Customers Want 'Lighter, Not Fewer' Branches

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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

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