Bank branch transformation is becoming increasingly important as financial institutions respond to the rapid growth of online and mobile banking. With more routine transactions moving to digital channels, banks are reassessing the number, location, size, and design of their physical branches.
Rather than eliminating branches altogether, some financial institutions are redefining their purpose. New branch concepts can combine self-service technology with employees who focus on more complex customer needs, allowing banks to maintain a physical presence while adapting to changing consumer behavior.
Fifth Third Bank’s planned closure of three branches in West Michigan, part of a far broader plan to jettison 100 of its more than 1,300 offices in 12 states, illustrates the situation banks face in adapting to the digital age.
Retail and commercial customers these days are doing more transactions electronically, either online or via an app on their smartphones or tablets, forcing banks to take a hard look at and possibly redefine their physical footprint.
Some banks, such as PNC Bank, have invested heavily to renovate and redesign offices to accommodate customers still coming into the branches, often for reasons beyond simply cashing a check or making a deposit or withdrawal.
Even in one instance where a bank is expanding its branch network with a new office, the growth of mobile banking technologies will guide its design.“How we’re going to do things on the inside is an open question yet,” said Art Johnson, CEO of United Bank of Michigan, a Grand Rapids-based company that plans to renovate an existing optometrist office in Jenison for its 12th branch, which will open in 2016.
United Bank wanted to open the new branch to establish a physical presence in the Jenison market, but it’s approaching the design in a way that accommodates changing consumer habits, Johnson told me in a recent interview. Expect the physical layout to be more conducive to the evolving role that branches are taking on, he said.
Digital Banking Reshapes the Role of the Branch
The topics of the changing role of branches, banking customers’ desire to increase their use of digital banking, and how best to manage the convergence of branch and digital banking are important topics for banking leaders. These changes will only accelerate with the introduction of new branch concepts that include a broader selection of self- and assisted-service options for users, and more digital banking choices.
The continued growth of digital banking does not necessarily mean the end of the physical branch. Instead, it is forcing banks to determine which services customers still value in person and how branches can complement increasingly popular digital channels.
Self-service technology, assisted-service options, and redesigned spaces could allow financial institutions to operate branches differently while maintaining important face-to-face customer relationships. As consumer banking habits continue to evolve, bank branch transformation will increasingly involve creating a coordinated experience in which physical and digital channels support one another rather than operate separately.
Overview by Ed O’Brien, Director, Banking Channels Advisory Service at Mercator Advisory Group
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