- Branches suffer from lack of talent availability. The best person for the job is not always going to be in the right location at right time. Yet mobile is driving “right time, right place, instant” contextual interactions, and consumers are increasingly expecting this level of service.
- Many of the frontline staff are underpaid and undertrained, yet are the face of the institution. They often aren´t trained properly or paid enough to care about delivering the kind of customer service banks are trying to deliver through digital.
- It’s difficult to distribute foot traffic across locations. Some branches suffer from massive queues, while employees at other locations are killing time on Facebook. This adds cost, lowers efficiency, and is incompatible with demand for instant service from consumers as well as modern IT delivery.
June 17, 2015 by Leave a Comment
The branch is an important channel is every bank, but the rise of digital raises two questions: what’s its role in with a digital engagement model, and how should banks think about its value? First, consider some of the challenges of the traditional branch for the modern, digital consumer:
April 23, 2015 by 1 Comment
*As mentioned in an earlier blog, the persistence of the “branch is dead” debate seems to be to betray the deeply invested interests on each side of the debate. In many financial institutions, digital and physical channels still have separate reporting structures (Figure 1). In Celent’s October 2014 survey of North American financial institutions, we found that less than a third of responding FIs have a single person responsible for all delivery channels. Interestingly, this appeared to be more likely among large banks. Another observation is that much of the debate is deeply polarized – all or nothing – as if banks serve a static and homogeneous market. Neither is true. Most banks serve a diverse client base whose needs and preferences are in a state of change. Niche players, such as Moven, can take a more polarized (or shall we say extreme) position. A third (and my favorite) observation is that all too often, inaccurate assertions are made about channel usage as if demographics were a sole and causal determinant. We hear it all the time; “Millennials don’t use branches.” “Old people don’t use digital channels” and so on. In March, the US Federal Reserve published its third instalment of comprehensive consumer research on the topic, Consumers and Mobile Financial Services 2015. It makes for insightful reading. One myth the report busts is that digitally driven consumers have little use for other channels. Nothing could be farther from the truth – at least for the present. The survey (an online survey administered with a managed panel of nearly 3,000 consumers designed to be representative of the U.S. eighteen and over population) sought to understand how mobile banking users (35% of the panel, up from 30% in 2013 and 26% in 2012) used other channels. The results may surprise you. A few tid-bits:
- Between 2011 and 2014, mobile banking usage has grown strongly across all age groups. Among 60+ consumers, usage has nearly tripled.
- Hispanics reported the highest incidence of P12M mobile banking usage (53% of those having bank accounts, compared to 39% in the overall sample).
- While mobile banking users are using the platform frequently and consistently, they also interact with their banks through more traditional branch and ATM channels. 72% of mobile banking users frequented a branch in the past month.
- Omnichannel is a legitimate pursuit. All channels need to be optimized.
- Banks neglect the branch channel at their peril.
January 29, 2015 by 3 Comments
My wife and I decided that it was time. Time to introduce our 2 daughters to a bank and open their own accounts. Our girls are old enough (ages 8 and 6) to understand what a bank is, plus they hear their daddy talk way too much about banks. So far, their birthday money has been stored in their collection of wallets, piggy banks or ziploc bags. They are no strangers to financial education as we have talked before about the different uses for money and the importance of saving. They were ecstatic when I told them we would be going on a little field trip to open bank accounts, even if it meant handing over some money to the bank to safeguard. It was all downhill from there. I went online to try to make an appointment to visit the local branch. Unfortunately my bank offers no such tool. So, I picked up the phone, called the branch and left a message. My call was never returned. I’m a pretty persistent guy, so I actually walked into the branch (a foreign concept for me) and had no trouble making an appointment. We arrived a few minutes early on the day of our appointment as the girls were super excited to go to the bank and open their own accounts. Alas, the banker assigned to us was running late. After a 15 minute delay we were given the privilege of sitting down in his office. The process was mundane and no different than if an adult were opening an account. The girls were bored out of their minds. Thankfully, they sat nicely through the entire hour long process and were extremely patient. The only info the banker asked them for was their birth date. I wasn’t expecting this to be a kids activity, though it would have been cool if they could have opened the account while bouncing on a trampoline. In all seriousness, I was expecting there to be SOMETHING that was kid friendly. Although my kids are very digitally inclined, I was also hoping they could get a traditional bank passbook. I think it’s a little more tangible and easier to teach them about debits and credits using the book. However, the bank doesn’t issue passbooks anymore and that frankly isn’t a big deal as I can teach them online. Daddy signed all the paperwork, they were issued debit cards, and we went off on our merry way. The girls were confused, they wanted more. They couldn’t believe that they had to sit for an hour just so I could sign some papers on their behalf. I felt bad, because it was my mistake. I shouldn’t have dragged them along for the account opening process without checking it out first. However, I was really disappointed that there was simply nothing in the process that was fun and educational for kids. We had some “fun” at the ATM though as I showed them how it works and they got to press all the buttons and deposit their funds. So much went wrong, yet it was such an opportunity for so much to go right. The account opening process should have some elements tailored to kids (other than the trampoline of course). Here are some suggestions:
- Offer a customized debit cards for kids. Kids love cards. Why not allow them to customize the color or add a picture of their choice?
- Ask them to sign something. Even though the parent signs the official documents, I believe it’s important for kids to feel that they have some skin in the game. A bank account is a responsibility. A fictitious kids contract will make the child feel important and also teach a sense of responsibility.
- Give out a kid friendly short story. My kids know how to read, why not get them to read a short story that teaches lessons about money? Some banks invest pretty heavily in children’s literacy, though this doesn’t have anything to do with the branch experience.
- Develop or showcase an app that teaches kids about money. Some banks offer this already (e.g. RBC), though it’s unclear to me if the app is used in the branch. Even if your bank doesn’t have an app like this, there are 3rd party apps that can serve the same purpose. This would be a good use for iPads in the branch, as kids can play with an app while the parent does the paperwork.
- Explain how the bank works. There is so much that takes place in the bank branch. It would be great to walk the kids around the branch, and explain to them what is going on and what the various employees do.
December 2, 2014 by Leave a Comment
Celent recently released two reports looking at the state of banks and credit unions: And Then There Were None: The Disappearance of Community Banks and Catch CU: The Ongoing Evolution of the Credit Union Market. The analysis within each report shows a clear trend towards industry consolidation. The number of commercial banks in the US is declining rapidly, from 11,462 at the end of 1992 to 5,809 in 2014, while credit unions in the US went from 10,316 in 2000 to 6,491 in 2014. As the industry consolidates, the majority of institutions disappearing are disproportionately coming from the lower tiers. For banks, the point at which institutions see rapid decline is around $300 million in assets and below. For credit unions, that number is around $50 million and below. The figures below provide a broad summary view of what´s happening in each industry. For every asset tier, the CAGR for inflation-adjusted deposit and institution growth is charted along with the difference between the two. Asset tiers with a negative difference between the growth of deposits and institutions are declining on a per institution basis. This is an effective summary when assessing the health of a tier. Banking is obviously becoming more complex, and competing is no longer a matter of opening a branch, setting up an ATM, and accepting deposits. The past 10 years have seen the rise of internet banking, bill pay, know your customer (KYC), Office of Foreign Assets Control (OFAC) compliance, mobile banking, consumer and business remote deposit capture, branch capture, and much more. Most small institutions don´t have the resources to stay on top of it all, and the requirements to “keep the lights on” leave pockets dry for modern customer facing applications and services that have become crucial to growing deposits. Is the consolidation good for the industry? What role will small banks and credit unions play in the future? Is further consolidation inexorable, or will the industry soon meet a healthy equilibrium? Feel free to comment.
July 11, 2013 by 2 Comments
Celent recently hosted a client event called New Imperatives for Omni-Channel Delivery. Motivated by the convergence of channels, we designed this forum to explore banks’ need to coordinate all the ways they touch customers across the entire set of organizational silos. Celent’s belief is that in the New Normal, retail delivery will never be the same. Retail banking customers are driving the most fundamental change in delivery that the industry has ever seen; these empowered consumers have new knowledge and expectations that are forcing banks to up their game. Additionally, because the way that banks make money is changing radically, banks have no choice but to reconsider their overall system of retail delivery. A large expense for retail banks is their branch network. It will have to change. The branch of the not so distant future is more than just talk this time; it’s not optional. It will entail transaction and sales/service automation; physical re-design; and cultural and organizational change. Moving to this new branch mindset is a journey, not a destination. Results will almost always delivered in increments, not via a “big-bang.” Additionally, branch transformation needs to be executed in a multichannel context, and quickly. Ultimately, this will result in fewer, smaller, more efficient and more effective branches. On the more technology-oriented side, Celent surveys show that mobile banking and multi-channel delivery are “top retail banking technologies.” The tablet will act as a catalyst to the redesign of online banking as online and mobile are growing rapidly in priority. Tablets are unique devices that provide a unique experience and shouldn’t be thought of us simply larger phones. Digital startups are challenging the status quo with slick experiences and innovative business models. In response, banks have to become digital powerhouses; they must take advantage of emerging opportunities and use them complement physical channels. We opened up a free-flowing discussion with a few questions for our banking attendees. We think retail bankers of all stripes will do well to ponder them.
- What is the customer’s perspective?
- How do you coordinate between the branch, digital and other channel teams?
- Do you watch other industries? Who and how?
- What are you doing to grow digital sales?
- How will the role of the branch change in an omni-channel environment?
http://www.regonline.com/builder/site/?eventid=1256874 Additionally, we’ll be hosting a bankers-only roundtable called “Evolve or die: the future of the bank account” in London on October 17. Details at http://www.regonline.com/builder/site/Default.aspx?EventID=1259271 Finally, we’ll be hosting a broader cross-industry event on October 3 in San Francisco. Entitled “What’s Next: The Search for Disruptive Innovation,” you can find out more at http://www.regonline.com/builder/site/Default.aspx?EventID=1237201 Hope to see you there!
January 5, 2012 by Leave a Comment
Few global brands have created the equity of Kodak. For decades, Kodak was synonymous with family memories and led the world in intellectual capital related to imaging – in both chemical and digital realms. Kodak is a household name if there ever was one. For example, the colloquialism, “Kodak Moment”, refers to a rare, one time, moment that is captured by a picture, or should have been captured by a picture. In its own stunning Kodak Moment, it appears the company is facing likely bankruptcy. Once a US$16 billion annual revenue juggernaut, the company now fights for survival. Another Kodak Moment comes with a picture. Georgia-based RaceTrac is opening a new store today in an Atlanta suburb that company leaders say will serve as the prototype for all new RaceTrac stations. At 6,000 square feet, the new store is one-third larger than the typical station and includes new features such as free wireless Internet access, indoor and outdoor seating, expanded food and beverage offerings, a frozen yogurt bar, and a walk-in “beer cave” room for chilled beer. On the outside, the store looks vastly different from a typical gas station, with such features as stone columns and stacked-stone accents. “It’s really something you’ve never seen in a convenience store,” said spokeswoman Sherri Scott, who compared it to a mini grocery store. “The whole goal is to take you back to the idea of a neighborhood store versus a traditional gas station.” The company, headquartered in the Atlanta area, operates more than 300 gas stations in four states. What do these two Kodak Moments have to do with banking? Nothing and everything. Neither is directly related to banking, of course. But, both are examples of established entities challenging their operating models – or not. For Kodak, making strategic investments in digital imaging that would cannibalize its film business was a tough decision – one it waited way too long to make. Retail banks face a similar challenge in “alternative” channel innovation when doing so will cannibalize branch traffic. In contrast, RaceTrac is challenging what it means to operate a convenience store. It’s doing so when the complexion of the average c-store hasn’t changed much in the past few decades. Sound familiar?
November 1, 2011 by 1 Comment
Account opening is an interesting process at US Banks and it is insightful to see how much the process and style differs across banks. At one bank, I was given a needs assessment, asked about my mortgage and what kind of credit cards I carried. Another bank showed me a list of accounts and asked me to pick one. Finally a third asked me my income (I answered), and then did nothing with that information. I’m certain that there is a bit of variation within banks as well as lots of variation across banks, but it is insightful to see the philosophies underlying the questions. One bank clearly wants to be my financial service provider of choice. Another has products on a menu and invites me to pick. One bundled a savings account with the checking account in spite of the fact I had no need for savings. Another let me articulate my needs and move forward from that basis. As transactions continue to move away from the branch, American retail banks are going to need to be better at understanding customers and creating appealing offers to those customers. They haven’t quite arrived yet. Do you have any experiences you’d like to share?
June 20, 2011 by 1 Comment
Last Thursday, Celent hosted it’s annual Banking Innovation & Insight Day. It’s the first time we have held an event in Atlanta and were pleased by the fantastic turnout. We had a broad range of panel sessions and presentations, all following a common theme – banking innovation. Bank Systems & Technology wrote up a brief article describing the theme for the event. Bart Narter welcomed the group with a brief presentation and we then launched into a fascinating discussion on branch of the future moderated by Bob Meara. Bob’s panelists from Extraco Banks and Kennebunk Savings Bank did a great job demonstrating to the audience why the branch is far from dead. Bank Systems & Technology wrote up an interesting article on the session. From there we switched into a series of sessions focused on mainstream, AKA electronic, channels. The audience was swept into online and mobile nirvana with sessions on the future of online banking (with panelists from ING Direct, Bank of Montreal, and BBVA Compass), payments innovation, and mobile banking (with panelists from Bank of The West, City National Bank, M&I Bank, and Bank of America). Last but certainly not least, awards were presented to the banks selected for our 2011 Model Bank initiative. Stay tuned on more about the model bank awards from Bob Meara. All presentations from the event are available for Celent clients to download on our web site. There were quite a number of tweeters in the room providing an event play by play. We invite you to review what folks had to say about the event on Twitter . If you would like to see a few photos from the event please visit our Flickr photostream.
February 3, 2011 by 3 Comments
Celent Banking team has kicked off 2011 with a bang. In addition to the flury of new reports, we hosted an industry event in London. Management of multiple channels continues to be high on many of our clients’ agendas, and so we decided to focus on the multi-channel theme and called our event “Branch is Dead; Long Live the Branch.” Bart Narter, Celent’s Senior Vice President for Banking opened the event and introduced two distinguished guest speakers representing two sides of the argument. Batting for the “Branch is Dead” corner was Mr. Steve Townend, CEO and co-founder of MoBank, an independent mobile money management app in the UK. He asserted that “customers increasingly want and need to control their finances in ways that allows them to get on with their lives” and claimed that mobile is becoming an important financial management tool for many consumers. At the other side of the argument was Mr. Anthony Thomson, co-founder and chairman of Metro bank, the first UK high street bank to be launched since Queen Victoria ascended to the throne. Given the Metro bank’s core values of convenience, service, transparency and engagement, branches are very much a cornerstone of the bank’s value proposition. It was a hard act to follow for the two Celent’s Senior Analysts, but Bob Meara and I accepted the challenge. Bob painted the vision of the branch of the future, describing it as a “journey, not a destination”. While bank branch renewal programmes can take different shapes and forms, Bob is yet to find a bank that is happy to say “we are done”. And I began with the assertion that the UK banks can do more with their investment into the online channel and use the channel for more than basic customer self-service. I shared with the audience some of the lessons from the other markets, such as how banks are re-claiming the P2P payments. However, eWise payo, UK-focused Online Banking ePayments solution represents perhaps the biggest opportunity for the UK banks to leverage their investment into online banking and Faster Payments infrastructure. Now is the right time for the UK banks to make a decision whether they should adopt such a solution. Finally, the event concluded with a mobile banking and payments panel, featuring Celent analysts from around the world, including France, Japan, China, Korea and the US, which not only affirmed the rising importance of a mobile device in financial services, but also demonstrated the diversity of development patterns around the world. And that is the value that Celent brings to its clients – a global insight based on deep local expertise in multiple markets. If you attended the event, we hope you enjoyed the presentations and networking opportunities. If not, we missed you and hope to see you at our next event – don’t forget to check our website www.celent.com for the latest schedule.
December 8, 2010 by Leave a Comment
The Federal Reserve published a summary of its 2010 Federal Reserve Payments Study this week. Predictably, the study evidenced double digit growth in debit and prepaid cards from 2006 through 2009, alongside essentially flat credit card usage. The study evidenced a continued decline in check writing of -6.5% CAGR, from 33.1 billion in 2006 to 27.5 billion in 2009. The anatomy of check usage was well reported in the study as well, with an analysis of check writing by counterparty and purpose based on a random sampling of checks processed by a small number of large banks. The results show double digit declines in C2B check writing (-11%), modest declines in B2B (-2%) and B2C (-3%) check usage and a growth in C2C check writing. In other words, businesses aren’t kicking the check habit – much.The implications of these findings are many. One deserves special mention in my opinion. Less check writing alongside growing use of self-service channels is eroding branch foot traffic like never before. It’s no shocker that check volumes in the United States have been declining for most of the last decade. What appears less well understood is the long-term effect of this decline and what financial institutions should do in response. In addition to steady declines in check writing is a steady growth in self-service deposit activity taking the form of image ATM and RDC usage. The aggregate impact of these trends points to dramatic erosion in branch transactional activity – and with it foot traffic. The chart below shows a conservative Celent estimate of resulting average effect on branch foot traffic. This is a polarizing picture. For financial institutions with highly automated branch networks and well-trained personnel, these trends can point to significant cost reductions without compromising customer service. For other financial institutions, branch channel cost reductions will prove comparatively elusive. All financial institutions should embrace these trends as a mandate to quickly develop multichannel sales and service infrastructures to accommodate the quickly changing landscape.