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The Shrinking Bank Branch

ATMs and branches are starting to look a lot alike. Not literally, of course - it's still easy to tell a self-service cash dispenser from a storefront. But banks of all sizes are busy turning self-service machines into tellers, while turning teller stations into ATMs.

New technology projects, such as Wells Fargo's electronic pads at teller stations, Dollar Bank's use of ATM video to put customers in touch with actual tellers and Bank of Montreal's leveraging of videoconferencing to bring financial experts to remote locations, highlight innovation that banks are using to win the battle of the bulk.

Even four years after the financial crisis first hit, banks face a problem of bloated overhead that, as the consultant Michael Nuciforo opined in March's issue of Bank Technology News, adversely affects their ability to innovate in other areas. Making branches and automated teller machines work faster by bringing more personal service to ATMs and more digital service to teller windows is a primary way in which banks are reimagining the concept of the store for a new age - one in which branches frankly are smaller and employ fewer people on-site. Branches are embracing technology-enabled agility, lean physical resources and customers who are more comfortable with digital banking than ever before because of their experiences with mobile and the Web.

"There's a tipping point as a result of the regulatory and broader economic issues of the past few years that have banks rethinking the cost and effectiveness of maintaining branches," says Bob Meara, a senior analyst at Celent.

One of the larger branch networks in the U.S. belongs to Wells Fargo, which has more than 6,000 stores and 12,000 ATMs across the country. The bank is doing a number of things to marry self-service channels such as ATMs and remote access via mobile banking applications to the branches. One initiative has enabled the actual teller stations in the branches to take on the appearance of an ATM session.

The bank is outfitting branches with touch-screen PIN pads that allow the customer to execute transactions such as deposits and withdrawals as if they were at an ATM while standing before a human teller. While that's happening, the rep signs up customers for new accounts or performs more complex interactions.

The strategy is to bring at least some automation to all consumers, even those who prefer to do all of their banking in person at the branch. "More than half of our ATM transactions are from 'teller preferred' customers [those who like to engage with tellers primarily]. So with that in mind, we built an ATM-like interface for the teller window. If you want to do a withdrawal, you enter that amount into the pad and the teller dispenses the cash to you," says Jonathan Velline, executive vice president of ATM banking and store strategy for Wells Fargo.

The bank is also using ATMs to help execute a broader channel diversification strategy. For example, it's tying mobile banking closely to cash machines. Customers who are authenticated at an ATM can enter their cellphone number to sign up for mobile banking. A personal financial management interface has also been linked to the ATM. "You can see how much you withdraw in a month," Velline says. ATM activity can be tracked by consumers as part of budgeting goals, with the goals represented by a thermometer - the "temperature" moves up and down to monitor progress.

Apart from some partnerships with hardware manufacturers, Wells develops most of the underlying technology for self-service and branch automation internally and links varied channels and touch points to its customer relationship management and core banking system, which allows for cross-channel pollination: mobile, ATM, Web and personal service are all drawing information and executing transactions from the same core processing software.

Marc DeCastro, a research director at IDC Financial Insights, says the drive to reduce costs and manage declining foot traffic at branches will spark a broad change in how expanded automated self-service capabilities can be used to optimize branches as a financial services venue.

"How the branch is perceived and how it will be built out in the future is changing. There is a movement to go with much smaller branches, perhaps having very small self-service branches tied to a more centralized full-service branch" he says. "So you have a local branch with no tellers where everything is automated, but if you want to do something more complex you'll have to travel to another branch a few miles away."

The analysts and tech providers Bank Technology News spoke with place the cost of running a branch network at about two-thirds of a bank's overall facilities budget, when the expense of employees, maintenance, equipment and size and location of the actual buildings are factored in. A new branch network dominated by smaller buildings, digital self-service, video tellers and less local staff would undoubtedly save money.

Existing remote access technology that's not necessarily cutting edge, such as video tellers and telepresence, is getting a second, more serious look as a remote customer service enabler.


(7) Comments



Comments (7)
Banking has changed and the financial institution must change with the times. It is not a question of technology solutions for customers just to save cash. Unfortunately, banks are up against the negative media and public back lash directed at them based on the financial sector bail-outs. Government regulations created in the Dodd Frank Bill also cause banks to have their backs against wall. The end result are customers demanding more from their financial institutions in the form of service (banks should be flush in cash related to the bail-out money) when the reality is Dodd-Frank directly tagets and fixes Debit Card exchange rates thus lowering bank income by billions. It is a delicate balance. If cuts are made in the branches, corresponding technology services need to be available. Business bankers are particularly in need right now. The largest income producing deposits are found in businesses and they are increasingly under fire with fees from banks. A Business representative covering several branches to offer the personal touch is a must to smooth things over. Investments in making things cheaper and easier for cash flow velocity with businesses is also a do or die situation. Inexpensive apps and attachments with smart phones for credit card processing is a good example. These are not easy times but they can be navigated with the right strategies.
Posted by busbanker05 | Tuesday, April 17 2012 at 7:26PM ET
Another approach is to make the staff at a branch as multi channeled as well. Use technology to process the labor intensive task. Inventory the skill sets of your branch staff to find the type of emplyees that can be trained to be mutiple products experts. The consumer today researches the products they are in need of online and look to come into a branch for the expertise to navagate the finer points of their research. A good example is Best Buy unable to remake themselves in the fast moving internet sales of electronic products. Consumers need to view the staff at a branch as their advisors and product experts. Consumers still want to have personal interaction when making financial decisions.
Posted by TommyL | Tuesday, April 17 2012 at 9:11AM ET
While I agree with the previous comments, it is impossible to deny the fact that banking has dramatically changed in the last 4 years. The focus from the revenue perspective has shifted to require a leaner more efficient business model that banks were not prepared to change to. The two highest costs in any business are their overhead and personnel costs, and for years banks operated with a business model that called for high FTE staffing. While this model served most banks and their customers well, it also created higher costs. The shrinking economy has forced all financial institutions to analyze the way they make money. We have seen decreasing trends in the financial sector when it comes to ROE, Asset Turnover and Current ratios, and the banks are more aware of their costs. Add to the stress of the recent financial crisis, the changing legislature around banking (Dodd-Frank, Basel III...) and you get a clear picture of what banking CEOs are faced with. Although the answer is not clear, and different markets will require different solutions, scaling down the branch structure is definitely a means to increasing efficiency. However, simply scaling down the branch network is not enough, as stated in the article; banks will need to invest in technology that can handle the changing needs of the consumer. Just as we scale down the military and require more flexibility and cross-job functionality of our troops, banks will need to invest in training their core branch staff to handle more complex banking transactions while relegating simple transactions to automated systems. I agree with the author's model of the HUB branch system, while many years away, it is definitely the direction that banks will be forced to move to in large metropolitan areas.
Posted by ricklozano31 | Friday, April 13 2012 at 1:04PM ET
Be careful how much service you eliminate-small banks give these services and will continue to do so. They will get those customers who don't buy into new tech service.
Posted by glancesr | Friday, April 13 2012 at 8:52AM ET
Well said ELAINE!!!! The problem with this business is the 'customer' has been forgotten. The customer is now the dollar bill. That is the interest of banks now. The person can carry the dollar bill into the bank, but once they leave it, the bank loses interest very quickly. It's a real shame that the world has become what it has today. I guess we dinosaurs that still believe in a hand shake and a cup of coffee will soon be replaced by the automated keypad and video conference.
Posted by plawson | Tuesday, April 10 2012 at 4:14PM ET
ElaineP is spot on, as is todays recent article from TD bank and their plans for branch expansion.
Technology is great and a necessary evil, but for small business, and mid market lending along with checking and MM customers, people still favor face to face contact.
But I sincerely hope the Mega's will not appreciate this and start closing their branches.....
Posted by tfer | Monday, April 09 2012 at 2:50PM ET
I can't speak for "other" banks, but First Federal Bank of Bucks County puts their "Customer Service" first. We believe our relationship with our customers is "The" most important part of our business. Tecnology will never replace our person to person consults. I have worked for many banks in the past and in many different states, and I find First Federal a wonderful community bank who interacts with the community itself. "I hope machines never replace our human interactions."
Elaine Panagos, Branch Manager in the Yardley branch of First Federal Bank.
Posted by ELAINE P | Tuesday, April 03 2012 at 10:07AM ET
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