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Whats Next For The Branch Network


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The role of bank branches is changing as traditional cash and check transactions decline. This presentation, from BAI Retail Delivery 2009, includes case studes from Citizens Bank, MidSouth Bank, and Coastal Federal Credit Union.

Published in: Economy & Finance, Business

Whats Next For The Branch Network

  1. 1. What’s Next for the Branch Network – Rationalize or Revisit?<br />David Kerstein<br />Peak Performance Consulting Group®<br />November 5, 2009<br />
  2. 2. ActionCase study Take-away Now!<br />Financial institutions need to more accurately target opportunities for de-novo growth and to optimize performance of existing branch networks<br />“Best practice” banks are making more sophisticated use of segmentation data to target specific growth markets<br />Innovative use of technology can improve service and distribution reach, while significantly reducing cost<br />Peak Performance Consulting Group -- Page 2<br />
  3. 3. Bank Branches: Do We Have Too Many?<br />Banks have been building branches faster than population has been growing<br />21% of branches have been open less than 10 years<br />Source: FDIC, US Census, Peak Performance analysis<br />Peak Performance Consulting Group -- Page 3<br />
  4. 4. Branches Losing Role as Transaction Point<br />Fewer checks<br />Deposit activity shifting to direct deposit and remote capture<br />Greater use of online payment and debit point of sale<br />Online bill payment projected to grow at CAGR of 19% through 2012<br />Peak Performance Consulting Group -- Page 4<br />
  5. 5. Branches remain critical driver of deposit growth<br />41% of all deposit growth comes from 8% of branches open less than 2 years<br />Need physical branch locations to continue to grow consumer and small business relationships<br />Aggressive growth in branches due to competition for depositsbr />Peak Performance Consulting Group -- Page 5<br />
  6. 6. Too Many Branches or Still Room to Grow?<br />Differences in branch density driven by:<br />Self service channel usage<br />Cultural preferences for face-to-face<br />Branch formats: smaller, more community oriented vs. hub locations<br />Competitive environment<br />Source: Bank for International Settlements, Peak Performance analysis<br />Peak Performance Consulting Group -- Page 6<br />
  7. 7. Industry Best Practices Drive Significant Improvement in Result<br />Pick the right spots: improved market and location analysis<br />Better local market knowledge and relationship management<br />Leveraging new distribution models<br />Source: Peak Performance client data<br />Peak Performance Consulting Group -- Page 7<br />
  8. 8. Revitalization or Reinvention? We Need Both<br />Tremendous opportunity to improve revenue growth and cost effectiveness of existing branch network<br /><ul><li>Refine mix of branches: size, type, segments served
  9. 9. Improve local market segmentation and sales management</li></ul>Continued growth requires distribution expansion, but picking the right channels, markets, sites will be increasingly complex<br />Economics will drive shift to smaller, more cost efficient facilities that need to be managed differently<br /><ul><li>Greater use of technology for transaction processing and remote delivery of service
  10. 10. Different staff skills: more utilization of universal staff with fewer specialists
  11. 11. Tighter integration with hub branches or call centers to provide specialized expertise
  12. 12. Greater emphasis on micro-market knowledge and outside sales calling to improve market penetration </li></ul>Peak Performance Consulting Group -- Page 8<br />
  13. 13. Recipes for Success: the “Secret Sauce”<br />John Zugschwert<br />Senior Vice President, Distribution Analysis<br />Citizens Bank<br /> <br />Alex Calicchia<br />EVP and Chief Marketing Officer<br />MidSouth Bank<br /><br />Chuck Purvis<br />Chief Operating Officer<br />Coastal Federal Credit Union<br /><br />Page 9<br />
  14. 14. Thank you!<br />David Kerstein<br />President<br />Peak Performance Consulting Group<br />512-607-6332<br /><br /><br />Peak Performance Consulting Group -- Page 10<br />
  15. 15. Identifying Strategic Opportunities in Branch Distribution<br />BAI Retail Delivery<br />John Zugschwert<br />SVP, Distribution Strategy<br />November 5, 2009<br />
  16. 16. 12<br />RBS: Market Leading Customer Franchises<br />UK<br />US<br />#1 Small business banking<br />#1 Corporate and commercial<br />#1 Cash management<br />#1 Private banking<br />#2 Personal checking<br />#1 Auto insurance<br />#2 Household insurance<br />#1 branches in New Hampshire and Rhode Island<br />#2 branches in Pennsylvania<br />#2 deposits in New England<br />#3 deposits in Pennsylvania<br />12<br />
  17. 17. 13<br />Twelve State Franchise<br />Strong franchise in New England and Pennsylvania with good branch distribution in the Mid-West<br />492 Branches<br />644 Branches<br />372 Branches<br />12 States<br />76 Metropolitan Areas<br />13<br />
  18. 18. 14<br />Our Challenges<br />New England: well situated in terms of deposits and branch share<br />Mid Atlantic: well situated in terms of branch share but lag in deposit share<br />Mid-West: Sub-scale player with low branch share, but markets generally over-branched<br />14<br />
  19. 19. 15<br />Strategic Market Development<br />Citizens Bank has a very large geographic footprint. The creation of specific strategies for each metropolitan market is critical to overall success.<br />Strategic Market Prioritization and Strategy<br />Which MSA Level Markets have the highest potential?<br />Growth<br />Value<br />Economic Outlook<br />What is the strategy for each market relative to position?<br />Overall convenience or niche opportunities?<br />How can Alternative Delivery Support Growth?<br /> - ATM Network Partnerships<br /> - Co-Branding Opportunities<br />
  20. 20. 16<br />Organizational Growth – De-Novo Branching<br />Once overall market strategies have been developed tactical plans can be executed. Given the competitive environment, prioritizing submarkets within metropolitan markets for growth and creating strategies is key to success.<br />Tactical Sub-Market Prioritization<br />Where are the highest potential sub-markets within each metro market?<br />Can we create critical mass in the sub-markets?<br />Trade Area Opportunity Assessment<br />What is the long term potential for each individual branch decision?<br />Combination of advanced modeling and market experiential knowledge<br />
  21. 21. 17<br />Staff<br />Customer Satisfaction<br />Relationship Building<br />Execution<br />Engagement<br />Branch Characteristics<br />Suitability<br />Accessibility<br />Visibility<br />Type<br />Hours<br />Market Opportunity<br />Competitive Environment<br />Deposit Growth<br />Average Branch Size<br />Proximity to other CFG Branches<br />Brand Equity<br />Branch Performance Hierarchy<br />Branch Performance can be explained with the following factors<br />Each factor builds from the lower factors in the pyramid.<br />The staffing of the branch is critical to its ultimate success. Poor performing staff can undermine the branch’s performance. <br />However staff performance alone cannot compensate for weak market conditions or poor branch design. <br />Features of the branch directly effect the performance of the location. <br /> In-Stores typically generate 33% of traditional free standing branch deposits and In-lines generate 70%. There is a trade off between expense and performance.<br />Statistically 65% to 70% of the variability in branch performance can be attributed to the geographic market in which the branch is located.<br />Primary attributes are competitive strength of the market and proximity of other CFG locations.<br />
  22. 22. 18<br />Organizational Growth - Existing Network Optimization<br />Maintaining the value of the Existing Citizens branch network has significant upside potential given the size of the overall network. Key focus areas include:<br />Branch and Customer Segmentation – Focus on best opportunity<br />Branch segmentation will lead to strategy development and prioritization of investment<br />Customer segmentation will lead to effective opportunity development at customer and branch level<br />Technology – Focus on High Quality Service Efficiency<br />CRM<br />Customer Level and Market Level<br />Transaction Automation<br />Branch Characteristics – Focus on the optimal branch features<br />Layout<br />Visual Appeal<br />Features – Drive-Thru/ATM/etc.<br />Branch Placement – Are we in the right locations?<br />Trade area potential<br />Visibility<br />Accessibility<br />
  23. 23. 19<br />Segment 1 <br />Large Branches<br />With<br />Additional Opportunity<br />Segment 2 <br />Large Branches<br />Currently Exceeding Their <br />Market Opportunity<br />Opportunities for impact:<br /><ul><li>Goal Setting
  24. 24. Marketing/ Merchandising
  25. 25. HR Allocations
  26. 26. Partner Support
  27. 27. Sales Activities/ Campaigns</li></ul>Strategy<br />Service & Sales<br />Strategy<br />Service<br />Branch Size<br />Segment 3 <br />Smaller Branches<br />With<br />Additional Opportunity<br />Segment 4 <br />Smaller Branches<br />Currently Exceeding Their <br />Market Opportunity<br />Strategy<br />Performance<br />Maximization<br />Strategy<br />Sales<br />Additional Market Opportunity<br />Segmenting the Branch Network<br />Create 4 distinct branch segments with specific short and long term tactics for each<br />
  28. 28. 20<br />Recap<br />Strong franchise<br />Different strategic advantages in different markets<br />Refocusing resources to capitalize on opportunities<br />20<br />
  29. 29. Cranking Up the Offense: Building Deeper Customer Relationships<br />__________________________________________________________________________________________________________<br />BAI Retail Delivery<br />November 5, 2009<br />Alexander Calicchia<br />Executive Vice President & Chief Marketing Officer<br />
  30. 30. MidSouth Bank Profile<br />WHO WE ARE<br /><ul><li>Headquartered in Lafayette, Louisiana
  31. 31. Total Assets: $938 Million</li></ul>GROWTH-ORIENTED<br />1985 – Chartered as a National Bank<br />1987 – Acquired Breaux Bridge Bank & Trust (LA)<br />1989 – Acquired Commerce & Energy Bank (LA)<br />1993 – Listed on AMEX: MSL<br />1995 – Acquired Sugarland State Bank (LA)<br />2004 – Acquired Lamar Bank (Beaumont, TX)<br />2008 – Merged MidSouth Bank Texas into MidSouth Bank, N.A.<br />BUSINESS FUNDAMENTALS<br /><ul><li>Small business focus supported by retail and commercial funding
  32. 32. Experienced leadership
  33. 33. Entrepreneurial management style
  34. 34. Organic growth
  35. 35. Quality relationships and dedication to customer service</li></ul>22<br />
  36. 36. Market Footprint<br />49<br /><ul><li>Strategically Located along I-10, I-49 </li></ul> and Hwy 90 Corridors<br /><ul><li> 35 locations
  37. 37. 170+ ATMs</li></ul>23<br />
  38. 38. Strategic Vision<br /> 8<br />24<br />
  39. 39. “Staying True to Our Tradition”- Rusty Cloutier, CEO & President, MidSouth Bank<br />We are going to place even greater emphasis to develop deeper more personal relationships with our commercial and retail customers to better meet their needs.<br />Provide a greater emphasis on: <br />decentralized decision-making, <br />employee empowerment<br />increased knowledge about our customer, <br />improved processes<br />25<br />
  40. 40. Success Strategies<br />Our challenge<br />Thin distribution over a large footprint<br />Shift from acquisitions to organic growth<br />How we’ll succeed: <br />Better tools: Oracle On-Demand CRM <br />Better products: market and customer segmentation<br />Clarity of Focus: better support infrastructure<br />Changing the game on distribution<br />26<br />
  41. 41. Better Tools: CRM On-Demand<br />27<br />
  42. 42. We Understand Our Customers<br />Consumer and small business segmentation in each market<br />Product usage, preferences, and potential <br />Sales & marketing strategies<br />Product development & pricing<br />Example: High Level Consumer Segmentation in MidSouth Markets<br />$<br />Lifestage<br />28<br />
  43. 43. Improve Effectiveness<br />Integrated brand communication: Web, Point of Sale, Newspaper<br />Intranet for employee communication and training<br />Video conferencing for remote training and management coordination<br />29<br />
  44. 44. Cranking Up the Offense<br />Town Hall meetings: Lending in the New Economy<br />Integrated marketing<br />Aggressive PR<br />30<br />Rusty Cloutier Has Money to Spare <br />JIM RENDON<br />Rusty Cloutier wants to lend money. If you live in Lafayette, La., you already know this. In large black letters hovering above a pile of bundled green bills, billboards all over town announce, “We have $200 million to lend.” <br />
  45. 45. Let’s Wrap It Up!<br />Questions & AnswerContact Info:Alex find me<br />31<br />
  46. 46. Express Tellers: A New Model for Improving Distribution Effectiveness<br />Chuck Purvis<br />Chief Operations Officer<br />Coastal Federal Credit Union<br />Raleigh, NC<br />
  47. 47. About Coastal<br /><ul><li>Headquartered in Raleigh, NC
  48. 48. Chartered in 1967 to serve employees of IBM
  49. 49. Today we serve 1,200+ employers & associations
  50. 50. 201,000 members
  51. 51. $2.2 billion in assets</li></ul>33<br />
  52. 52. Community FocusNational Access<br /><ul><li>19 branches in the Raleigh-Durham and Charlotte markets
  53. 53. Access to 3,797 shared branches nationwide
  54. 54. Access to 55,000 surcharge-free ATM’s nationwide
  55. 55. CO-OP Network
  56. 56. Allpoint Network
  57. 57. Online Banking</li></ul>34<br />
  58. 58. Our Challenge<br /><ul><li>Provide convenient branch access in two metro markets while controlling branch network costs
  59. 59. On-campus locations ideal for members from large employers, but economics do not support free standing branch
  60. 60. Need solutions that allow physical expansion at low cost to serve</li></ul>35<br />
  61. 61. Express Teller Technology<br /><ul><li>The Vision . . .</li></ul>“To deliver first class member service right to theteller line . . . remotely!”<br /><ul><li>It is:</li></ul>A full-service, face-to-face member experience that uses the power of video to improve efficiency by reducing headcount while enabling cost-effective branch expansion.<br /><ul><li>It is NOT:</li></ul>The drive-up inside. There aren’t any pneumatic tubes loudly shuttling transactions to and from a teller room hidden in the back of the branch.<br />36<br />
  62. 62. Benefits of Express Teller <br /><ul><li>Provides superior service than a traditional teller line or remote teller system.
  63. 63. Leads to expense reduction – FTE may be reduced by as much as 50%*.
  64. 64. Enables the ability to offer extended teller hours.
  65. 65. Reduces the required footprint of the branch itself while at the same time facilitating branch expansion.
  66. 66. Fosters sales by freeing the Branch Manager and platform staff from day-to-day operational teller tasks.</li></ul>* Results based on a full conversion of a branch network of at least 10 locations.<br />37<br />
  67. 67. Two-Year Plan<br />38<br />
  68. 68. Express Branch<br /><ul><li> Converted branch on IBM campus in 2009
  69. 69. Installed standalone unit at Lenovo campus in July
  70. 70. Lenovo is converting thru-wall ATM space into office space
  71. 71. Member service associate will start 4th Q
  72. 72. 4,000 Lenovo employees work on campus
  73. 73. Operates as a spoke of a larger branch
  74. 74. Very Cost-effective: Express Branch model will allow us to open with as little as 1 Express Teller machine and 1 associate. </li></ul>39<br />
  75. 75. Functionality<br /><ul><li>Cash and check deposits
  76. 76. Cash and coin withdrawal
  77. 77. Official check withdrawal
  78. 78. Account inquiries and transfers
  79. 79. Signature pad
  80. 80. ID verification
  81. 81. Receipt printed
  82. 82. Check 21 enabled
  83. 83. On-screen account # entry
  84. 84. Handset/hands free</li></ul>40<br />
  85. 85. Express Teller Service Center<br />“We are replacing 110 branch tellers and supervisors with 48 Express Tellers and 3 supervisors to service our 19 location branch network.”<br />41<br />
  86. 86. A Success Out of the Gate!<br />During a Winter storm Coastal was able to open two branches with a single Express Teller from our headquarters that otherwise would have been closed.<br />Our Express Teller Machines , equipped with battery back-up power, kept member service up and running during a power outage.<br />Our extended hours transactions are spiking, 2,500 sessions in October.( 7:00-8:30 a.m. and 5:30-7:00 p.m.) <br />42<br />
  87. 87. Better Ability to Serve Extended Hours<br />40,000 Express Teller sessions in October<br />Express Teller session comprise 65% of total branch transactions in October<br />6% of Express Teller sessions done during extended teller hours in October<br />43<br />
  88. 88. Members Migrating to Express<br />Total Branch Sessions<br />44<br />
  89. 89. Serve More Members Without Increasing Wait Time<br />Time<br />Sessions<br />45<br />
  90. 90. 46<br />
  91. 91. In Summary<br />Lower costs = more<br />locations<br />Fewer employees<br />Extended hours<br />Better service<br />Member acceptance<br />47<br />
  92. 92. Questions?<br />?<br />?<br />?<br />?<br />?<br />?<br />?<br />