Bank branches need to balance new technology with personalized service

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Recently, a bank executive contacted me after realizing he was on the wrong side of downsizing his company. He works at a major bank and was looking for advice about his future career.

We met many months ago and shared backgrounds at a branch within a store. I always enjoy sharing war stories with veterans. In-store banking. Although he hadn't worked in a retail branch in several decades, we agreed that once proactive banking with small teams was in his DNA, it was here to stay.

As we talked about his recent experience, he shared that he had gained a lot of practice with his recent employer. close branch. I couldn't help but laugh when he said that. I said to him, “Well, it would be interesting to start your cover letter with, “If you want to close your branch…I'm your guy.''

He joined in the laughter and pointed out that his role is to work with a team that helps customers learn how to use digital banking products instead of visiting a branch. He was not part of the team that made the decision to close the branch. He appeared on the topic “How to limit customer outflow?” team.

A friend of mine was previously part of a team that set up new branches for the bank and entered new markets. I half-jokingly asked him which team he liked. After thinking for a moment, he answered: “Well, opening a new branch is obviously more fun and brighter than closing one…but many of my tasks were similar.”

When I asked him to elaborate, he explained that today, even when opening new branches in new markets, the focus is on promoting self-service and digital banking products.

We discussed how financial institutions can now enter new markets without the levels of capital expenditure previously required to compete. It wasn't that long ago that it seemed impossible to make a big impact in a market with far fewer branches than the market leader.

Now, all else being equal, having more branches in a market usually gives you a competitive advantage. However, with the spread of mobile banking, the service area of ​​each branch has expanded significantly in recent years.

This has led to overlapping service areas for some institutions with dense branch networks. A smart person can (and does) debate whether dense branches have a multiplier effect or a cannibalization effect on the network. I have long argued that the answer varies from bank to bank, depending on their ability to build, develop, motivate and maintain great bank teams.

Assuming that one bank's branch has the same prospects as another bank's branch overlooks the fact that some organizations operate their branches more economically and/or productively than others. Masu. Some banks are great at keeping their branches visually appealing inside and out, and they have branch teams that are adept at serving customers, serving their communities, and growing their businesses.

Years ago, a banking analyst friend of mine argued that a bank's success with new branches has more to do with its performance in its current branches than the markets it enters.

His favorite analogy involved restaurants. It doesn't matter how many new stores you open in new markets if the food, service, and prices are bad. It will not be successful.

In recent years, I have looked at banks' mobile banking services and in-branch technology as they consider the potential for success with new branches, as well as decisions to keep existing branches open rather than just closing them. I believe it adds to the mix. operating.

Mobile technology reduces the need for high-volume, low-value-added transactions at branches. At the same time, improvements in in-branch technology for bankers have made them more productive than in years past.

Smaller teams of more productive bankers not only keep some once-marginal branches afloat, but help them gain and protect market share.

Different banks use different metrics to identify what branch density is appropriate for each market. One company may be shrinking its market presence while another is expanding its presence. And both parties may be making decisions that are appropriate for their respective institutions.

However, it is important to remember that regardless of a particular bank's decision-making process, customers and potential customers do not visit branches. They visit the banker.

Whether branch duplication creates a growth advantage or a cost disadvantage depends as much on the quality of the branch team as on branch density in any given market.

Investing in developing and retaining talented bankers may be the most important investment any bank can make in its physical branch network.