5 minutes
The most successful national and international branch transformations represent deep self–analysis throughout every aspect of a financial institution, and then the building of new business models and brand experiences that do more than just save money. These new business models measurably improve financial and brand performance that drives an increase in target market engagement, as well as bottom-line returns.
To get more perspective on branch transformation, I recently talked with David Cavell, a retail banking delivery channel consultant, and a fellow of The Chartered Institute of Bankers.
Cavell has extensive international experience developing, directing and supporting banks’ delivery strategies. He recently wrote the book, Branch Banking II – Case Studies for the Next Generation. Eighteen financial institutions are presented as best case examples of branch transformation; two of them are credit unions: $18 billion Vancity Credit Union in Vancouver, B.C., Canada and Numerica Credit Union in Spokane, Wash. Here is a transcript of our conversation.
Question: What is the purpose of your book?
Answer: To show that, properly operated, the branch is valuable and profitable within the omnichannel mix, and to offer examples of global and local best practices in the profitable operation of branches.
Q: How do you go about selecting the example institutions?
A: My work means that I am fortunate to have built a global network of industry professionals whose extensive knowledge supplements my own when seeking out industry-leading examples.
Q: What have you seen as the major changes in the industry and branch transformation over the past five years?
A: Heightened engagement with digital; greater appreciation of the need to live the brand at the branch, including community outreach; greater appreciation of the need for first-class interpersonal skills amongst branch staff; a continuing commitment to enhanced retail environments; and now a real appreciation that the days of the large footprint costly “gas guzzling” branch are over. Local, neighborhood, and community strategies all make great sense and are well suited to deploying smaller footprint branches.
Q: What do you mean by aligning branches and segments?
A: Branches serve streams of customers of many different types: higher net worth, middle market, basic banking, female, ethnic, etc. One shape doesn’t fit all … different dedicated zones are frequently justified and deployed within branches reflecting the needs of specific segments, and often whole branches are dedicated to a specific segment. Globally, we can talk about branches for women in Eastern Europe or the Middle East. Here in the United States, we can talk about branches dedicated to serving people who speak Polish.
Q: What does it mean to be prepared to initiate the transformation process?
A: Omnichannel strategy and branch transformation are not rocket science. My job has so often been about setting up an effective organization to build and execute the required strategies as well as bringing knowledge about the key components and issues. It requires a professional, coordinated, multi-disciplinary effort.
Q: Why do you think many new branch prototypes under-perform?
A: The three critical success factors for a branch are location, design and staff skills. I assume that we understand the issues around location. If not, there are many specialist consultancies; the subject is not to be under-rated. Shortcomings in design include, but are not limited to, too large/over-engineered/too costly, dysfunctional in layout, inadequate attention to the branch’s role as a brand ambassador, and poor communications strategy. After that, poor staff skills—perhaps including overly-aggressive sales techniques—will corrode relationships, thwart sales, and drive attrition.
We must look hard and objectively at our prototypes (especially “mock shops”), and be prepared to admit weaknesses and take remedial action, including modifications or abandonment. Avoid getting to that point where there is no return, even though there are known critical weaknesses.
Q: What part do you feel branches will play in the omnichannel delivery environment over the next 10 years?
A: The recent record spending on branch transformation projects and the continued growth in these spending numbers suggest a continued leading role for branches in brand representation, customer acquisition, relationship development, digital channel promotion, and community outreach.
Q: What are your predictions for branch evolution in five and 10 years?
A: After five years of growth in the global estate, RBR Research shows that there are now over a million bank branches across the world. To this figure must be added those run by credit unions. Digital channels are not quite at the stage where they can take over relationship management for the entire customer profile. And the branches we see will be smarter and more effective. RBR estimates that the global branch transformation technology market was worth $4.9 billion in 2014. This is forecast to grow by 55 percent to reach $7.6 billion by 2019.
Q: How important is operating a strong brand before starting the transformation process and after?
A: A strong brand is about a set of intrinsic values with which a customer can build an emotional commitment. I cannot emphasize the issue of brand and living the brand too much. Research published by Accenture in 2014 found that nearly three-quarters of U.S. customers and two-thirds in Canada considered their banking relationships to be merely transactional. This will also be the case in many other markets across the world. Inevitably, this will create a tendency for customers to be increasingly indifferent to commoditized branches which they will see as just transaction shops. Thus, they will increasingly conduct their day-to-day banking business through channels that do not require them to have contact with their bankers.
A strong brand will capture the hearts and minds of customers – and avoid the indifference seen in the survey findings of Accenture. This is an area where community banks and credit unions can have a significant strategic advantage if they play their cards right. It is certainly the most effective platform from which to build profitable relationships and will increasingly be another critical success factor – at both branch and institution level.
Paul Seibert, CMC, is principal/financial and retail design for CUES Supplier member EHS, a NELSON Company, Seattle.
