sought after capabilities such as mobile remote deposit capture, many banks enrol mobile banking users primarily through the online channel. Go figure! In-branch merchandizing is a logical way to leverage remaining foot-traffic for the mutual benefit of online banking enrolment, and QR codes at the teller line is a great way to do so in my opinion. After reading the article, I was eager to see them for myself at a local Bank of America Branch. Upon entering the branch, I was instantly greeted by a charming and enthusiastic employee who was quick to answer my query. She had no personal experience with the in-store merchandising though, and even asked me what app I use to read QR codes. The merchandising wasn’t at the teller stations, but at the deposit preparation desk (below) and also prominently positioned at each new account desk. Once scanned, the QR code directs the user to the appropriate app store to download the bank’s 4.2.69 version of the mobile banking app.

Selling mobile deposit right where customers fill out deposit slips is a great idea

Note that the merchandising didn’t simply advertise mobile banking, it sells the benefits of the bank’s newly released mobile deposit capability. Placement was perfect – right where in-branch depositors will be filling out deposit slips. Use of QR codes is smart for their ability to allow consumers to easily inquire without taking bank staff’s time. It reminds me of another clever application of QR codes. My wife is a first grade teacher. She enjoys the use of iPads in her classroom and integrates them into her curriculum. One way she does so is by loading a variety of educational games onto the iPads for use throughout the day to reinforce lessons. She makes a number of “low-technology” games available as well. Games are a great way to provide some educational fun while she is working with other students. Like new banking capabilities, the problem with games is that they must be explained. Having to do so in the classroom is distracting and diminishes the value of “self-service’ learning games otherwise provide. To address this problem, she recorded instructions for each game on YouTube and provides a QR code for each game that links to the explanation video. Students wishing to explore a new game simply scan the appropriate QR code and they’re off. It saves her countless interruptions.

Even First Graders think QR codes are easy

Apparently Bank of America tellers will soon be enjoying the same benefit.

How Many Bank Branches do we Need in the US?

Finextra published an article yesterday that was also picked up by American Banker and others. The news was twofold: 1. Bank of America announced it enjoys 10 million mobile banking customers, up about 3 million from a year ago – about 43,000 new active mobile customers per week. 2. Concurrent with its swelling ranks of active mobile banking customer, the bank is closing branches and unplugging ATMs. The bank closed 154 branches and eliminated 631 ATMs in Q1, citing the move to online and mobile channels as a contributory factor according to the Finextra article. Celent is not surprized by the branch closure news. As explained in a recent Oliver Wyman report, Branch Flexing: An Agile Approach to Cost Management, April 2012, “to maintain profit levels in the face of a post-crisis and regulatory-reform decline in net revenue of about 32%, US banks would need to increase revenues by 12% a year for the next three years or cut costs by 18% a year, or a combination of the two.” Cost cutting isn’t optional, particularly among larger US banks. Making material cost reductions will require a re-examination of branch networks, which typically contribute between 40% and 60% of a modern retail bank’s costs. Branch flexing refers to a strategic realignment of branch resources (and cost) with customer profitability. Ultimately, branch flexing involves investments in technology, training, culture and compensation. Celent has advocated departure from traditional, teller centric retail operating models for some time. But what about the total number of branches. Is there an argument that the industry has built an unsustainable number of branches, flexing or not? We think so. The argument begins with a simple observation that the US branch density (branches per million inhabitants) has nearly tripled since 1970. Thus, before consumers enjoyed the ATM, telephone banking, internet banking or mobile banking, the industry served consumer’s collective needs with less than 22,000 FDIC insured branches. Do we really need 90, 000 now? branch-density1 We think not. But it’s not so much if they’re needed (The Economist had a great debate about that topic earlier this week), but will they remain profitable? If indeed we’re in a “new normal” of sharply reduced retail banking profitability, than the answer – to one degree or another – is “no”. Celent is developing a more detailed perspective on how many bank branches the US is likely to support over the next ten years. Stay tuned.