Madison, WI (May 20, 2014) —
Do banks and credit unions keep, improve, or close their branches to manage today’s evolving financial services environment? BankersHub webcast reveals new stats to show shift.
In a recent BankersHub webcast (Keep, Improve, or Close Branches?), Novantas discussed the hot topic of how credit unions and banks should manage their branches in the face of shifting customer preferences, and participants revealed that that they are focused on using analytic tools to aid them in the process. Financial institutions are under pressure to make tough network decisions faster and smarter to remain profitable, and channel preferences have shifted away from branches much faster than expected, increasing the pressure to act decisively.
According to the presenters, Novantas Managing Director Darryl Demos and Principal Alex Lee, network revenue and costs have moved in opposite directions – especially with the cost of maintaining the traditional branch network skyrocketing. The good news, however, is that consumers are transacting in new ways and often prefer lower cost channels such as online, ATM, and mobile. For example, in a comparison from 2006 vs. 2012 of transactions preferences for the branch (teller) channel, deposits declined 16 percentage points to 54% in 2012, and withdrawals followed suit with drop from 41% branch preference in 2006 to just 25% in 2012.
“As a result, the branch is no longer the anchor of the shopping and, to some extent, the buying process,” Demos says. “That said, consumer convenience and profit considerations will demand that financial institutions expand their investments in new channels and products for continued relevancy and value.”
Subsequently, nearly one-fourth (22%) of branches remain unprofitable (Source: 2012 US Multi-Channel Preference Survey). There is a change in attitudes as new cohorts of customers enter the banking system. Already, price and online banking (not branch proximity) are critical to both younger and core segments.
To further support this research trend, webcast attendees were asked to identify the top two strategic issues on which their institution is focused for network planning. While one out of three cited changes to overall number of branches, either through reductions or trading off locations with ATMs, “Changing branch formats” and “Improving perception of scale through non branch means” ranked highest, garnering 56% of responses each. How are they accomplishing this? According to attendees, more than 70% are either just starting to use analytic tools or are looking for a tool, supporting that institutions of all sizes can and do benefit from analytic resources.
Armed with this information, the Novantas findings identified five challenging “trade-off” questions institutions need to address for future prosperity:
- Which markets are best positioned for growth, and how can institutions win business without major network investment?
- In which markets could additional marketing spend improve awareness and visibility, in lieu of additional scale?
- Given customer demand shifts, how can banks statistically assess the right locations to consolidate or close locations without losing customers or share?
- Which branches could be replaced with a smaller format location without incurring significant attrition based on known market demographics and transactional preferences?
- Where could ATMs replace scale for branches, and what is the right trade off ratio?
Novantas, Inc. is the leader in customer science and revenue management strategy in the financial services industry. A FinTech 100 Company, the firm’s Management Consulting, Solutions, Data and Research divisions specialize in investigating and interpreting customer needs, attitudes, and behaviors in ways that help companies refine marketing decisions, customer strategies, and sales and service activities. For more information, visit www.novantas.com.
BankersHub was founded in 2012 by two financial services professionals, Managing Director – Financial Services Michael Beird and Managing Director – Events and Education Erin Handel. Both Beird and Handel are dedicated to educating and informing banks, credit unions, solution providers and consultants in the U.S. and around the globe. BankersHub delivers best practices, research insights, opinions, economic trends and consumer views through online web education, virtual events and conferences, live streaming activities, custom training and content development. For more information, visit: www.bankershub.net