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Customers Want 'Lighter, Not Fewer' Branches

Changing consumer behavior is upending the traditional branch-banking model as consumers increasingly demand a seamless, ubiquitous, simple, personalized and empowered banking experience.

Banks on the forefront of change have recognized that success in the near future will be driven by two factors: how well banks adapt to these changing customer needs and how well they improve branch network efficiency.

By adopting a "lighter, not fewer" approach to branches, banks can gain more flexibility and become nimbler in responding to customer challenges. At the same time, they can better position themselves to reduce the traditional fixed costs associated with the branch network. While many U.S. banks are still considering these adaptations, Citi and Chase are leading the charge in this direction.

Banks that are slow to respond will soon be at a competitive disadvantage.  If your bank isn't already doing so, we suggest you review the role the branch plays — as part of your multichannel distribution network — in meeting customer needs, particularly their need for advice. You can then investigate whether the skills and competencies within your branches sufficiently support that role, especially whether your branch staff has the necessary proactive customer engagement skills.

Leading banks have recognized that the branch is no longer a one-stop destination for meeting customer needs across the entire value chain: research, advice, purchase and service. The branch is only one aspect of an integrated, multichannel experience.

Today's branches handle under 25% of product research requests, as customers now do the bulk of their research online. This shift in services has narrowed the primary focus of the branch to providing advice, where it is uniquely positioned to deliver a rich and personalized customer interaction.

To make this shift, banks are investing in tools that allow branch staff to better understand customer needs, educate customers about available products and identify and communicate the best alternatives for a customer's financial situation. In order to cost effectively provide this advice as well as other necessary services, leading banks are adopting a "lighter, not fewer" philosophy — a "lighter" footprint, using a hub-and-spoke model that distributes branch responsibilities within regions; "not fewer" branches. This model is based on three branch formats, each with a specific function.

The hub, the largest of the branch types, is a one-stop facility that delivers a comprehensive suite of services and excellent overall customer experience. Customers test available products and improve their multichannel literacy, sales representatives provide personalized advice and sell new products and a small task force completes complex service requests. The hub is supported by a number of branches — the spokes in the network — that specialize in either advice or service, but not both.

Advice branches are on the leading edge of size and expertise, with only two or three staff members who provide counsel and originate accounts. Supported by videoconferencing technology, they are able to make specific expertise available to consumers on demand.

Service branches, similarly small, focus on self-service activities. Customers typically will not talk to a representative working at the facility, but will instead interact via video machines with staff based elsewhere. A service representative may walk the floor to proactively engage with customers, providing advice and offers. Real-time information about customers within the branch and personalized customer offers are displayed on the service representative's tablet computer.

Both advice and service branches are located in shopping malls with high foot traffic – not in standalone buildings.

These branches are designed with an integrated channel experience in mind: Information entered in another channel is available in the branch in real time and processes started in other channels can be picked up seamlessly. Several banks are also finding ways to simplify and standardize technology across channels so agents can use exactly the same process, screens and online applications that are available to the customer. All the branches work together to better meet the customer's needs.

New consumer behavior, combined with pressure to manage costs, is forcing banks to become much more specialized in how they go to market. Leading banks are responding to these challenges by developing specialized branch formats, increasing their focus on advice and shifting employee hiring practices to emphasize proactive engagement with customers. If your bank hasn't taken action, it's time to get started – or keeping up with the competition will be difficult in the near future.

Fergus Gordon is a partner in the financial institutions practice of A.T. Kearney, a global management consulting firm. He can be reached at


(7) Comments



Comments (7)
Fergus, I completely agree with your assertion that bank branches are going to need to change. With roughly 70% of current branch visits being driven by transactional banking needs (like depositing a check), it seems safe to say that the rise of self-service channels (that enable amazing features like remote deposit capture) will force branches to adapt.

Adapt, not die. As you point out, branches will still play an important role in facilitating high touch, face-to-face interactions. The wave of the future isn't going to be the complete elimination of the branch, but rather the adoption of a true "omni-channel" approach. As a consumer, I'm looking forward to working with a bank that provides suitable channels for all of my banking needs and a truly seamless customer experience across all those channels.
Posted by Eric Lindeen | Monday, October 22 2012 at 2:34PM ET
Consumers want neither 'Lighter' nor 'Fewer' Branches. In fact, most consumers simply do not care as long as they are able to effectively accomplish their tasks. This is perhaps the biggest challenge in the Banking industry... the inability to understand that product, channels, services and pricing should be customer centric. If Banks are able to meet the needs and wants of their customer base, all else will rationalize itself.

The issue isn't smaller branches vs larger branches... it is about what customer want, how they want to interact with their bank, and ultimately, how the bank can grow an average customer into a profitable relationship from one that generates an operating loss.

Mr. Gordon is right that most Bank Branches are essentially obsolete; that their existence cannot be justified based on sales & service contribution. However, moving from 'Order Takers' to a 'Trusted Adviser' requires more than a shift from a large branch into a small branch... and frankly, most likely such a dramatic shift will require different skill-sets.

But perhaps more importantly, each Bank needs to develop a strategy that will in turn measure the success of its product development team, its marketing, its pricing group, its relationship management, its IT and other functions. Without a comprehensive and detailed strategy, we find the situation that is so prevalent today wherein many Banks are "spinning in place"... much activity but little to show for it.
Posted by Serge Milman | Friday, October 19 2012 at 1:17PM ET
Attention is very important and subject matter expertise is even more important. If the person in the "branch" is a data entry staffer, then there is no value and no real opportunity for a close.
Example - a person comes in to the branch and says I have just inherited $20,000. I work for a company and make $30,000/year with a 401k plan with a 50% match but I cannot afford to contribute to the 401k because I am making payments on a $10,000 credit card at 15% interest, have no emergency fund, a car loan of $5000 at 6% and no retirement. What does the person in the "advice branch" say? What does does their computer system say? There are actually 3 scenarios that could happen depending on the qualifications of the person and computer in the "advice" location:
1) a fiduciary response
2) a suitability response
3) a traditional "caveat emptor" response.

Which one do you think might be optimal and which one do think actually will be given?
Posted by frankarauscher | Thursday, October 18 2012 at 1:23PM ET
It's all about the attention! You can spend thousands of dollars in a beautiful branches like most banks but the problem is that those branches are staffed with people that cannot make the most simple decisions likes approving a credit card or a car loan, they are just intermediaries that enter your information into the system and then wait for a response from corporate, then is not personal anymore but merely transactional. That is the reason why people HAVE TO USE other avenues liken banking online or applying for a car loan directly at the dealership. People use to know the name of their doctor, lawyer, accountant and banker, nowadays you are your own banker.
Posted by ahuertas | Wednesday, October 17 2012 at 11:33PM ET
This topic has been pondered for decades. I agree with Fergus that it is a good way to go but it needs great execution. Selling high value products can be optimized in the "face-to-face" situation offered by "advice branches" because placing a pen in the hand of a customer and saying "sign here" is still the optimal sales close.

However, a new problem is emerging because of the greedy and predatory actions of four major banks. That problem is "what kind of advice will a customer receive at an advice branch"? Banks currently offer three types of "duty of care" to their customers. Fiduciary, Suitability, and Caveat Emptor. Until every customer can be sure that they will receive advice worthy of an RIA, then there will be no trust and the specialty branches will not be optimized or trusted. This would not be as much of a problem if those four large banks (Wells, US Bank, Fifth-Third, and Regions) would stop their predatory practices including Payday loans at 100% - 365% interest. They will muddy the waters for every bank "branch".
Posted by frankarauscher | Wednesday, October 17 2012 at 2:58PM ET
Pondering the "Future of the Branch" question, I've had this thought: a branching strategy is ultimately going to boil down to an advertising strategy. It's all about the signage. I don't want to go to a branch, I just want to know it's there. -Katherine Kane, editor, Dodd-Frank Reform Watch
Posted by kkane | Wednesday, October 17 2012 at 2:28PM ET
Add your comments here.
Posted by planetom | Wednesday, October 17 2012 at 1:18PM ET
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