1. finance
2. bank

2013 CIB Annual Conference
The Branch of Future:
How to Plan for it Today
Presented by:
Andy Grinstead
Senior Vice President
Fiserv Bank Intelligence
[email protected]
Agenda
The role of the branch is fundamentally changing and
banks of all sizes must plan for the “branch for the future”.
In this session, we’ll discuss:
• Industry trends
• Consumer trends
• Branch trends
• Case study
• Action planning for my bank
• Summary & conclusions
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About Us
• Online Advisory Solution
• Established in 2000 and was privately capitalized
• Acquired by Fiserv in October 2007
• Banking industry’s only Online Advisory Solution
• Cost-effective delivery to institutions of any size
• Bank Validation
• Over 400 subscribing client financial institutions
• Client banks range from $32 million to $26 billion in total assets
• More than 1,500 planning sessions each year
• Partner Validation
• ICBA Preferred Service Provider
• State and regional associations
• Association for Financial Technology (AFT)
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© 2013 Fiserv, Inc. or its affiliates.
Five Year Industry Trends
ROA has rebounded, but note that lesser
Loan loss provision has driven much…
As net interest margins are facing pressure…
… as loan yields are pricing down…
… and loan volume is less than optimal…
Source: Q4 2012 BankAnalyst® Financial
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Trends Point to Importance of Branch Efficiency
… Cost of funds are nearing the bottom
Loan production has been strong, but how
much longer?
Service charge fees have come under regulatory and
behavioral pressure in the current environment
Source: Q4 2012 BankAnalyst® Financial
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Key Branching Issue: It’s the $$$$$, Right?
• Costs for branches and staff represent 65% of the non-interest
expense for the average financial institution.
Branch &
Staff Costs
65%
( of Non Interest Expense)
Average Delivery System Expense = 37bp (12 percent of NIE)
Average Personnel Expense = 168bp (53 percent of NIE)
Average Total NIE = 316bp
Median Deposit Service Charge Income = 21bp
Median Core Deposits per Office = $34,128,000
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Customer &
Channel Trends
Numerous “Game Changers”
Business Models
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Demographic shifts
Social change
Channel shifts
Payments
Regulatory change
Lending patterns
Talent management
Macroeconomic and
Geopolitical Risks
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•
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Interest rates/inflation
Unemployment
U.S. housing market
EU instability
Energy and commodity prices
Going for Growth: Untethered Interactions with
Consumers and Businesses
ATMs
3,000,000,000
Devices
Branches
Financial
Institutions
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It Is Indeed a Changing World…
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Will “Alternative Channels” Really Take Off?
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Mobile Has Impacted Consumers’ Daily Habits and ...
Mobile vs. Branch Strategy – The Customer Doesn’t Care.
Voice
Organizer
SMS/Alerts
Email/MMS
Budgets
Banking
Communicate
Payment
Commerce
Control
Ticketing
Maps
Social
IM/chat
Create
Transit
Consume
Search
Blogs
Mobile web
Pictures
Games
Video
TV
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Music
News
A Personal Case Study…
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1. Signs up for new services
faster
2. Responds to experience
Gen Y…
more than product
3. Is more likely to switch
4. Is more comfortable online
5. Is the mobile generation
6. Is on the move – capitalize!
7. Recommends a good
experience more and faster
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Online and Mobile Are No Longer “Alternative Channels”
Transactions (in Billions)
80
70
60
50
40
30
20
10
0
ATM
Source: TowerGroup, 2012
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13.40
17.00
5.00
6.40
8.20
10.60
28.50
29.70
30.80
32.10
33.10
34.10
14.00
13.70
13.50
13.40
12.70
12.10
11.00
11.20
11.40
11.50
11.60
11.80
2010
2011
2012P
2013P
2014P
2015P
Branch
Online
Mobile
Transacting at the Branch, But Are We Forcing Them
Into This Channel?
Why did you visit a branch last month?
81%
82%
Make a deposit or withdraw cash
87%
86%
24%
15%
Obtain a cashiers check or money order
7%
4%
15%
Resolve an account issue
9%
7%
7%
Open or close an account
9%
13%
Access safety deposit box
3%
4%
GenY (21-32)
8%
7%
5%
5%
GenX (33-47)
Boomers (48-66)
Seniors (67+)
10%
Sign paperwork
Use Notary
6%
4%
2%
8%
6%
3%
5%
10%
Change account information (name, etc.)
5%
3%
3%
Source: 2012 Fiserv Consumer Trends Survey – 12/12/12
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Fiserv Proprietary and Confidential
Retail Banking Channel Interactions
2015E
Source: Brett King
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Takeaways…
Will branches remain a relationship cornerstone for acquiring and
retaining deposits and growing profitably?
Fewer transactions in branches – focus shifts to advice, loans and
small business services.
The implementation of self-service technology in branches will free
branch staff to spend more time with customers.
Branches must be tightly integrated with other delivery channels,
giving customers channel choice.
Financial Institutions must focus on providing an outstanding
experience in every channel – including mobile and tablet.
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Branch Format
Trends
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Many Different Combinations of “New”
(just a few examples)
Form Factor / Look and
Feel / Components
Services Offered /
Staffing Required
Technology
Ultra-modern
Financial planning
Video tellers
Ultra-traditional
Brokerage
Self service kiosks
Flagship branch
(your $ is safe with us)
Small business services
Surface technology
Restaurant / Coffee shop
Tax advice
On-line “everything”
coordination / CRM
Community space
Lending advice
Digital walls
Smaller footprint /
Portable and pop up
Small business “rental”
space
Straight through
processing
Concierge / Kids area
Flexible staffing skills &
hours
Customer recognition
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Citibank – “Smart Banking”
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Flagship branch
“Smart Banking”
Interactive sales wall
Highly trained staff
Enhanced image ATM
Free Wifi
Media walls
Access to global
experts via video
conferencing
• Private seating lounge
for Citigold customers
Source: Citigroup.com, thefinancialbrand.com
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Community Bank –
Bridge Online and Offline Experience
• St. Petersburg, FL
• Five Zones:
-
Teller Zone
Sales & Advice Zone
Dwell Zone
Community Zone
Brand Zone
• Inspired by Apple
• “A visual barometer
for the company’s
brand, mood, social
awareness and
public relations”
Source: thefinancialbrand.com
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Umpqua Bank – Stores vs. Branches
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Early adopter
Retail vs. bank
“Stores” vs. branches
Service based –
Ritz Carlton
Starts with people
Connection to
local business
Ice cream truck
to local events
Yoga classes
Children’s theaters
Interactive technology
Clean design
Source: umpquabank.com
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North Shore Credit Union – “Financial Spa”
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Vancouver, BC
“Financial Spa”
Concierge
Carved pine
columns
Granite and stone
Private lounge
Refresh bar –
cappuccinos,
hot towels
“Bringing the
beauty of the
outside, inside.”
Source: EHS Design, North Shore Credit Union, thefinancialbrand.com
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Naugatuck Savings Bank – Extend Hours
• Naugatuck, CT
• Design concept
around convenience
• Personal Teller
technology
• Extended hours
• Two way video with a
teller
• Investment center
• Fully trained staff for
loans, deposits, cash
management
Source: naugatucksavingsbank.com
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Virgin Money – The “Cool Factor”
• Guildford, UK
• Modern blend into architecture
• “Fresh approach to high
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•
street banking”
Access to Virgin Money
products
Free use of
• Wifi
• iPads
• iMacs
No hard sell policy adopted by
all staff
Community events –
baby grand piano
Source: thefinancialbrand.com, virginmoney.com
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Where Do
Community
FI’s Fit In?
Start With the End in Mind – Acru
A Community FI Case Study
• Woodstock, GA
• Needed to rethink what “banking”
meant
• Metrics are critical
• Small business, business owners,
professionals are key targets
• Surveyed the market about banks
and their money
- Highly emotional issue
- Last thing we need is more loans
and deposits
Listen to the Acru story at www.acruwealth.com
- Baseline solutions assumed;
web, mobile, etc.
- They want more – trusted
advisor to help with strategies for
Money that fit their “Life”
Acru Wealth, LLC (Acru) is a subsidiary of Community & Southern Bank
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Thinking Outside of the Box –
Creating Valuable Reasons to Visit the Branch
• Ai3 Architectural Firm
• Café Style –community and small
business gathering space
• Wealth strategists
• Frictionless environment
- “Wealth Bar”
- Clarity Conversations and Clarity
Maps
- Community support & events
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Actions Speak Louder Than Words….
https://acruwealth.com/community/author/brad
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Where To Start
Step Back – Ask the Tough Questions
What’s the historical purpose of our branches?
• Core deposits?
• Loans?
• Customer service / transactions / account opening?
• Branding awareness?
Key Questions:
How has each branch performed?
If we were starting a bank today, would we anticipate
the same number of branches?
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© 2013 Fiserv, Inc. or its affiliates.
Benchmark
Your FI
Consider Your Operating Strategy and Benchmark
Example:
Consider
VLO – Very
Low Balance
Accounts
Offices are
smaller = more
offices required
but…
Lower COF and
more service
charge $
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Benchmark Medians
Lower COF
and
More Service
Charge Income
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Measure Your Key Branch Efficiency Metrics
Benchmark and calculate
opportunity $:
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Core Deposits Per Office
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Revenue Per Office
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Accounts Per Office
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Revenue Per FTE
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Loan $ Per FTE
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Deposit $ Per FTE
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Accounts Per FTE
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Analyze the Potential
Market Opportunity
Utilize Available Tools for Analysis
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Identify Potential Business Targets by Branch:
Deposit Opportunities
Loan Opportunities
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Cash Management
Merchant Card
Identify Potential Consumer Segments
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Fully Research & Understand Your Targeted Segments
U.S. Statistics
U.S. Households: 6,872,214
Median HH Income:$91,185
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• Flourishing families
• Suburbanites with high incomes, large
homes (and mortgages), and
substantial income-producing assets
• Well educated with executive jobs
• Most likely of all groups to manage
their finances online--paying bills,
transfers
• Risk averse / wide variety of insurance
• These well-off families pursue active
lifestyles
• Use credit cards that help them rack
up airline reward miles
Target Specific Product Demand: Home Equity
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Determine Your
Optimal Branch
Footprint
Consolidate Branches?
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Analysis to Consider
Bank Intelligence Analysis
Examples of Other Data
• Branch investment matrix
• Branch profitability
• Bank performance ratios
• Do we own or lease
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(Delivery system capacity)
Market growth potential
Performance of the branch
Proximity of other branches
Competitive saturation
Competitor type
• Actual cost savings
• In market loans
• In market deposits
• Volume of transactions
• Intangible value of
transactions
• Reputation risk
In case study example, branch capacity is a $4.5 million annual opportunity
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Expand Footprint?
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Expansion Considerations
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Ratios indicate an earning engine in a slow growth market
Capital considerations
Future earnings capability
Very high current market share
LPO vs. branch
M&A vs. De novo
Use tools to identify potential markets
Ideal
Markets
Combination of growth, target segments and not as saturated
as current markets and/or have the ideal competition type
Example
MW bank in slow growth markets searched every county
across half their state to identify 8 potential LPOs. Currently
looking for the right person to become the market president.
© 2013 Fiserv, Inc. or its affiliates.
All Markets are Not Created Equally- Think Franchise
Clemmons, NC branch vs. Johnson City, TN branch
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Narrow the Focus for Each Branch to a Few Combinations
Example
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Deposits
Loans
+
Retention
Origination
Cross Sale
+
Consumer
Commercial
+
Specific
Segments/Niches
Deposits
Origination
Commercial
Health
Svc
Take Action
Take Action – Next Steps
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How much will we invest in technology and “alternative”
channels?
How many branches will we have?
Who & what types of customers will they serve?
Where will they be?
What will they look and feel like?
Who will staff them?
New lines of business?
Benchmark where you are today
Take stock of your strengths and weaknesses
Identify rationalization candidates
Identify best target opportunity for each branch market
Begin process of choosing your head(s) of
Internet/mobile/payments
© 2013 Fiserv, Inc. or its affiliates.
Connect with us:
Complementary Benchmarking and Market Review for your Bank
Andy Grinstead
[email protected]
678-375-5229
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