We have all read about the huge impact anticipated from the changes in the payments world.
Fundamentally, there are three major changes driving the revolution.
- Check 21, the last nail in the coffin of paper drafts, unleashed a tidal wave of changes in traditional payments.
- Changes in consumer behavior in the last five years are driving merchants, businesses, and others to adapt and leverage different payment channels.
- Technology has come into its own in the last couple of years. The Internet, imaging, falling hardware prices, and the growing capability of software have transformed the landscape, serving as both enablers of change and incubators for new applications.
An area that has not been fully explored is how these changes should influence bank decisions about technology investments in the brick-and-mortar distribution channel.
Many experts have predicted the demise of the branch only to experience an epiphany later and evangelize for its re-emergence.
The pendulum of opinion continues to swing. Some bankers have made new brick-and-mortar networks a cornerstone of their distribution strategy, while others have taken a more ad hoc approach.
One thing all these banks have in common is the need for branch automation technology.
Banks are continuously refreshing or replacing technology for this distribution channel. On average, major decisions about this technology are made every three to five years.
These decisions typically are very costly and disruptive; an automation project involving only tellers can cost upward of $35,000 a branch.
When considering branch investments, and the future of brick-and-mortar distribution, some underlying assumptions need to be made.
First, checks are a dead business. There will be some level of check presentment in the banking system into the foreseeable future, but it will be in continual decline and have a long tail.
Second, the customer experience will be increasingly relationship-based and consultative, instead of being transaction-based.
Third, customers will look increasingly to the teller functions in a more universal, less differentiated way.
Here are my thoughts on how to develop your strategy.
- Limit investment in traditional software and hardware associated with checks.
A back-counter, medium-speed system for capturing check images could be simpler, less expensive, and more attractive than integrating such a system into the teller desktop software and hardware.
- De-emphasize handling checks in branch design.
- Optimize plastics in your teller design — make it easier for customers to use cards instead of checks for financial transactions. Some examples include using a credit card for customer identification and self-initiated transactions. This strategy furthers the migration toward paperless transactions and de-emphasizes the need for the more expensive checks.
- Eliminate teller cash drawers. Adapt and deploy cash-recycling technology.
- Teller design needs to co-opt or minimally co-host a full sales platform. In other words, the transaction and relationship/sales systems should be on the same desktop. There should not be stand-alone teller systems or stand-alone sales desktops. Branch staff members who conduct financial transactions on the teller desktop should be able to sell on that same desktop.
This last point can be extended into the traditional call center sales and to a lesser extent to the Internet channel. Most bank distribution channels have evolved independently over time, so each channel likely has different software, different user interfaces, different capabilities, and maybe even different hardware and software platforms.Bank information technology departments should develop strategies to reduce the differences, simplify interfaces wherever possible, and move toward a more seamless channel framework.
What this buys is enormous benefits in usability, training, simplicity, and cost of ownership.
