Is the bank branch Dead?

Key Trends Branch-generated revenue growth is becoming more challenging. Transactions processing and customer service are becoming increasingly independent of the branch channel. Customer demographics are shifting, making Generation Y and ethnic groups vitally important. Source: Evolving Models of Retail Banking Distribution, Deloitte, 2008

Branch-generated revenue growth is becoming more challenging.

Transactions processing and customer service are becoming increasingly independent of the branch channel.

Customer demographics are shifting, making Generation Y and ethnic groups vitally important.

Source: Evolving Models of Retail Banking Distribution, Deloitte, 2008

The Branch Value: Customer Perspective Customers continue to cite convenience as the number one reason for choosing a bank: Retail Bank Selection % of respondents Branch Close to Home 52% Good Service 36 Convenient ATMs 35 Free Checking 34 Previous Relationship 32 Offers Direct Deposit 24 Branch Close to Work 22 Low Fees/Charges 19 Low or no ATM Fees 18 Convenient Hours 17 Source: PSI Survey of US customers

Customers continue to cite convenience as the number one reason for choosing a bank:

Retail Bank Selection % of respondents

Branch Close to Home 52%

Good Service 36

Convenient ATMs 35

Free Checking 34

Previous Relationship 32

Offers Direct Deposit 24

Branch Close to Work 22

Low Fees/Charges 19

Low or no ATM Fees 18

Convenient Hours 17

Source: PSI Survey of US customers

Does this mean having a lot of branches Does this mean having a extensive ATM network Does this mean having an extensive array of products Questions:

Does this mean having a lot of branches

Does this mean having a extensive ATM network

Does this mean having an extensive array of products

Answers The answer is a both a yes and no to the questions. Having an extensive ATM and branch network along with 10 page menu of products does not assure success alone Banks should focus on: Distribution excellence This drives customer choice, loyalty, and ultimately, profitability Forward thinking The world is changing at a rapid pace and customer expectations the bank role is changing Less transactions and more on retailing Mastering retail concepts from such success as Starbucks, Target, and others will provide greater insight to marketing and selling bank services

The answer is a both a yes and no to the questions. Having an extensive ATM and branch network along with 10 page menu of products does not assure success alone

Banks should focus on:

Distribution excellence

This drives customer choice, loyalty, and ultimately, profitability

Forward thinking

The world is changing at a rapid pace and customer expectations the bank role is changing

Less transactions and more on retailing

Mastering retail concepts from such success as Starbucks, Target, and others will provide greater insight to marketing and selling bank services

New Banking Paradigm Customer Anywhere Anytime Anyway customer convenience Online banking 24/7 service 8 to 8 branch service 365 days branch service Instant comparison of products and services Reduced Turn Around Time Enriched interactivity through customized services Bank

Customer

Anywhere Anytime Anyway customer convenience

Online banking

24/7 service

8 to 8 branch service

365 days branch service

Instant comparison of products and services

Reduced Turn Around Time

Enriched interactivity through customized services

New Banking Paradigm Bank Redefine Traditional concepts Role of the branch Business processes Wider and more focused market reach Reduced distribution costs Cross Sell Leverage customer database Customer acquisition / retention Credit screening and data mining Customer

Bank

Redefine

Traditional concepts

Role of the branch

Business processes

Wider and more focused market reach

Reduced distribution costs

Cross Sell

Leverage customer database

Customer acquisition / retention

Credit screening and data mining

The Innovators ING Savings Retail banking Very Limited branches E-banking Basic Product Menu Commerce Bancorp Commercial and Retail Numerous branches Traditional Banking Multiple products sets HSBC ( US banking ) Commercial and Retail Limited branches “ Self-Directed” banking Limited Products

ING Savings

Retail banking

Very Limited branches

E-banking

Basic Product Menu

Commerce Bancorp

Commercial and Retail

Numerous branches

Traditional Banking

Multiple products sets

HSBC ( US banking )

Commercial and Retail

Limited branches

“ Self-Directed” banking

Limited Products

ING Savings ING branches: Differentiate the brand Are not called branches, they are called “ Cafes” Creates social currency…banking is cool, very cool.

ING branches:

Differentiate the brand

Are not called branches, they are called “ Cafes”

Creates social currency…banking is cool, very cool.

Commerce Bancorp Commerce branches: Build the brand Are the mission statement...”Building the Brand one brick at a time” Unconventional Opened seven days a week Hours based on working class people convenient banking

Commerce branches:

Build the brand

Are the mission statement...”Building the Brand one brick at a time”

Unconventional

Opened seven days a week

Hours based on working class people

convenient banking

HSBC USA HSBC USA branches: Provide Niche services for Cosmocrats Provide Straight-Thru banking for ‘Self-Directed’ customers

HSBC USA branches:

Provide Niche services for Cosmocrats

Provide Straight-Thru banking for ‘Self-Directed’ customers

The theme among all three cases Demand for non-traditional Service Automation of Services (for customer needs, not for bank needs) Emphasis on Customer rather than Product

Demand for non-traditional Service

Automation of Services (for customer needs, not for bank needs)

Emphasis on Customer rather than Product

Branch as a Multi-Channel Platform The branch represents: A significant opportunity for changing the customer experience; A significant opportunity for enhancing the brand; A platform for offering superior non-deposit offices and e-banking services

The branch represents:

A significant opportunity for changing the customer experience;

A significant opportunity for enhancing the brand;

A platform for offering superior non-deposit offices and e-banking services

From Transactions to Interactions From this………… to this………

And…Trust and Transparency Customers outside IndyMac Bank Stanford Bank