Bemoaning the Decline in Branch Foot Traffic: It Could be Worse!

Bemoaning the Decline in Branch Foot Traffic: It Could be Worse!
Banks and credit unions have been bemoaning the decline in branch foot traffic for some time now. In part, this is a result of widespread and accelerating consumer preferences for digital channel interactions. In a 2012 Celent survey of North American financial institutions (an effort we intend to repeat in 2014) , nearly half of respondents expected a 10% to 25% runoff over the next five years. Many expect a higher rate of decline. Transaction Migration 2012 Source: Celent survey of NA financial institutions, July 2012, n=132 Data collected by Financial Management Solutions, Inc. (FMSI) among its sizeable client base of small and midsize financial institutions suggests an annual decline of around 3% over the past three years. Declines are likely steeper among large banks resulting from significant digital channel investments. It Could be Worse…If banks are struggling to accommodate declining branch foot traffic, other retail segments have it much worse. According to ShopperTrak, a leading analytics vendor to the retail industry, even as U.S. retail sales rose about 3% over the November – December 2013 holiday period, foot traffic declined 15%. December 2013 was particularly hard-hit, with foot traffic down 18% from December 2012. Why this is occurring is no mystery. The good news for retailers is that sales growth has returned, somewhat. The long-term picture, clearly driven by economic trends, is cautionary, with year-over-year growth rates eroding since the early 1970’s. Retailers got only about half the holiday traffic in 2013 as they did just three years earlier, according to ShopperTrak, which uses a network of 60,000 shopper-counting devices to track visits at malls and large retailers across the country. The larger retail picture makes banking’s misery look modest. foot traffic comparison Source: FMSI, ShopperTrak National Retail Sales Estimate(NRSE ®) used with permission So what will the future hold? Where are we on the inexorable transition from brick and mortar shopping? Look at any forecast; omnichannel banking has just begun. What banks should do in response will be the subject of my next blog.

Higher Education: Another Lesson in Multichannel Delivery

Higher Education: Another Lesson in Multichannel Delivery
Celent recently published a report, Branch Boom Gone Bust: Predicting a Steep Decline in US Branch Density. As expected, some misunderstood the report as another piece decrying the death of the branch channel. It isn’t. Instead, the report advocates embracing a “right-sizing” of the branch channel as a means to strategically invest in retail delivery models more appropriate for the market’s rapidly changing consumer preferences. More recently, FMSI released its 2013 Teller Line Study, demonstrating the continued decline in branch foot traffic and growing per transaction costs experienced by its many, mostly smaller bank and credit union clients (see below). These aren’t new trends, and they’re not confined to the US. Yet, too many banks remain invested in historic operating models – despite the growing body of evidence that suggests dramatic change is needed. FMSI 2013 I found one example of this occurring in higher education to be particularly fascinating – and bold. The Georgia Institute of Technology (Georgia Tech) plans to offer a $7,000 online master’s degree to 10,000 new students over the next three years without hiring much more than a handful of new instructors. Georgia Tech will work with AT&T and Udacity, the 15-month-old Silicon Valley-based company, to offer a new online master’s degree in computer science to students across the world at a sixth of the price of its current degree. The deal, announced Tuesday, is portrayed as a revolutionary attempt by a respected university, an education technology startup and a major corporate employer to drive down costs and expand higher education capacity. The story has been widely covered. If closing branches sounds like heresy to retail banking executives in dire need of low-cost revenue growth, Imagine what the idea of offering an online master’s degree for less than 20% of the cost of a traditional, in-person lecture format will do to tenured professors heavily invested in their own traditional delivery models? Some bankers argue the inadequacy of digital channels for sales because so many consumers desire a face-to-face experience for “complex” product sales. Is not a master’s degree complex? What about buying window treatments? Blinds.com has become the largest purveyor of window treatments through its online presence. But, buying blinds can be complex. There’s sizing, placement, color choices, degrees of light transparency, texture…the list goes on. Blinds.com addresses this by offering a by-appointment online videoconferencing experience it calls face2face. Consumers schedule an appointment with an expert online for a free video consultation. Consumers send blinds.com a picture of the window(s) in question, and the design consultant provides expert consultation at a convenient time – including showing you what your windows in your room would look like with various treatment options using the picture you provided. To be clear, it’s too early to read the results of Georgia Tech’s experiment, but I applaud its aggressive approach to dramatically alter the cost and accessibility of higher education. Similarly aggressive banks step forward!

A Big Week for Workforce Optimization (WFO) Software

A Big Week for Workforce Optimization (WFO) Software
The past week saw two significant announcements in the world of WFO. Historically, use of WFO has been the domain of large organizations. In financial services for example, Celent estimates that 80% of top tier banks use WFO (those with assets of US$50b or more) while less than 500 US FIs employ WFO (about 3%). Said another way, the compelling WFO opportunity in financial services is to usher in adoption by midsize and small FIs. This objective has been aided by software as a service (SaaS) and managed services options that most WFO vendors now offer. One announcement in the past week was the acquisition of GMT Corporation by Verint Systems. Among large banks, Verint and GMT were the market share leaders. The combined entity will give Verint a dominant market share leadership – among large banks. Down market, other vendors – particularly FMSI and Kronos have market share leadership. And down market is where the WFO growth opportunity lies in financial services. That leads to the other big news in WFO this week – the announcement of a cooperative marketing agreement between Kronos and Fiserv. The two companies will integrate Kronos’ Workforce Central suite with Fiserv core systems, beginning with Signature. The two will then cooperatively sell the pre-integrated solution to the prodigious installed base of Fiserv core banking clients. Both announcements are big news in a space occupied by relatively few solution providers. For both Kronos and Verint, the announcements signal a growing interest in financial services – a sector underserved by WFO. Good news indeed. Other WFO providers and the remaining core banking vendors should take note.