Actionable Insights From APT's Financial Services Practice

City Branch Revolution

May 27th, 2014 | Posted by JDouglass in Financial Services

With the influx of technology solutions in retail banking, which includes ATM upgrades that enable more types of transactions, mobile solutions, and internet banking, banks are seeking to change branch models in high-traffic urban areas.

Similar trends have already been a focus for retailers and restaurants where there is a shift towards opening smaller, but more technology-based, stores in the past few years. Mary Wisniewski speaks to this trend in an American Banker article, which discusses how Wells Fargo has recently opened urban branches in densely populated, urban areas, such as the U Street corridor of Washington, D.C. In doing this, Well Fargo aims to target customers who are comfortable using technology and who prefer their branches to be within walking distances to either their home or work. In addition to these changes reflecting customer demand and behavior, she notes that the cost savings are a huge bonus: “Because they are significantly smaller than a typical branch, they are also helping Wells to reduce branch overhead at a time when branch traffic continues to decline.”

Employees too have to be hired or trained with the view of offering flexibility to customers–i.e., they should be able to handle requests for a diverse number of transactions and offer technology solutions when necessary. In the same article, Wisniewski points to such an example, “The bank’s teller software, which runs on staff members’ tablets, can talk with the ATM software when self-service complications arise. A staffer would get an alert, say, that the customer at machine number two hit his ATM withdrawal limit. That prompt is meant to motivate the employee to troubleshoot the customer restriction, and more broadly, make the two historically separate channels act as a unit.”

It is essential that these branches are marketed appropriately in a way that customers see the value of the enhanced technology experience. Additionally, banks often see pushback from existing long-tenured employees who see this as a threat to their jobs and the relationships they have built with their customers and the community. As with other newly introduced initiatives, testing plays an import part in proving out value and measuring the efficacy of such efforts. For example, different types of urban branches can be tested in different geographies, as the needs and habits of a customer in an East Coast city (for instance, New York City) may widely differ from those of customers in cities like Dallas or San Diego, where more established driving cultures prevail.

Retail banking has been undergoing a revolution in the past few years and like many other changes, testing ideas before rolling them out will help inform if opening urban branches is a profitable proposition for banks.

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