May 16, 2013 by 2 Comments
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. 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!