Build Your Planning Playbook in 2014 and Beyond
With narrowing net interest margins, less-than-optimal loan volumes and service charge fees under fire, it's more difficult than ever for America's financial institutions to plan for the future and achieve their strategic objectives. Like other financial institutions, you probably believe you've squeezed every drop of efficiency out of your operations already. What's the key to further efficiency, profitability and growth in this environment?
It all comes down to the branch.
Branches represent 66 percent of the non-interest expense for the average financial institution, at a time when consumers are moving to online and mobile channels. Yet, in a 2013 survey of bank executives, Fiserv found that only 19 percent of financial institutions surveyed had a 5-year plan for their branch network.
Banks and credit unions must strengthen the value of the branch to position themselves for success. Financial institutions of all sizes can profit from creating a "Branch Planning Playbook" that uses analytics to maximize investment in current branches and impact decisions regarding new locations. This is a highly structured process of reimagining your branch network, and the time to start is now.
Tough Questions Lead to an Honest Appraisal
Begin by stepping back and asking some tough questions.
- What has been the historical purpose of your branches? Document how each branch has performed based on this purpose. Imagine the shape of your branch network if you were starting over today.
- Does your funding strategy make sense? How you fund your bank – wholesale or low-balance accounts, for example – shapes your path to high performance.
- Do you have excess capacity? All financial institutions experience excess capacity as they add branches. The question is how long they will subsidize it.
- How do your branch efficiency metrics stack up to those of high-performing peers? Measure core deposits, revenue and number of accounts per office. Then size up revenues, loan volume, deposit totals and number of accounts per FTE.
- What are your franchise-level growth goals? Determine how these goals compare to the growth projections in the market.
Once you know where your financial institution has been, where it stands and where you want it to go, the next step is to examine how that aligns with your marketplace and how your organization can improve its position.
Knowing Versus Guessing
Market analysis tools provide a more complete market view. There's a wealth of data available, and financial institutions need software that can identify both competitive saturation and the demographics of potential customers. These tools will prove indispensable as you examine your market, growth potential, customers, competition and opportunities, before building a branch strategy matrix. This will help your organization sort branches according to current market position and market growth potential, and identify top performers and branches that may be candidates for closure or consolidation.
Armed with this research, your organization can now set up branches for greater success. Narrow the focus of each branch to products and services that fit the market. For example, you might designate a branch as an origination point for commercial deposits, catering to the health services industry. Then, staff accordingly. Set obtainable goals that are conditioned by what you've learned about the growth potential and competition in the market.
The strategic framework in the Branch Planning Playbook provides an orderly plan for refining your branch network to achieve strategic objectives. It will mean making important decisions – perhaps even closing or consolidating branches. But you can rely on the intentional use of market analytics to help maximize your financial institution's investment in current branches and inform your decisions to open new ones.
To further explore the process for creating your own Branch Planning Playbook, review the Branch Planning Checklist from Fiserv.
Exclusive for Fiserv clients:
In a short video with downloadable transcript, Andy Grinstead examines the future of branch banking on Fiserv Boardroom Series, our online thought leadership community. *login required*