The document discusses the future of bank branches and retail distribution channels. It notes that there are differing perspectives on the importance of branches, from those who think branches will be replaced by self-service channels to those who think branches will remain important. While branches currently face challenges like rising costs and declining traffic, many banks still predict modest branch expansion in the next five years. Transactions are expected to continue migrating to self-service channels, resulting in fewer branches and teller stations overall.

2. continuation I Compass Social Media
Summit

3. Olympics
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4. Olympics
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5. Olympics
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7. Banco Bilbao Vizcaya Argentaria
- More than $740 billion in total assets,
More than $740 billion in total assets,
- 47 million clients, 7,400 branches
- 47 million clients, 7,400 branches
- 107,000 employees in more than 30 than 30 countries
- 107,000 employees in more countries
- Headquartered in Madrid, Spain Spain
- Headquartered in Madrid,
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8. Maximizing Self-Service Capabilities to Increase
Branch Efficiencies of Banking
William Hippensteel
Managing Director, Content
BAI

9. Agenda
9

10. Agenda
10

11. “The future
ain't what it
used to be.”
Yogi Berra
Baseball Player and
Philosopher
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12. We Face Unprecedented Challenges in Global Financial Services
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13. Uncertainty….Uncertainty….Uncertainty
13

14. Transformation of Global Financial Services
Economic Political Regulatory
Uncertainty Uncertainty Uncertainty
Competitive Customer
Uncertainty Uncertainty
14 14
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15. Global Economic Challenges Affect All of Us
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16. Economic Uncertainty is Worldwide
Source: The Gallup Organization Survey, 2011

17. Trusted Brand Building: Consumer
Confidence
17

18. Consumers are Redefining Their Values
Transparency
Simplicity
Feedback
18

19. Agenda
19

20. What Matters Most?
Source: BAI Research Demand Pulse Survey-July 2011
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21. Four Strategies that are Winning
Customer-Centric Trusted Brand Focus on Integrated
Value
Building Efficiency Channels
Propositions
Customer-centric Generate Focus on simplifying Manage your
customer your products and distribution network
business models segment approaches with a holistic
built around experiences that and create core approach and expect
transparent value create satisfaction, competencies on comparable customer
propositions loyalty and maximizing your experiences across
advocacy resources all channels
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22. Self Service Solutions & Channel Integration Priorities
Considering the various aspects of your
institution’s RETAIL DISTRIBUTION CHANNELS,
please select up to three areas where you think Institution Asset Size
your institution will allocate the most investment
(A) (B) (C) (D)
dollars in the next year to two years?
Under $500M to $2.5B to $50B or
$500M $2.5B $50B more
45% 75% 57% 62%
55% 44% 62% 77%
64% 63% 38% 38%
27% 38% 24% 23%
9% 13% 43% 8%
9% 19% 24% 8%
9% 0% 10% 46%
9% 13% 10% 8%
9% 25% 5% 8%
9% 0% 5% 8%
22
Source: BAI

23. Emerging Channels Investment Rationale
How much do you agree or disagree Top 2 Box
with each statement regarding new or
Total Retail Dist. Respondents Agreement
emerging channels?
N= 61
74%
74%
65%
33%
24%
Source: BAI 23

24. Agenda
24

25. What is the future of the branch?
What is the future of the
branch?
25

26. There is a wide range of perspectives on the
branch’s importanceDifferentiate with
Start the replacement Uncertain / cautious Branch Values
• Self-service
channels will
substitute for
branches and
human assistance
• Technology has
advanced (e.g.
mobile)
• Customers have
transitioned
• Revenues are cut;
rationalization is an
imperative
• Tipping point is now
© 2011 FMCG BAI 169 26

27. There is a wide range of perspectives on the
branch’s importanceDifferentiate with
Start the replacement Uncertain / cautious Branch Values
• Self-service • Undecided on
channels will importance or role
substitute for of branches
branches and • Are new roles or
human assistance formats the
• Technology has answer?
advanced (e.g. • Not clear on
mobile) strategy for other
• Customers have channels
transitioned • Adapt call centers?
• Revenues are cut; Use video?
rationalization is an • Many questions
imperative
• Tipping point is now
© 2011 FMCG BAI 169 27

28. There is a wide range of perspectives on the
branch’s importanceDifferentiate with
Start the replacement Uncertain / cautious Branch Values
• Self-service • Undecided on • The branch will
channels will importance or role remain important
substitute for of branches for:
branches and • Are new roles or ̶ Routine and
human assistance formats the complex servicing
• Technology has answer? ̶ Customer
advanced (e.g. • Not clear on acquisition
mobile) strategy for other ̶ Cross-sell /
• Customers have channels deepening
transitioned • Adapt call centers? relationships
• Revenues are cut; Use video? • Alternative channels
rationalization is an • Many questions will be
imperative complementary vs.
• Tipping point is now substitutes
© 2011 FMCG BAI 169 28

29. The branch is far from dead
• Many high value clients are
branch-loyal
• Most account originations still
come from branches
• Branches still important to
business banking clients
• The need for advice will
continue to increase
• Remote deposit capture may
not fully satisfy the need for
branch access
29

30. Retail Branches are the Cornerstone of a Multi-Channel Strategy
30

31. The branch channel is plagued by at least three challenges
1. Cost control
 Rising operating costs
 Rising labor costs
 Declining transaction volume
1. Declining foot traffic
 Growth in self-service channel
usage
 Declining check writing (and
depositing)
 Declining cash usage
1. Eroding relevance
 Expanding self-service functionality
 Prodigious and widespread growth
in mobile device usage
Source: FMSI 2011 Teller Line Study
31

32. Many banks predict continued branch expansion
• Nearly 2/3 of banks and CUs
expect their institutions to
modestly increase branch
count in the next 5 years
• More larger banks expect
significant branch growth,
although they are in the
minority (17%)
• Nearly 1/3 will see a decrease
in their branch count
Based on what you know now, which of the following seems most likely
for your financial institution over the next 5 years? Celent Research
July, 2011
32

33. Transactions will continue their migration to self-service channels
Resulting in fewer branches and fewer teller stations industry wide
• Weighted averages suggest FIs
expect ~25% transaction
migration from branches to self-
service over next five years
• About half of FIs expect 25% or
more transaction migration from
branches to self-service
Over the next five years, what percent of current branch transactions will likely migrate to self-service channels. Celent Research July 2011
33

34. Agenda
34

35. Self Service Channels are Growing Significantly
Online Banking Mobile Banking ATMs
• Rapid adoption • Focus on simplifying your
• Strong adoption rates
• Key segment attraction products and segment
• Competing with best in class
• Mobile applications are approaches and create core
online experiences
important competencies on maximizing
• Radical simplicity,
• Seamlessly connect with your your resources
personalization and
life
seamlessly connect with your
• Highly competitive and
life
source of new entrants
35

36. Self Service Channels are Growing Significantly
Online Banking Mobile Banking ATMs
• Rapid adoption • Focus on simplifying your
• Strong adoption rates
• Key segment attraction products and segment
• Competing with best in class
• Mobile applications are approaches and create core
online experiences
important competencies on maximizing
• Radical simplicity,
• Seamlessly connect with your your resources
personalization and
life
seamlessly connect with your
• Highly competitive and
life
source of new entrants
36

37. Online Banking Space Continues to Grow
Top 10
Q/Q % Change
At 68MM customers, just over 30% of the total U.S. online population logged in to view their LDA account
last quarter
Source: ComScore Banking Benchmarker© comScore, Inc. Proprietary
Beginning Q109, Top 10 includes mergers and acquisitions 37

38. We Ground Ourselves in What Consumers Want
Seamless, Connected
Radical Simplicity Recognition Life
Customer First Be Human Meet customers
where
Lead with Design Recognize Value I they are
Bring
Streamline! Seamless,
Be Contextual connected
experience
The Bar is Not Other Financial Services Companies
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39. Radical Simplicity
39

40. Recognition
iTunes Netflix
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41. Seamless, Connected Life
Open Table
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42. Self Service Channels are Growing Significantly
Online Banking Mobile Banking ATMs
• Rapid adoption • Focus on simplifying your
• Strong adoption rates
• Key segment attraction products and segment
• Competing with best in class
• Mobile applications are approaches and create core
online experiences
important competencies on maximizing
• Radical simplicity,
• Seamlessly connect with your your resources
personalization and
life
seamlessly connect with your
• Highly competitive and
life
source of new entrants
42

43. Mobile usage for financial services continues to grow significantly
Growth in Mobile Usage within the Financial Industry
(Millions) Y/Y
Change
+56%
Banking +59%
Credit Card +68%
Brokerage +13%
Insurance +98%
© comScore, Inc. Proprietary.
Source: MobiLens™ : 3-mth rolling averages
Note: Data includes both customers and prospects who have utilized a browser, app or SMS in the prior month.
43

44. Today’s Mobile Banking Adopters Are More Affluent and
Buy More Products
Demographic Profile of Today’s Mobile Banking Customers
Younger More Affluent Buy More Products
Non Non
Mobile Mobile
Mobile Mobile
Banker Banker
Banker Banker
Average Average# of
HH $73k $60k Products and
3.5 3
Income Services Held
With Bank
Average
HH $459k $227k Share of Wallet 51% 46%
Assets
Source: AlixPartners Mobile Financial Services Tracking Study, Q2 2011
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45. Mobile is expanding beyond transactions
Pageonce
PNC Virtual
Bill App Mint Mobile
Wallet
45
App

46. Mobile is becoming your personal financial assistant
Test screenshots from USAA mobile app (already in production)
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47. The Biggest Financial Services Company in the World?
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48. Google’s #2 Strategic Priority
“Second, we must attend to the
development of mobile money. Phones,
as we know, are used as banks in many
poorer parts of the world—and modern
technology means that their use as
financial tools can go much
further than that.”

49. Many see mobile as the future for banking
1m users
$5m per day
"Cash registers and
credit card terminals are
relics of an expensive,
complicated, and
impersonal commercial
transaction system..."
Jack Dorsey, Square

50. Self Service Channels are Growing Significantly
Online Banking Mobile Banking ATMs
• Rapid adoption • Focus on simplifying your
• Strong adoption rates
• Key segment attraction products and segment
• Competing with best in class
• Mobile applications are approaches and create core
online experiences
important competencies on maximizing
• Radical simplicity,
• Seamlessly connect with your your resources
personalization and
life
seamlessly connect with your
• Highly competitive and
life
source of new entrants
50

51. Seamless, Connected Life
Citi: ATM Redesign
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52. Element
Physical design elements
Rationale Example
• Engages customers quickly, eliminates
wandering
• Can form a choke point in high traffic
Concierge
branches
• Slowly being equipped with customer
authentication
• Gives tellers flexibility to engage customers
• Often staffed with more highly trained
Teller Pods
“Relationship Bankers”
• Practically requires teller cash recycling
• Comfortable waiting area offers good
Lounge merchandizing options
• Increasingly equipped with self-service
refreshments
Source: Celent
52

53. Element
Physical design elements
Rationale Example
• Merchandizes key product offerings
Branded Retail
Destinations • Intuitive retail paradigm
• Most appropriate for large format branch
designs
• Low-wait, low-cost transaction delivery
Self-service Area • In addition to or replacing tellers
• Often vestibule based to extend hours
• Considerate and smart for larger branches
Kid’s Areas • Reflects the evolving role of branches:
customers visit longer and less often
Source: Celent
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54. The Key is How You Bring it all Together
54

55. Think differently like Home Plus in South Korea
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56. Summary
• Unprecedented challenges require
different thinking
• Self service channels will continue to grow
significantly
• Approach to branching will need to be
different with redesign and automation
• Integrate your delivery channels and place
the customer at the center
56

57. “Design isn’t about how
something looks. Design is
about how something
works. And great design
can motivate people to do
remarkable things.”
Steve Jobs
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