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Budgets, Boardrooms and Branch Optimization_ Backed-by-Science Strategies for Conquering All Three In 2017
This document discusses strategies for branch optimization in banking, emphasizing the need for transformation amid rising costs and declining relevance in traditional banking models. It highlights the importance of leveraging new technologies and understanding customer needs to enhance service delivery and operational efficiency. The report also details the current state of branch design and budgetary considerations necessary for effective transformation.
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Budgets, Boardrooms and Branch Optimization_ Backed-by-Science Strategies for Conquering All Three In 2017
- 1. BUDGETS, BOARDROOMS, & BRANCHOPTIMIZATION Backed-By-Science Strategies for Conquering All 3 in 2017 JOHN W. SMITH CEO, DBSI BOB MEARA SENIOR ANALYST, CELENT
- 2. JOHN W. SMITH CEO| DBSI jwsmith@dbsi-inc.com BOB MEARA Senior Analyst | Celent bmeara@celent.com
- 3. HOUSEKEEPING ITEMS A COPYOF THE SLIDES AND TODAY’S RECORDING WILL BE EMAILED SHORTLY AFTER THE WEBINAR PLEASE COMPLETE THE SURVEY AT THE END USE THE CHAT WINDOW TO SEND US ANY QUESTIONS
- 4. WIN THE BOARDROOM Benchmark data ofwhere your peers stand today WIN BRANCH OPTIMIZATION Research-Based technologies and designs aligned to strategy WIN THE BUDGET What to plan for and why 1 32 THE THREE KEY TAKEAWAYS
- 5. CURRENT STATE DESIRED STATE COMPREHENSIVE SERVICES DESIGN/ BUILD TECH/ EQUIPMENT SOFTWARE DEV PROCESS PEOPLE& PRODUCTION ON-TIMEON-BUDGETON-STRATEGY ON-SATISFACTION DBSI: REDEFINE BANKING HOW SUCCESS
- 6. 55© CELENT About Celent Weare… …the industry’s premier provider of… • Business and IT strategy research • Ongoing research & advisory services • Vertically-oriented consulting • Global, domain specific events and leadership forums …an experienced presence in financial services • Staffed by financial services industry experts with over 500 years of combined experience • 50+ full time analysts devoted to financial services • Clients include 50 of global top 100 financial institutions • Centres of excellence across Capital Markets, Finance & Risk, Wealth Management, Banking and Insurance …focused on cross practice themes …a division of Oliver Wyman • Global financial services consultancy • 1,400 consultants, offices in 40 countries • Domain experts throughout financial services, mirroring Celent’s coverage almost perfectly …a global firm • Offices in North America, Europe and Asia • Reports in English, French, Japanese and Mandarin • Coverage that spans many geographies Digital Legacy & Ecosystem Transformation Innovation & Emerging Technology
- 7. WHERE YOUR PEERSSTAND TODAY INDUSTRY BENCHMARKS
- 8. Understanding Branch Bankingin an Omnichannel World 1
- 9. 8© Oliver Wyman8 Why now for an omnichannel strategy? US Financial Institutions face an imperative to evolve their consumer and small business banking business models 1 New economic realities Fee regulation, persistently low interest rates, and a sluggish economic recovery have mired banks in a "no growth zone" 2 Evolving consumer behavior, preferences, and expectations The way that consumers want to shop, buy, and use financial services is changing 3 Increased competition Competition among traditional banks is intensifying, and new-form competitors are emerging leveraging digital strategies and data 4 New strategic focus Increased focus on the most attractive customer segments, deepening wallet share and retention to drive organic growth without de novo activity Market dynamics Omnichannel imperatives Deliver a high-quality, hassle-free client experience that supports more / longer / deeper relationships, while lowering the cost-to-serve Drive more personalized marketing, sales, advice, and service experiences leveraging a single view of customer data Manifest the FI’s brand proposition effectively across all customer touchponts Empower more differentiated segment service propositions to attract high-priority customer segments
- 10. 99© CELENT The branchis plagued by at least three challenges And the trend lines aren’t favorable… 1. Cost control • Rising operating costs • Rising labor costs • Declining transaction volume 2. Declining foot traffic • Growth in self-service channel usage • Declining check writing (and depositing) 3. Eroding relevance • Expanding self-service functionality • Prodigious growth in mobile device usage • Mainstream video usage (e.g., Skype, Face Time) 1. Source: FMSI 2013 Teller Line Study Branch teller cost dynamics1 • The branch channel isn’t dead – just different • FIs are rethinking what role the branch plays, and how to redesign accordingly 0 20 40 60 80 100 120 0 2 4 6 8 10 12 2005 2006 2007 2008 2009 2010 2011 2012 2013 CostperXA(cents) TellerXasperMonth(000) Avg Monthly Teller Transactions (000) Per Transaction Labor Cost (cents)
- 11. 1010© CELENT Here’s whythe branch channel remains so important 19% 24% 28% 53% 76% 0% 20% 40% 60% 80% Fraud/risk management Regulatory compliance Cost reduction Improving customer relationships Improving sales results % rating #1 or #2 priority Top Retail Banking Priorities Source: Celent survey of NA financial institutions, October 2014 (n=156) Q: “What are your institution's top retail banking priorities? Please indicate up to five in order of priority.” Mobile 2% Contact Center 8% Online 11% Branch 79% Sales mix for non-mortgage consumer lending Mobile 2% Online 7% Contact Center 8% Branch 83% Sales mix for DDA and Savings accounts Source: Celent survey of NA financial institutions, March 2016, n=31 Q: “Indicate your channel mix for new and existing customer DDA or savings accounts.” Q: “Indicate your channel mix for new non-mortgage lending applications.”
- 12. State of BranchTransformation2
- 13. 12© CELENT 12 Anarea that Celent pays close attention to • Created two managed research panels in 2015 to take a deep dive into topics of enduring importance: – Branch transformation – Digital & omnichannel banking • Our fifth branch transformation survey is currently in the field • This section draws from the first survey (June 2015, n=43)
- 14. 1313© CELENT We’ll tryto answer three questions 1 What does branch transformation mean to US financial institutions? 2 Where are banks in this journey, and how long will it take? 3 What is the likely end game?
- 15. 14© CELENT 14 Mostnow agree that branch channel transformation is imperative But there’s no consensus of what “transformation” means • After years of talk with little action, US FIs are now serious about improving branch channel efficiency and effectiveness. • But, attitudes vary considerably about what to do. – Some see radical changes needed – Some not so much Source: Celent NA FI survey, June 2015, n=43 Q. How does your institution view the need for branch transformation Q. In your view, “branch transformation” means 14% 27% 57% 0% 20% 40% 60% 80% Refinements and/or modernization of tried and true design concepts (e.g., incremental improvements / maintenance / updating in individual… Modest changes to the branch operating model Radical changes to the branch operating model 0% 0% 8% 11% 81% 0% 20% 40% 60% 80% 100% Unnecessary No position No consensus Optional Imperative Resp, (%) Importance of branch channel transformation Meaning of “branch transformation”
- 16. 15© CELENT 15 Just1 in 10 US FIs have a clear vision of the future branch Lots of learning will take place in the next few years • Institutions know what they need to accomplish, but they don’t know how to do so. • Getting there won’t be fast or easy. Pilot branches need to be designed, built and tested. • Over time, variations of standard archetypes will likely emerge, making things modestly faster for lagging FIs. 3% 41% 46% 11% 0% 20% 40% 60% Lacking (we do not have a vision) Unclear (we have begun, but much work remains) Developing (we are narrowing options; making decisions) Crystal clear (we are executing on a clear vision and strategy) Resp.(%) Source: Celent NA FI survey, June 2015, n=43 Q. How clear is your institution’s vision for what your branch network will look like 5 years from now? Clarity (or not) of vision
- 17. 16© CELENT 16 Mostinstitutions have just begun their journey But 70% are actively pursuing • Now is a good time to be engaging US FIs about branch automation. • Roughly two-thirds of banks and credit unions will not have made key technology decisions. Fewer will have implemented. • Most implementations are pilots – so there may be time to influence direction. Source: Celent NA FI survey, June 2015, n=43 Q. Which option best describes where your institution is in developing a branch transformation strategy? 30% 35% 19% 16% 0% 10% 20% 30% 40% 50% Developing (researching, debating…) Testing (one or more pilots are operational) Refining (evolving pilot concepts prior to roll out) Executing (strategy and design are in- place) Resp.(%) Low ------------------------- Maturity Level -------------------------- High Branch channel transformation development maturity
- 18. 17© CELENT 17 Competingpriorities and high cost/complexity hamper progress • Even though branch transformation is “imperative”, not all FIs are able to fund rapid progress. • Multiple priorities are competing for funding. • As a result, it will take several years to make required progress. Source: Celent NA FI survey, June 2015, n=43 Q. What are your biggest challenges to transforming your branch network? (choose up to three) 3% 24% 24% 38% 46% 51% 62% 0% 20% 40% 60% 80% Lack of executive sponsorship Lack of a compelling business case/ ROI Unclear vision Culture Legacy systems Cost/ complexity Competing priorities within the bank / lack of budget Resp. (%) Branch network transformation challenges “Baby steps” will be a pragmatic necessary for most FIs, given the cost and complexity of branch transformation
- 19. 18© CELENT 18 Severaltechnologies will be commonplace With rich variety in how they are implemented • Cash recycling is among the most likely technology investment in the near-term • Along with tablet usage for front line staff • The hard part will be integrating these new technologies with legacy systems and processes Source: Celent NA FI survey, June 2015, n=43 Q. Based on what you know now, how likely will your future (1-5 years) branch designs include the following technologies in one or more branch designs? 27% 32% 46% 51% 62% 69% 78% 78% 78% 81% 89% 92% 0% 50% 100% iBeacon or other geo-location technology Some form of biometric customer authentication (e.g., fingerprint, voice,… Video teller machines Interactive walls or surfaces Video conferencing for customer contact with remote SMEs Assisted self-service devices not involving video tellers Paperless loan origination Paperless deposit account origination Wi-Fi for customers Digital signage Cash recycling (either within other devices or as separate devices) Tablet based applications for front line staff Top 2-box likelihood (%) Likelihood of technology usage in future branch designs
- 20. 19© CELENT 19 Pronouncedphysical design changes are in the works • Exactly how new branch designs will evolve is uncertain. • However, traditional designs will be in the minority. Source: Celent NA FI survey, June 2015, n=43 Q. Based on what you know now, how likely will your future branch designs involve the following physical design elements in one or more branch designs? 22% 27% 28% 30% 46% 49% 59% 73% 73% 76% 78% 0% 20% 40% 60% 80% 100% Traditional teller stations Safety deposit boxes Mixed use space (e.g., coffee shop) Cash vaults Meeting rooms for businesses or outside groups to use Concierge desk Drive-thru tellers Micro-branches (very small footprint, minimal staff) Lounge/waiting areas Digital areas where customers can interact with digital channels Drive-thru ATMs Top 2-Box Likelihood (%) Likelihood of physical design elements in future branch designs
- 21. 20© CELENT 20 But,getting there will take some time Most institutions are piloting new designs as a first step • A single pilot can take more than a year to design and implement • Once operational, most institutions take another 6 months or more to read results 13% 39% 37% 11% 0% 20% 40% 60% 80% Less than 6 months Between 6 months and one year 1-2 years 2-3 years Resp.(%) Pilot duration: time to results 68% 12% 16% 62% 15% 23% 0% 20% 40% 60% 80% 1-2 years 2-3 years 3-5 years Resp.(%) Pilot implementation timeframe < $10 billion > $10 billion Source: Celent NA FI survey, October 2015, n=39 Q. Based on what you know now, Over what time frame will you be implementing pilots? Q: How long did/will it take to design and construct a pilot and read results?
- 22. 21© CELENT 21 Compellingnear-term objectives will force change ahead of those new designs • Banks are focused on a triumvirate of near- term priorities: – Maximizing sales and service effectiveness of front line staff – Favorably influencing adoption of digital channel capabilities – Reducing channel costs • None of these can wait for new branch designs to be built, tested and operationalized Source: Celent NA FI survey, August 2015, n=39 Q. For each of the objectives listed below, indicate the importance of each based on your institutions’ near-term branch channel priorities? 3.2 3.6 3.9 4.0 4.2 4.6 3.5 3.9 3.8 4.4 4.2 4.5 1 2 3 4 5 Improve staff adherence to policy and procedure Improve branch staff visibility of customer interactions in other channels Implement business process improvements Reduce channel costs Favorably influence customer adoption of digital channel capabilities Maximize the sales & service effectiveness of front-line staff Low ------ Avg. Importance ----- high > $10 billon < $10 billion What is important in the near-term
- 23. BRIEF RECAP 81% FINDIT IMPERATIVE TO TRANSFORM THE BRANCH BUT, ONLY 10% HAVE A CLEAR VISION OF HOW IN FACT, MANY KNOW WHAT THEY WANT IT’S HARD! (you are focused to your day job and it’s complex)
- 24. TAKE THE COMPLEX& MAKE IT SIMPLE: BEST PROCESSAND PRACTICES TO MOVE FORWARD
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- 26. ANSWER THE QUESTIONS WHATARE WE GOING TO DO? WHY ARE THESE SPECIFIC ACTIONS SELECTED? WHERE & WHEN DO WE PLAN TO START? WIN THE BOARD WHAT PROBLEMS ARE WE SOLVING?
- 27. BUILD A GAME PLAN Askthe right questions, of the right people in your organization Identify what works, what doesn’t, your uniqueness, the barriers getting in your way, and the desired state Establish what success looks like to you Create a summary playbook to ensure you are all on the same page
- 28. DISCOVERY QUESTIONNAIRE Whatis BranchTransformation? What makes you different or unique? What is the client experience? What gets in the way? Who gets it right? Objectives Project Scope Key Elements of the Program Client Experience Budget Success Metrics DISCOVER 27 DEVELOPYOUR STRATEGICINTENT
- 29. EXECUTIVE SUMMARY All yourchallenges, desires and research-in- between are summarized in an Executive Summary to ensure executive alignment is obtained, and we are all on the same page. Objectives Project Scope Key Elements of the Program Client Experience Budget Success Metrics DISCOVER 28 DEFINE A PATH TO SUPPORT EXECUTIVE & BOARD ALIGNMENT
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- 31. “WHAT ALL GOESINTO A BRANCH TRANSFORMATION?”
- 32. IT’S A LOTMORE THAN YOU THINK! YOU HAVE TO INCLUDE: DESIGN, ARCHITECTURE, INTERIOR DESIGN, ENGINEERING DEMOLITION (IF NEEDED) BANKING EQUIPMENT, TECHNOLOGY, FURNITURE, SIGNAGE BRANDING DIGITAL SIGNAGE, MERCHANDISING CONSTRUCTION VARIES GREATLY ON CURRENT SITE CONDITION OWNER PROVIDED ITEMS, I.T., OFFICE SUPPLIES CONTINGENCY FOR UNFORSEEN CONDITIONS + + + + + +
- 33. SO, HOW CANI GET MY ALL-IN COST? DBSI’s proprietary SMART BUDGET TOOL considers every part of your Branch Transformation to calculate an accurate estimate of your all-in cost. That way, there’s no surprises.
- 34. SMARTKIT™ FOR NEXTFI NEXTTECH EXPERT NEARBY SELF-SERVICE EDUCATION STATION SIGNATURE ITEM TCRs & ATMs FURNITURE PKG RE-DESIGN DIGITAL LIGHTING CARPET & PAINT ADA Remote Expertise All Flagship Elements LOW 1 LOW 2 LOW 3 MED 1 MED 2 MED 3 HIGH 1 HIGH 2 HIGH 3 Brand Refresh Sell with Digital Retail Design Pkg Open Plan Design Efficiency Drivers Transformation Educate DESIGN/BRANCHELEMENTS BRANCH TYPE INVESTMENT & BUDGET OUTLINE $60,000 $100,000 $200,000 $500,000 $700,000 $900,000 $1.1M $1.3M $1.5M HOW WILL I APPLY THIS? Distinct SMARTKIT™ of parts by branch segment for easy implementation across your network giving you the best return for your investment.
- 35. CREATE AN ACCURATE BUDGET CREATEAN EXECUTIVE SUMMARY WHY TAKE ACTION, WHAT THE ACTIONS ARE, AND BY WHEN WIN THE BOARDROOM & THE BUDGET
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- 37. CHALLENGES Design abranch that defies banking traditions Invite the community in Appeal to the Agrifinance community without losing the Rabobank identity IMPACT “In my 20 years in banking I’ve never heard clients express this much excitement when coming into a bank.” SCOTT CISNEROS Vice President Community Banking Manager DBSI X-FACTOR Having to only work with one company (DBSI) for everything from design, to tech, to build, to the integration of it all helped Rabobank discover the perfect blend of design and technology – and ultimately deliver a WOW experience. RABOBANK BRANCH TRANSFORMATION | 3,600 sf
- 38. RABOBANK BRANCH TRANSFORMATION |3,600 sf
- 39. CHALLENGES Develop aninviting, hyperlocal design to align to the brand & Colorado lifestyle Create the roadmap to determine how many branches, where, and why Remove all barriers to service Ensure no one asks again “do you offer Mortgages?” IMPACT ALL success metrics by the Executive Team and Board have been achieved! DBSI X-FACTOR This was a complicated project. A building housing not only a branch but significant back office operations, 3 levels, very old building and it with 2 previous major additions in it’s a past. WOW was end game, but the planning to keep all of that running while DBSI fully transformed the location was a challenge that was overcome to rave results. COORS CU BRANCH & CALL CENTER TRANSFORMATION | 11,000 sf
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- 42. CHALLENGES Create anew global, go-to market branch strategy Drive efficiency in a high transaction environment Enable staff to drive adoption to alternate channels IMPACT “You’re an extraordinarily professional team that really takes the time to listen. We thoroughly value your recommendations!” STEVE ROMANO EVP DBSI X-FACTOR With a proven 6D process to guide, DBSI was able to breakthrough lack of executive alignment define their current state to desired in just 3- months with a full go-to market strategy. NAVY FEDERAL CU BRANCH CHANNEL EVOLUTION | LESS THAN 3 MONTHS
- 43. NAVY FEDERAL CU BRANCHCHANNEL EVOLUTION | LESS THAN 3 MONTHS
- 44. TOP SHORT &MEDIUM-TERM STRATEGIES UNCOVERED BY CELENT RESEARCH Maximizing sales and service effectiveness of front line staff Favorably influencing adoption of digital channel capabilities Reducing channel costs
- 45. Attract leads. Drive engagement. Matchyour products and services with your clients’ interests. STRATEGY: DRIVE ADVISORY BRANCH TRAFFIC
- 46. Individuals can self-assesskey indicators of their financial fitness in just 90 seconds, and see how their results stack up against their peers both locally and nationally.
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- 48. Break the chainsof your hardware and open your cash automation machines up to all associates—from anywhere in the branch. STRATEGY: FREE STAFF TO UNIVERSAL REMOTE TRANSACTION ASSIST
- 49. STRATEGY: FREE STAFFTO UNIVERSAL
- 50. Transactions startedanywhere, fulfilled anywhere All associates (FSR, Teller, or the Branch Manager) can now complete ALL transaction needs STRATEGY: FREE STAFF TO UNIVERSAL
- 51. Help clients understand what youoffer, successes you’ve delivered to others and how to obtain those solutions easily. STRATEGY: HELP CLIENTS DISCOVER & ADOPT TO PRODUCTS INTERACTIVE DIGITAL SIGNAGE
- 52. Clients canENGAGE to learn about “why you,” a simplified view of your products, successes you’ve provided to others, your community contributions and even the people doing all of this. INTERACT to learn mobile check deposit, bill pay, who they may want to bank with—and actually get started. 35+ apps to engage clients to help them DISCOVER how you can assist. STRATEGY: HELP CLIENTS DISCOVER & ADOPT TO PRODUCTS
- 53. Introducing the first core-integrated, all-in-oneservice branch channel TM P O W E R E D B Y C F M STRATEGY: IMPLEMENT SELF-SERVICE TO REDUCE CHANNEL COSTS
- 54. $ ONE SOLUTION. ALL OFTHIS: THREE DIFFERENT APPLICATIONS IN ONE DEVICE NEXT fulfills the need for self-service, assisted-service, and full-service by opening up your cash recyclers to clients and tellers. FULL TRANSACTION SET CAPABILITIES A full integration with your core platform makes NEXT more than just an ATM. It brings teller functionality— without the ATM cost. LOWER COST AND INVESTMENT Repurpose your existing cash recyclers and dispensers to the new assisted-service model. SMARTER RETAIL ENVIRONMENT Simple transactions are completed by the client to drive your costs down, while allowing staff to handle consultative-type tasks that drive up sales. STRATEGY: IMPLEMENT SELF-SERVICE TO REDUCE CHANNEL COSTS
- 55. STRATEGY: IMPLEMENT SELF-SERVICE TOREDUCE CHANNEL COSTS TELLER LINE+NEXT POWER TOWER/ TELLER TOWER+NEXT STANDALONE
- 56. STRATEGY: IMPLEMENT SELF-SERVICE TOREDUCE CHANNEL COSTS
- 57. SUMMARY SHORT TERM ACTIONS Drive branch traffic: FINANCIAL HEALTHCHECK Help client discover products: DIGITAL SIGNAGE Free staff and create Universal Bankers: RTA Migrate to self-service: NEXT LONG TERM ACTIONS Discovery for redesigns and go-to-market strategies Board on-board & budgets 81% FIND IT IMPERATIVE TO TRANSFORM THE BRANCH ONLY 10% HAVE A CLEAR VISION OF HOW TO DO SO NEED TO ACHIEVE SHORT TERM OBJECTIVES IN PARALLEL TO MEDIUM-TERM TRANFORMATION EFFORTS
- 58. GROWTH STRATEGY ALIGNMENT & EXPERIENCE ENHANCEMENTCOST REDUCTION CHANNEL OPTIMIZATION 45% YOY increase in business accounts Evolved vast majority (85%+) of clients only using tax services to add-on wealth management services 160new accounts monthly Micro-branch 715 SF Saved tens of millions of dollars on Private Client initiative with the rapid test approach done in our Collaboratory SHARED TENANCY 50% less cost DOUBLE traffic 2 FTEs less per location Closed 2 underperforming branches to optimize others Developed go-to-market branch strategy in 3 MONTHS TARGETED SEGMENTATION Attracted largest depositor through event held in the “Community Room” Created new regional HQ that incorporates all business aspects 49% YOY increase in loan origination 53% YOY increase in client growth THE RESULTS
- 59. SHRINK THE ENTIREPROCESS BY SPENDING ONE DAY AT THE IDEATION CENTER
- 60. Where more than400 financial institutions started their branch transformation efforts Learn the Top 10 retail banking barriers that affect sales and service Interact with over 20 retail components and technologies Discover the latest trends in retail and learn how they can work for you IDEATION CENTER YOU’RE INVITED!
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- 62. JOHN W. SMITH CEO| DBSI jwsmith@dbsi-inc.com BOB MEARA Senior Analyst | Celent bmeara@celent.com THANK YOU FOR ATTENDING! Questions? Feel free to reach out: