In this video, APT SVP Will Weidman discusses recent trends in the retail banking industry.
“How to Retain Customers While Closing Branches,” a byline from APT SVP Will Weidman, was recently featured in American Banker. Click here to read more.
APT VP Will Weidman recently wrote a great byline for Banking Strategies about the top trends for 2013. Check out the article here.
Will outlined the following five trends:
1) Multi-Channel Impact of Mobile/Online
2) Making Money from Mobile
3) Smaller Branches with Innovative Approaches to Staffing
4) Demanding ROI from Online/Social Media
5) Selective Investments in Branch Technology
Will argues that, “as these trends drive transformations in retail banking it becomes increasingly necessary to innovate while minimizing the risk involved in innovation.” Testing continuously proves to be the leading way to de-risk innovation while maximizing profits.
Learn more about how APT is helping companies harness their Big Data to accurately measure the profit impact of pricing, marketing, operations, and capital initiatives, tailoring investments in these areas to maximize ROI.
A recent American Banker article posed the question of whether some bank branches will be completely replaced by an ATM with video technology. The idea is that more complex transactions which cannot be completed at the ATM today could in the future be completed by a call center employee or a specialist in a remote office using video technology.
It would appear there is now more than one way for the branch to die. Customers continue to migrate towards online and mobile banking, and they may use increasingly sophisticated ATMs rather than set foot in a branch. In reality, neither will fully replace a branch, but this new technology offers interesting possibilities that banks should consider.
First and foremost, banks should start thinking about how this technology could impact staffing needs. Video ATMs could reduce the cost of servicing more routine transactions. We have worked with banks to measure the impact of ATM technology investments, such as remote check imaging. In some cases, this has reduced the need for tellers, and video ATMs could push this trend further.
This can allow banks to achieve bottom line savings, but they should also seriously consider shifting resources towards more specialized staff. The biggest benefit of adding technology in branches is that it often frees up resources to focus more on relationship management and increasing sales. As banks try out these new video ATMs, they should also try changing the staffing mix or adjusting staffing levels to find the right balance. Training programs are also important to help staff build this skill set.
Banks should also be highly targeted in how they invest in this technology or any new technology for that matter. This is an incredibly expensive investment, and, too often, we find that banks invest across the entire network. That is a waste of capital, and we have seen time and again that only a subset of branches will warrant this investment. Banks will need to determine if the investment makes sense based on a variety of factors, including branch traffic, size of the customer base, the competitive environment, demographics in the area, etc. When banks try out these new ATMs, they should therefore try them across a broad variety of branches that represent the full spectrum across these characteristics.
New technology is exciting and can help banks gain a competitive edge and find new ways to attract customers. However, without carefully testing the new technology’s business impact, it is all too likely that banks will overinvest and not realize all of the potential benefits.
“While the $6.6 billion lawsuit between the credit card industry and a trade association of merchants has been settled, the battle is far from over. A recent Wall Street Journal article highlights a part of the settlement with far-ranging future consequences: the right for retailers to charge more for customers who use a credit card. Banks need to immediately start preparing for the possible outcomes of this legislation, including retailers’ reactions at the register.”
Click here to check out APT VP Will Weidman’s recent byline in Banking Strategies.
There is intense debate right now about the future of the branch. Some say it will become increasingly obsolete as customers move towards online, mobile and other non-branch channels. Others point out that the majority of new accounts are still opened at the branch and customers look for who has the most convenient locations when selecting a bank. TD Bank is in this particular camp and recently announced an aggressive expansion of its branch footprint.
Time will tell how extensive branch footprints will be in the future but branches will continue to exist. The focus of attention, then, should be on understanding how to make branches more efficient, how to maximize revenue in the current environment and how to most effectively interact with customers as technology and channel preferences change. Click here to read more of APT VP Will Weidman’s Banking Strategies byline.
American Banker recently featured an article on how banks too often take a “one-size-fits-all” approach and do not tailor strategies for specific branches. They give an example where “a bank might opt to put wealth managers in all their branches when a better approach would be to staff up only those branches in more affluent neighborhoods.”
We also observe that banks do not differentiate strategies across branches and markets as much as they could. Some banks have extended hours for all branches, but typically only certain types of branches see any benefit from longer hours. The cadence and scope of remodels should vary across branches, but many times banks spend the same for each branch and remodel all branches on the same cadence. Not every branch will warrant investment in new ATMs that can handle multiple deposits at once and provide video conferencing.
Our perspective differs from this article in that APT does not believe market research is enough to figure out the right approach by branch for every strategy. Understanding the demographic, economics, and competitive environment and surveying customers on their preferences does not tell you the exact impact of adding a wealth manager on balances, account generation, and ultimately branch profitability.
Instead, banks should be executing business experiments to test new strategies and understand the exact impact of those strategies. From there, determine where the program actually worked well and was profitable. Did the wealth managers only work in more affluent neighborhoods? How affluent did the area need to be? Did that story change when there was a competitor across the street who historically has been strong with wealth management?
The world’s leading organizations are constantly leveraging big data to get smarter and develop more targeted strategies. A key component is to test out new ideas and learn from those trials to inform the optimal approach by branch and by customer.
Over the past few months, we’ve seen several companies put effort into unlocking the vast insights of transactional data. Using this type of data, American Express has launched targeted, merchant-funded offers, and Bank of America is piloting a program to provide tailored deals inside online account statements. Both Google and PayPal are exploring ways to use this data to open new advertising channels. Furthermore, PayPal has also begun offering Point of Sale terminals to major US retailers such as Home Depot, in an effort to improve loyalty and expand the breadth of their transaction log data.
The transaction log – commonly referred to as “t-log” – details every transaction conducted by a card, account, or customer. For many, using this data isn’t a new concept. Retailers have had the ability to look at their sales data for several decades and have aggregated it to understand the general behavior of their customers. The richness and size of t-log data has the potential for companies to increase loyalty, expand customer relationships, and increase profits.
There are a couple of recent trends that have brought t-log back into the spotlight. Retailer and financial services companies now sit on aggregated t-log’s for millions of customers. With the rise of computing power, it is extremely valuable to be able to leverage this detailed data in near real-time. (more…)
It turns out the answer may not be “no one.”
Banks are still struggling to replace fee revenue, and customers have reacted negatively to new fees on existing products. Just look at what happened when Bank of America tried adding a $5 debit card fee.
The only major product that has increased fees has been checking accounts, and most banks now charge $7-$10 per month or more. However, many customers are exempt from these fees because they have a direct deposit set up or they maintain a certain minimum balance. Banks continue to raise requirements for free checking. According to the Huffington Post, SunTrust recently raised the minimum required balance from $500 to $1,500. But a large percentage of customers still qualify for free checking, and checking account fees alone will not be enough to plug the revenue gap.
So if banks cannot add fees to existing products and cannot raise enough revenue from checking account fees, then what will they do? (more…)