Customer relationships remain a key part of successful financial institutions. Historically, maintaining relationships was done at the branch as accountholders took care of routine banking needs. But with the increased reliance on digital banking, the way accountholders bank at the branch is changing.
Savvy financial institution executives are redesigning branches to better meet their accountholders where they are, today.
Taking advantage of advances in self-service and digital technologies, executives are creating experiences for accountholders that blend the digital with the physical while providing their employees with modern tools to support new preferences. Branch modernization can increase revenue, deliver a more efficient overall operation, and improve accountholder and employee satisfaction.
The branch continues to be important
As digital transformation has reshaped the way consumers conduct financial transactions, the view of the branch from the consumer’s perspective is also changing. For example, studies show that millennials and Gen Z increasingly see the branch as a place to receive advice and open accounts. These are key consumer segments that all financial institutions will lean on for future growth and profitability. Branches must change to meet new needs such as these.
Traditionally, branches have always been important to banks and credit unions. Large national financial institutions have known for years that branch ubiquity equates to market share. They have leveraged the “network effect” to their benefit, and to the detriment of their smaller competitors. The network effect tells us that if a financial institution owns 3% of the branch share in any market, they should garner about 3% of the deposit share – however, if that branch share increases to 6%–8%, that financial institution will garner much more than its fair share, up to 2x or more.
To effectively leverage the network effect, regional and community financial institutions need to build a holistic strategy related to their branch networks. This strategy must be built off a foundation of data-driven insights into branch market growth potential and performance. And the investments in branch markets must align with the growth potential of each market.
Business value of modernization
In 2022, Fiserv commissioned marketing intelligence firm International Data Corporation (IDC) to analyze the impact of the Fiserv approach to branch modernization. The result – “The Business Value of Branch Modernization” – compiled insights from 13 financial institutions which show significant value and benefit from Fiserv analysis of branch needs and subsequent implementation of appropriate branch redesign and technology solutions.
The recommended technology supports branch modernization by automating branch operations and providing in-branch self-service options that enhance accountholder experiences while lowering operational costs. Examples include interactive branch kiosks, deposit solutions, biometric authentication, collaboration and scheduling systems, teller and workflow systems, card issuance and hardware.
Based on the interviews of the 13 financial institutions, IDC found that branch modernization resulted in the following benefits, including a 420% ROI.
Improved overall operations
Branch solutions help banks and credit unions downsize their physical footprint without sacrificing service. IDC study participants reported an average 20% reduction in rental costs alone.
With access to self-service technology like interactive kiosks and cash recyclers, accountholders are becoming more adept at cross-channel transactions. This efficiency reduces salary costs while freeing employees from tedious tasks to focus on more complex situations.
Banks and credit unions are capitalizing on the unique strength of a physical branch to improve accountholder experiences. Increased efficiency leads to shorter wait times, multichannel flexibility and a more knowledgeable staff – all of which directly impact customer satisfaction.
IDC predicts that financial institutions implementing digital innovation will derive over 25% of their overall revenue from digital products, services or experiences. Innovative digital products and services can create additional business value through new partnerships, data monetization, entrance into new markets and other approaches.
Branch transformations designed to attract a local clientele allow smaller financial institutions to level the playing field when it comes to competing with larger ones. This means providing easy access to products that allow accountholders to bank however they want, wherever they are, at any time. The ability to provide the same level of quality, convenience, expertise and flexibility allows branches to create greater consumer value, loyalty and engagement.
Implementing innovative technology solutions
Branch transformation is not a one-and-done proposition. It is a living and evolving process. That’s why Fiserv has created the Branch Evolution Roadmap to help our clients align with changing market needs and grow their institutions. The roadmap employs a data-driven approach to branch network design and market selection. With our partner Adrenaline, the roadmap extends into experience planning and branch design.
Taking a holistic approach, we develop an individualized strategy based on needs, priorities and a plan to leverage any existing solutions. A thorough assessment of the current branch network reveals challenges, opportunities and requirements that are translated into an actionable roadmap for implementation.
Branches will need to evolve now and into the future to remain relevant, requiring a strategic approach that is endorsed at the highest level within the organization and a willingness to think differently about the customer experience. Building the branch around a digital center improves customer, member and employee experiences and delivers a more efficient operation.