There is a wealth of evidence that consumers are using online and mobile channels as the primary channels for their everyday banking needs:
Having reached critical mass in online banking penetration, the largest U.S. banks continue to report strong growth in active mobile banking customers (Chase +23% y/y to 17.2 million; Bank of America up 17% to 15.5 million; and Wells Fargo +22% to 13.1 million)
Regional bank customers are also growing their usage of non-branch channels. 45% of PNC customers use non-branch channels for a majority of banking transactions. Fifth Third reports that ATM and mobile channels’ share of deposit volume rose from 12% to 31% over the past two years. KeyBank claims that online and mobile transactions are growing by 9% annually, while branch transactions are declining by 3%.
The rise of self-service channels for everyday banking transactions is leading banks to re-assess their investment in their branch networks. For example, banks are changing traditional assumptions as to what constitutes optimal branch density within markets. In a recent presentation, KeyBank claimed that branch density is now less relevant as long as a bank can pair branches with a good mobile offering. In addition, in a low-revenue-growth environment, banks are under pressure to cut costs in order to meet earnings expectations. As a result of these factors, banks are cutting branch numbers.
Bank of America is expected to cut branches to below 5,000 by the end of 2014, compared to more than 5,700 in the second quarter of 2011. It recently announced the sale of branch clusters in North Carolina and Michigan.
Over the past six months Citibank sold all of its branches in Texas, as it focuses its energies on a select number of large metro markets.
KeyBank has closed or sold 8% of its branches over the past two years, and plans to cut its network further, by about 2-3% per year.
However, banks remain strongly committed to their branch networks. This is largely due to the fact that consumers continue to value the branch channel, even if usage has declined. A recent ABA survey found that 21% of consumers named the branch as their preferred banking channel, up from 18% in 2013. In addition, banks recognize the benefits in encouraging customers to use multiple channels. Wells Fargo found that customers using its stores as well as online and mobile channels have a 70% higher purchase rate than customers who only use online and mobile. With in this mind, the following are five branch strategies that banks should follow, with examples of banks that have already implemented these approaches:
Deploy new branch formats. Given lower traffic and transaction volumes in branches, banks should launch branch prototypes with smaller footprints, so that they can maintain their physical presence, but at a lower cost.
PNC has converted 200 of its branches to a smaller format, with 100 more to follow by the end of 2014.
Launch flagship branches in selected markets. With changing ideas around branch density, bank can consolidate multiple branches into a large flagship store. These flagship stores act as a brand beacon for the bank in specific markets, as well as providing space for the bank to showcase new innovations
Reconfigure branch staff. As branch activity is switching from transaction processing to sales and advice, and branches switch to smaller format, bank can reduce the average number of staff per branch, but should also change the functional balance, with fewer tellers and more sales specialists.
In the 18 months to June 2014, Fifth Third cut 22% of its branch service staff, but increased sales staff by 6%.
Over the past year, PNC has grown its number of investment professionals in branches by 4%.
Incorporate technology into branches. As consumers become more accustomed with using technology for their everyday financial needs, banks should showcase customer-facing technology in branches. This can enhance the user experience and capture sales opportunities
Regions is installing two-way video to enable customers communicate directly with bankers via an ATM.
Open branches outside of footprint. As having a critical mass of branches in a market is no longer a prerequisite for success, banks can open branches beyond their traditional retail footprint, to target specific consumer or business clusters.
City National has established branches in New York City, Atlanta and Nashville, dedicated to targeting entertainment firms that are clustered within these markets.
If you listen to Customer Success Management professionals talk about what they do, you’ll get the message loud and clear. In order to be viewed as a growth engine rather than a cost center, the CSM must move beyond being firefighters, which relegates the CSM function to the world of support – helpful, but totally reactive. Just because it is part of the story of how many CSM teams got started doesn’t mean that it needs to be part of how the CSM team is positioned going forward.
I’d like to take things one step further. I believe that success for CSM can be defined as the day that Success managers and executives no longer talk at all about how many customer relationships they and their team have “saved.” I understand the motivation – it’s a tangible demonstration of the value of their function and one that explicitly and clearly relates to the activities of the CSM team. However, there are three problems with ”saved customer” refrain:
It continues the focus on reactive impact, as saving implies that the customer was “at risk” until the successful intervention of the CSM team.
It undervalues the total impact of CSM on the top line because it doesn’t account for up-sell or cross-sell revenue and on the bottom line because, among other things, it doesn’t account for the lowering of customer acquisition costs through advocacy and word-of-mouth.
Finally, why should saving customers even be necessary? The strategic, pro-active approach of the CSM team should ensure that customers are kept on a path to value and rarely or never get diverted to end up at risk.
Not only does talk of saves do a poor job of positioning the CSM team within the organization, it has the potential to create or foster antagonism between CSM and other functions. The need to save results from some misstep, whether by marketing or sales in poorly setting expectations, product development in delivering an application with feature shortcomings or bugs, or support in failing to respond to requests quickly or thoroughly enough. Does the CSM team really want to be the nagging parent of the organization that always talks about cleaning up everyone else’s mess?
While we’re at it, maybe we should do away with the outward focus on “churn rate.” Talking about CSM in terms of churn still mires it in a framework of prevention rather than expansion and growth. Every customer relationship is an opportunity for growing revenue through renewal, upsell, cross-sell, and advocacy. So why not refer to the performance of the CSM team responsible for managing and nurturing those relationships in terms of conversion of that revenue opportunity? Sales isn’t measured by their loss rate (yes, win/loss is an element of sales performance analysis but it’s rarely the primary sales measure mentioned), but rather by their bookings against quota or their conversion rate. I’m not suggesting that churn should be ignored or even that it not be a/the primary measure used internally by the CSM team. Rather, I’m suggesting that perhaps CSM does itself a disservice and perpetuates the stale paradigms that it is trying to shift by highlighting “saves” to the non-CSM world.
EMI recently attended the LIMRA Marketing & Research Conference at Disney World. Our take-away from the conference: No business today can achieve sustainable growth and gain market share without being customer-centric. Easy to say, but less easy to implement.
As an exhibitor, we had dozens of conversations on companies reassessing and refining their client-centered strategies. The challenge of operating with a consumer marketing lens, versus the traditional product-centric lens, which so many companies have done, was well expressed in a recent McKinsey report* on U.S. retirement readiness:
[Providers] “have a unique, largely untapped opportunity…But to capture it, firms must stop driving product innovation based on actuarial models and instead lead with a strong consumer marketing lens…financial institutions must take a much stronger consumer view as they create new product prototypes.”
These challenges relate to how companies engage with their channel partners to enable customer-centric throughput. For example, one mutual fund leader at the Conference addressed investment language and how “financial security” resonates far more than “financial freedom.” An insurance leader explained the need to help agents establish an online social presence and keep diverse customers engaged through social media.
The LIMRA event helped us to crystalize several fundamental questions:
“Am I using customer-centricity to achieve competitive advantage with my channels and end-customers?”
“Is my organization unified in this approach, even if product, sales and research are in silos?”
“Am I extending my consumer-centric expertise and assets (e.g., research, collateral to advisor and agent channels) that arms advisors and agents with educational and motivational client tools?”
“Am I adapting core messaging to engage different generations, particularly as they age and their needs evolve, across relevant traditional and digital communications?”
“Am I preparing for what my distribution channels will need in the next two years based on what my research, marketing analysis and industry trends are reporting now?”
These questions speak to the need for strategies and tactics to help financial service institutions to grow share with their captive and third party distribution channels. EMI examined many of these questions at our recent webinarFour Strategies to Win the Hearts and Minds of Your Advisor Channel – and Grow Sharewhichshows you the need for customer-centric throughput and the importance of building better advisor relationships that can be adapted to sales channels and ultimately end customers. This is a topical concern of research and marketing experts at investment and insurance firms alike as we clearly recognized at the LIMRA event.
* McKinsey & Company, “Why Are We Not There Yet? An Update on U.S. Retirement Readiness,” May 2013.