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With the proliferation of internet, mobile devices, smartphones, tablets and social media, branch banking has been facing competition like never before. According to a 2011 survey by the American Bankers Association, 62% of bank customers preferred banking online vis--vis other channels while only 20% preferred using a branch. Many experts have sounded the death-knell for branch banking. 30 years since their advent, direct channels like ATM and telephone banking have not been able to make branches obsolete and there is no reason to believe that newer self-service channels would replace branches. The argument of higher operating costs compared to direct channels is unsustainable as most direct-channel customers are not profit making compared to branch customers. We believe that technology, innovation and channel integration will play a key role in re-engineering and re-energizing the branch as one of the preferred modes of banking.
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The below chart shows the number of Federal Deposit Insurance Corporation (FDIC) insured commercial banks and their branches from 2001 to 2011. A quick glance suggests that the number of banking institutions have decreased gradually, but in the last three to four years, the number of branches remained the same and even increased in 2011 compared to 2010. The number of branches per institution has gone up from 8.13 in 2001 to 13.23 in 2011. That is a 62% increase! Is there a catch somewhere? Is there still hope for a turn-around in branch banking? Can it still be among the preferred choices of the new age banking customers, a customer fed on mobility and social media?
There are varying views that banks and customers carry in this regards. While customers feel - why should we drive for 15-20 minutes and then wait in line at the branch? One can easily log-on to online banking from the web. Banks also have a similar opinion- why should we not cut the number of branches when most of the customers are showing an inclination towards online banking? We can save significant operational costs. While all this is true, one needs to understand that there is still significant opportunity in branch banking and a new model is needed to give branch banking the much needed boost.
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With the help of technology, transformation of the branch from a plain brick and mortar institution to relationship management center has been possible. Bank branches need to transform into an advisory channel to survive and flourish.
Self-service branch Heavily sta ed branches with low level of automation Digital signages Call centre applications extended to the branch for cross-selling and up-selling
Wealth management branch Sales sta armed with tablets to cater to customers in queues. Tablets in sync with the bank's CRM
Access to nancial experts and relationship managers through inhouse video centres
Modernization of ATMs
ATMs will have a more modern look and feel wherein it can have voice prompts, automated door with sensors to detect a person entering and close the door once the transaction is done. NCR has introduced the SelfServ ATM which is designed to accept cheques, make bill payments, mobile top-up etc. NCR SelfServ 32 can automatically recover from software failures and downtime in 10 to 15 minutes. This kind of modernization of ATMs will definitely help the branch banks to gain more momentum in the long run.
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Branch-banking trends
Banks need to re-work on their traditional bank-branching strategies and come up with innovative ways to improve services. Banks need to put the new social and mobile customer at the fore-front and make branch strategies focusing on their needs, instead of excluding them and focusing on traditional customers. Below are the branchbanking trends which will help restore customer confidence in branch banking.
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that they should provide. The Barclays staff is empowered so that, they dont have to strive for irrelevant rules and hence can put the customer first. This policy change has seen customer complaints reduce by close to 65%. Example: If a customer pays in 530.60 and only 530.20 is credited in the account then, the bank first refunds and then goes about its investigation. Similar to the 15 minute daily meeting in Ritz Carlton, Barclays too has its own meeting where Barclay corporates, across the organization inform their staff about whats happening in Barclays, what is important and what the customers are saying. This fifteen minute meeting at Barclays, where the team reviews what they did all the while and any issues or blockers they are facing is similar to what happens in agile software development called the standup.
Security
Not always the internet banking or social media is a preferred mode of transactions by customers as most of the frequent banking customers are concerned about the data breaches, viruses, privacy and transaction authenticity aspects that will limit the banks to use social media and internet banking in their business. Banks are grappling with the issues like balancing privacy requirements of customers against use of new forms of marketing hence; technology will take a back seat enhancing the scope of branch banking. Recently, HSBC one of the biggest bank in Britain, was exposed to impending fraud, because of flagrant security loophole concerning millions of online bank account users. As a result, 3.1 million UK customers registered to use the service have been vulnerable to attack for at least two years.
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Conclusion
Despite the mounting influence of direct banking, branch remains the preferred point of contact for the customer, for face to face interactions. Customers prefer the internet for getting information on the financial products but many still prefer visiting branches for buying and after sales. They also do not usually carry out intricate transactions or apply for complex products through direct channels. The present day customer prefers the banker to be more proactive and is even ready to pay for professional advice. In such a scenario, banks need to be familiar with the customers requirement and introduce branches that provide the best experience to their customers. This approach will not only have a positive impact on sales, it will increase loyalty too.
Abhinav Kishore Jaipuriar is a Senior Associate Consultant with the Financial Services and Insurance Vertical in Infosys. He has 5 years of
experience in Banking and finance, pre-sales, Supply Chain Management and product development. His areas of expertise include banking, capital markets and risk and compliance. He has worked on developing business cases and building strategic solutions for banking, capital market and supply chain management clients. He can be reached at Abhinav_Jaipuriar@infosys.com
Naga Madhavi Chintalapudi is a Consultant with the FSI Research Center team within the Financial Services and Insurance vertical in Infosys.
She has overall 7 years of experience, with her work revolving around researching various companies, industry/market analysis, vendor/ peer analysis focused on FSI and IT vertical. She has worked within a project for a leading UK based telecom player prior to working with FSI Research Center for conducting Market Analysis for various Telecom products and Company Research for various Companies in UK markets. She can be reached at nagamadhavi_c@infosys.com
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2012 Infosys Limited, Bangalore, India. Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.