Bank branch transformation is accelerating as consumers increasingly use online banking, mobile devices, and ATMs for routine financial transactions. With fewer customers visiting tellers for everyday banking needs, financial institutions are reconsidering the size, design, staffing, and purpose of their physical locations.
Rather than eliminating branches altogether, many banks are repositioning them as places where customers can receive financial guidance and assistance with more complex needs. New layouts featuring open spaces, fewer teller windows, and employees capable of handling a broader range of customer requests reflect this changing approach. As transaction volumes decline, the traditional bank branch is gradually evolving from a transaction center into an advice and education channel.
With teller transactions becoming less common, banks are reimagining their branches to better meet the needs of the modern customer
When Alan Digrace strolled into Evans Bank’s branch in Lancaster, he was struck by the new look.
A “concierge”-style desk was positioned up front, where an employee greeted customers. The branch had only two teller windows, rather than a series of them. The floor plan featured more open space.
Digrace, who used to work for banks, found the appearance refreshing.
“When you walk in here,” he said, “there’s people around. It’s kind of inviting.”
For banks such as Evans, this is more than a branch makeover. They are changing with the times. Customers are handling an increasing number of basic transactions online, on mobile devices or at ATMs, without stepping inside a branch. FMSI, a firm which studies the financial services industry, says branch transaction volumes have fallen more than 45 percent since 1992. And SNL Financial reports the number of branches nationwide is down 6.3 percent since 2009, a net decline of more than 6,000 locations. Earlier this year, JPMorgan said it would close 300 branches over the next two years, representing 5 percent of its total.
Banks insist branches remain essential to what they do. But they are looking for ways to hold down their real estate expenses, expand their employees’ skills, and make branches more appealing to customers.
So expect new branches – either refurbished or built new – to look different from branches of old, and likely with less space. Some banks are even referring to branches as “financial centers” or “customer centers,” seeing them as meeting places for more-complex transactions.
Recent changes occurring at branches are the result of a new mindset that self-service banking, including next-generation ATM and digital banking capabilities, are driving fundamental changes in the branch channel. These changes, chronicled in recent Mercator Advisory Group Banking Channels research, and will be included in future research as well, include the changing role of branches from being primarily a transaction channel to an education and advice channel. These changes are significant, and will impact all channels, including ATM, digital banking, as well as drive a similar transformation in financial institutions’ call and contact centers.
The decline in routine teller transactions does not necessarily signal the end of the bank branch. Instead, it is changing the role branches play within a broader network of customer service channels. Self-service technologies can handle many deposits, withdrawals, transfers, and other everyday transactions, allowing branch employees to spend more time helping customers with financial questions and more complicated products and services.
This transition also creates opportunities for financial institutions to reconsider their physical footprints. Smaller locations, more flexible layouts, and employees trained to perform multiple functions can potentially reduce real estate and operating costs while creating a more inviting customer experience. Branches increasingly described as financial centers or customer centers may become destinations for advice rather than places consumers routinely visit to complete transactions.
Bank branch transformation will also affect other banking channels. As consumers become accustomed to self-service capabilities through ATMs, online banking, and mobile applications, they will expect those channels to work seamlessly with branches and contact centers. Financial institutions will need to determine which services are best delivered digitally and where personal assistance provides additional value. Banks that successfully coordinate these channels can preserve the advantages of face-to-face service while responding to consumers’ growing preference for convenient self-service banking.
Overview by Ed O’ Brien, Director, Banking Channels Advisory Service at Mercator Advisory Group
