How E-Mortgages Are Changing the Bank Branch

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Survey data show that by midyear 2013, Internet-based mortgage sales in the U.S. increased 75% year-over-year, leading to a 16% decline in branch sales.

Accenture's 2013 annual survey of 2,001 retail banking customers across the United States compares results of the same pool of respondents contacted in 2012. The research also shows mobile banking increased 50%.

Together these changes are forcing banks to reconsider their retail branching strategies.

"Branches need to be reimagined as one aspect of a radically new approach to consumers," says Mike Goodson, a managing director and head of management consulting for Accenture's North America banking practice.

Online banking, regardless of its specifics, represents an opportunity for banks to recover profitability and reduce costs as much as a chance "to establish a much more sustainable relationship with customers and better retention of market share into the future," he says.

"Given the scale of these disruptions, traditional full-service banks, as a group, could lose significant market share by 2020 to banks that reorient around digital technologies and to new entrants from the retail and technology sectors," says Wayne Busch, managing director of Accenture's North America banking practice. "Our research shows signs of this already occurring."

Banks are responding to the trend differently.

Some banks are expanding in new locations, or trying to generate higher volumes of online sales of home equity loans. Others are creating new branch models that can manage borrowers' appetite for Internet and mobile banking efficiently enough to retain existing customers and attract new borrowers.

Such goals, however, cannot be achieved unless banks strike the right online/offline balance.

"There is little question that branches remain important in the minds of U.S. consumers," says Goodson.

As of today, the survey finds branches still are cited as "the number one reason for loyalty." Eight out of ten consumers see themselves using branches "as often or more often" in the next five years.

But the rapid rise of mobile banking illustrates how quickly customer behaviors can change through digital technologies. And profitability pressures motivate banks to promote less costly and more convenient online banking options, Goodson notes.

Examples include recent promotions of mobile check-deposit tools offered by major U.S. banks to drive "rapid mass-market adoption." Nearly one-third, or 32%, of U.S. consumers engage in mobile banking at least once a month, the survey found.

Other data show that in 2013, compared to 2012, customer behavior "has changed considerably in favor of online banking."

The number of survey participants who think online banking should be "the No. 1 area in which banks should be investing" increased to 43%, surpassing the 38% who instead recommend branch expansion.

The acceleration in consumer acceptance of digital banking, particularly in mobile banking and online product sales, adds Goodson, suggests "a very different banking landscape for 2020."

Every year the nation's top 25 banks spend more than $50 billion to maintain branch networks, where they sell approximately 60% of all their products including mortgage loans, according to Accenture data.

This fact in itself suggests "a lighter, more diverse branch banking model" is needed to maintain sales and enable digital banking, Goodson says.

Findings indicate new branch arrangements already have started to shape up.

So-called light branch networks, in which branches are oriented to direct sales, are one example. They are highly automated, with a small staff that facilitate sales and provide access to remote advisory specialists.

Flagship branch operations tend to be even smaller in size. Branches are strategically located to act as flagships centers of sales and services that promote the bank's brand, introduce new products and self-service tools.

Full-service "hubs," on the other hand, operate like conventional branches that offer full sales and service support with extended hours, and have specialized mortgage and trade advisers on staff.

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