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Branch strategies changing

Branch construction, expansion/renovation efforts have played a major role in many financial institutions’ strategic initiatives in recent years. While bank consolidation has been pervasive in the industry, research shows that over the past 20 years, there has been a net increase in bank branches in the United States. Given the trend, it’s hard to believe that a decade ago, some in the industry had forecast that branches would be obsolete.

But just how do banks define their branches these days? What is their role as a distribution channel, given the number of options available to customers today? These are questions that many banks have aimed to answer strategically on paper. But the execution aspect continues to be elusive for many institutions.

On the one hand, banks are challenged to squeeze as much revenue as they can out of their retail delivery systems. Simultaneously, they’re expected to keep a focused eye on expense control and efficiency. While some industry executives view branches as a super sales channel, others assert that they carry a hefty price. Moreover, the variety of banking choices available to customers has raised the bar of expectation from convenience, accessibility and customer-service standpoints. Branches are expected to deliver more to a more demanding customer base.

So, how have banks responded?

Nationally, some financial institutions have reinvented their branches as “stores” and have embraced a retailing perspective. Others have literally located branches in stores-bank branches in supermarkets are nothing unusual nowadays. Still others have sought to transform their branches into home-oriented environments with sofas, televisions and gourmet coffee. Others haven’t strayed much from what a branch has always looked like.

But do some of these changes really matter to banking customers?

It’s difficult to assess because different customer bases in different regions have varying expectations. Moreover, characteristics of a metropolitan market in California may differ greatly from metropolitan markets in New York or Chicago.

Banking companies with branch locations that span several states must find ways to consistently apply a customer-focused approach that’s relevant. Banks are challenged to determine what those key drivers of relevance are. In some areas, it may be convenience, with convenience defined by weekend accessibility or later hours. Other customers may prioritize a one-stop shop-transacting banking business while purchasing groceries.

Some clients may care less about televisions or sofas in a branch when all they want is shorter teller lines and knowledgeable employees who are empowered to make decisions.

Understanding the difference in what customers say they want versus what they are willing to back up with increased share of wallet is a critical exercise for the industry. The role of the branch in that process will continue to take on new meaning and importance as a strategic planning priority in the industry-and it’s up to individual banks to figure out what’s most effective for what seems to be an ever-expanding geographic customer base.

Contact MBJ contributing writer Karen Kahler Holliday at mbj@msbusiness.com.


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