Banks Transforming Branch Networks to Improve Efficiencies

A lot has been written lately around the desire for banks to transform their branch networks given the consumer acceptance of alternative channels and the need to reduce distribution costs. In the past week, there has been coverage in both the American Banker as well as in BAI's Banking Strategies publication (see links to recent articles and white papers below).

One such report, published by the financial market research firm Fitch Ratings entitled, U.S. Banks: Rationalizing the Branch Network, expects that both fewer numbers of branches and different types of branches will be serving customers in the future. According to the report, the continuously increasing cost structure of banking, accompanied by a challenging revenue environment and higher capital requirements is prompting banks to evaluate all expense categories — especially their branch distribution system, which is one of the most significant expenses.

Past Branch Growth

For the past 30 years, branch growth continued unabated while the number of financial institutions declined by more than 50%. The growth occurred largely through consolidation and de-novo expansion, with the objective being to expand a bank's footprint and customer base and therefore low cost deposits and loans.

The Changing Definition of Convenience in Banking

Historically, one of the reasons people have chosen big banks has been their large network of branches and ATMs. Especially for people like myself, who travel across the country frequently, finding a place to conduct basic transactions without a fee was a competitive advantage for those institutions with a wide distribution network.

Recently, however, small institutions have been working on ways to erode this advantage, closing the gap through expanded ATM networks, improved online banking and now mobile banking services. In short, technology is quickly changing the definition of convenience for bank customers.

A recent study, The New Banking Value Proposition, from market research firm Chadwick Martin Bailey, finds that credit unions and smaller banks are maintaining their perception of having high levels of personalized service while also catching up with their larger competitors in terms of banking convenience. For those smaller institutions who are focusing on new technologies, this can allow them to more effectively compete for the increasing number of accounts in motion. Additional findings include:

The Impact of the iPhone 5 on Bank Marketing

So, the anticipation is over and the newest version of the iPhone has been introduced. When all was said and done, there were few surprises left as to what the iPhone 5 would offer, and for those of us who were crossing our fingers for the possibility of NFC integration (and further payments disruption), there may have even been a bit of disappointment.

And while additional enhancements to the Passbook app provides a glimpse into the potential for a head on competition with Google Wallet for payments supremacy in the future, the shop-with-your-phone coupon capability is not applicable to most bank marketers. What should be of more importance to bank marketers is the additional marketing real estate provided with the new phone and the growth in sales that may be on the horizon.

Bank marketers should see promise with the iPhone 5's larger, 4-inch screen with Retina display which provides 18% more pixels for delivering enhanced mobile ads, banners, landing pages and interactive campaigns. While the extra pixels may not seem like much, it moves the iPhone experience closer to that of the iPad, which has already proven itself to be a major tool for consumer consumption. And for those who are still tablet-less, it is possible that this new device will a bridge for engaged behavior.