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Peak Performance Consulting Group
www.ppcgroup.com
March 13, 2014
Transforming Branches – and the
branch network
Retail banking is facing a difficult challenge…
 Consumers and businesses are changing the way they interact with financi...
Our panelists…
Andy Harmening
SEVP, Regional Banking Group Head
Mark Iniguez
SVP, Director of Retail Network Strategy
Bren...
“New Normal” requires change in strategy
 Primary role of the retail branch: drive customer acquisition and support consu...
The changing dynamic of how people bank means
the design of retail branches must evolve
 Redefine branch
operating model
...
Managing branch transformation
 Branches will be designed differently. They’ll be smaller, and fit into typical
retail fo...
Four new branch models emerging
 Programs actively underway at most major banks
 Early adopters are moving from pilot to...
Migrating transactions away from the teller line
JP Morgan Chase
 Deposits decreased 11% CAGR through
targeted efforts to...
Micro and mini branches provide very low cost, fill-
in opportunities
Page 8
1,250 sq. ft. Wells Fargo branch in Washingto...
Temporary branches: go where the customers are
Page 9
PNC “Pop Up” Branch Frost Bank mobile branch
Create attraction: re-establish branch as a
destination, not an infrequent errand
Page 10
Branches don’t create their own ...
Re-thinking staff efficiency and service delivery
 Issue is not whether teller staffing can be reduced or eliminated, it ...
Moving forward…
Managing the network mix
 What technology do we need?
 How do we manage the overall mix of branch types ...
Thank you ….
Page 13
Peak Performance Consulting Group
David Kerstein, President
512-607-6332
dkerstein@ppcgroup.com
www.p...
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Tranforming Branches and the Branch Network

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The changing nature of the branch channel and its transformation. Presentation at American Banker/Source Media Retail Banking 2014 conference.

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  • Thoughtful, David. Bank branches are like video stores in an on-demand world, and they are doing little to build/align their brand experience with the next generation of users. They've had many chances since de-reg to get this right, but all I see is more bricks, terrible IVR and on-line processes, empty desks and few staffers with a clue about building relationships. People still don't mind visiting a place they like, a bank branch should be one of them.
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Transcript of "Tranforming Branches and the Branch Network"

  1. 1. Peak Performance Consulting Group www.ppcgroup.com March 13, 2014 Transforming Branches – and the branch network
  2. 2. Retail banking is facing a difficult challenge…  Consumers and businesses are changing the way they interact with financial institutions, shifting to non-branch channels  But customers still value branch convenience ― It is the most important factor in bank selection ― Branches are still the primary channel for customer acquisition and consultative sales for both consumers and small business  Significant opportunity to improve branch efficiency/reduce cost… ― Redefine the model: the right branch configuration to efficiently meet customer needs ― Enable more efficient service through improved technology ― Shift branch staffing toward more flexible, “Universal Banker” model  …and grow revenue by refocusing away from declining transactions and toward sales growth  But banks must evolve their retail distribution strategies ― What kind of branches - and what kind of branch network – do we need for the future? ― Video banking, pop-up branches and other new formats: What is the “branch of the future?” ― Combining traditional, digital, and self-service – making it work on the front lines? ― Is the Universal Associate the answer to staffing retail branches? Page 1
  3. 3. Our panelists… Andy Harmening SEVP, Regional Banking Group Head Mark Iniguez SVP, Director of Retail Network Strategy Brent Tischler SVP, Director of Channel Optimization Page 2
  4. 4. “New Normal” requires change in strategy  Primary role of the retail branch: drive customer acquisition and support consultative sales ― Drive new customer acquisition and provide sales and for existing customers ― Support business customers, who are more dependent on branch services ― Build and reinforce bank’s brand  Customers still value branch presence: ― 64% identify branch convenience as primary reason for choosing their bank ― 61% still visit a bank branch at least once per quarter  Channel preferences are changing ― Transactions conducted in bank branches are declining 5-6% per year due to direct deposit, debit, electronic bill pay and other check displacement ― Transaction behavior and routine servicing shifting to other channels  Shrinking branch traffic leaves fewer sales opportunities ― New accounts opened per branch FTE declined 23% since 1997 Page 3 20% 46% 34% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Branch dominant Multi Channel Web/phone dominant Actual Channel Usage: Shifting Away from Branch 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Age 18-34 Age 35-54 Age 55+ Branch Preference Declining Among All Age Groups (% listing branch as preferred banking method) 2008 2010 2012 Source: ABA Source: PNC Investor Presentation
  5. 5. The changing dynamic of how people bank means the design of retail branches must evolve  Redefine branch operating model  Enhance multi-channel experience  Migrate customers to self service and digital channels  Reshape physical distribution model Page 4 Physical: bank at the branch Automated: ATMs/self service grows Virtual: on-line, mobile Personal: omni-channel
  6. 6. Managing branch transformation  Branches will be designed differently. They’ll be smaller, and fit into typical retail footprints. There will be fewer free standing branches (less need for large branches with drive-ups).  Branches will be staffed differently. There will be greater utilization of universal staff who can handle sales, service and transactions — we won’t need as many tellers.  Branches need different marketing support. Smaller, lower traffic branches will be more like sales centers, and this means greater micro-market promotion and calling efforts to improve trade area sales penetration.  Successful financial institutions will have more robust front-line relationship management technology to enable staff to deliver better customer service, stronger profitable cross-sell, and achieve greater share of wallet. Page 5
  7. 7. Four new branch models emerging  Programs actively underway at most major banks  Early adopters are moving from pilot to rollout, with at least one “top 10” institution planning to convert 15% of total branch network into Universal Banker model in 2014  Driving down costs: 50-60% lower expense, 6+ months faster break even than traditional model Page 6 Archetype Typical Size Technology Staffing Utilization Self Service 500-1,000 sq. ft. • Full self service • Advanced function ATM • Video teller • Full self service • Not staffed, but may have video teller link for live support • Urban core Express 1,000- 2,000 sq. ft. • Full self service or assisted self service • Concierge (1-2 FTE) • No dedicated teller • Urban core • Rural replacement as substitute for closing branch Neighborhood 2,000- 3,000 sq. ft. • Assisted self service or cash recycler pods • Video conferencing access to business line partners (business banking, mortgage, investments, etc.) • 3-4 Universal Associates • No dedicated tellers • Urban core • Suburban strip center and neighborhood “life style” centers • Rural replacement as substitute for closing branch Traditional 4,000+ sq. ft. • Cash recyclers to supplement or replace traditional teller lines • Assisted self service in high volume locations • 6-8 FTE • UA as component part of total branch staffing • Hub branch • Center of expertise, staffed with business line partners
  8. 8. Migrating transactions away from the teller line JP Morgan Chase  Deposits decreased 11% CAGR through targeted efforts to increase self service usage  Branch staff decreased 20% (same store)  Reinvested savings in new locations, improved sales process to fuel growth Large Regional Bank (>1,000 branches):  Pilot to improve self service acceptance resulted in 50% increase in deposits through ATMs in test market  Opportunity: 70% of all teller transactions could have been done through self service  Potentially shift 1/3 of branches to self- service format Page 7 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 % Consumer Deposit Transactions through Tellers: Chase Bank CAGR (11%) 90% 51%
  9. 9. Micro and mini branches provide very low cost, fill- in opportunities Page 8 1,250 sq. ft. Wells Fargo branch in Washington DC has enhanced self service, walls that seal off consultation rooms for 24 hr. access Fifth Third 2,000 sq. ft. teller-less branch in downtown Cincinnati BofA branches with Video Teller Assist in Atlanta, Boston, Charlotte, Dallas, Houston, New York
  10. 10. Temporary branches: go where the customers are Page 9 PNC “Pop Up” Branch Frost Bank mobile branch
  11. 11. Create attraction: re-establish branch as a destination, not an infrequent errand Page 10 Branches don’t create their own gravity – they need intrusive programs to drive traffic, providing opportunities for conversion  Fewer customers visiting branches = fewer natural sales opportunities  Smaller branches lose “billboard” impact  PNC: Utilizing mobile stores, street teams and educational events to drive branch traffic and acquire accounts at lower cost  Umpqua Bank: hyper-local, branch based and community events drive traffic, create engagement and sales conversion
  12. 12. Re-thinking staff efficiency and service delivery  Issue is not whether teller staffing can be reduced or eliminated, it is how to manage transformation ― Decreased need for specialized teller role ― Changes in branch mix requires staffing flexibility, not role rigidity — Establishing the optimal configuration based on trade area potential and transaction activity — Defining the baseline for technology: how much (or how little) is needed to eliminate barriers to change and prevent reversion to traditional roles  Sales improve, when combined with the right marketing paradigm and disciplined sales/service process  Universal Associate model is not just a training program but a major shift in focus, staff roles, and customer experience — Branch design and technology — Marketing — Measurements, rewards and recognition Page 11
  13. 13. Moving forward… Managing the network mix  What technology do we need?  How do we manage the overall mix of branch types (large, small, mini, etc.)  Balancing lease vs. own, CRA and other requirements Managing the customer transition  Many customer use branches because they like personal interaction, or at least the opportunity to interact  Too much change can be disruptive: Banks have tried new designs before, and results have often been disappointing — WAMU’s converted over 1,000 branches to its’ patented Occasio design, but many customers found it too “different” and confusing Managing the staff transition  New roles require new skills and new career paths  Not everyone will be happy: “Bank of America Tellers Picket ATM Machines” (ABC News, November 23, 2013) Page 12
  14. 14. Thank you …. Page 13 Peak Performance Consulting Group David Kerstein, President 512-607-6332 dkerstein@ppcgroup.com www.ppcgroup.com
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