While the total number of bank branches is declining, the industry is still opening 1,000 branches annually. Here are 10 keys to accelerating success of your new branch.
This article, by Peak Performance consultant Jon Voorhees, was originally published in BAI Banking Strategies on March 7, 2017
Seems like every banking journal today has an article about branch closures or consolidations. Less reported is that banks are still opening about 1,000 or more new branches annually. In fact, according to the latest FDIC update, banks opened nearly 6,000 new branches in the five-year period between 2011 and 2015, and are on pace to do nearly 900 more this year.
During the last half of my career I opened about 900 new branches and learned a great deal about the factors that drive a successful launch.
Here are my 10 best insights:
BY: DAVID KERSTEIN, Peak Performance Consulting Group, and DAN MERCURIO, Cambridge Savings Bank. This article was originally published in BAI Banking Strategies.
Compelling digital offerings aren’t just a consumer expectation anymore. They are a necessity to stay competitive.
But many financial institutions, especially smaller ones, are stuck in a holding pattern—with too many confusing options and choices to grasp a clear sense of how to move forward. What’s the best way to harness new digital technology to deliver the desired results? How should you select the right partner? What key strategies lead to successful implementation?
If there remains any question that the FinTech revolution is disrupting the banking ecosystem, just ask Millennials: 73 percent believe innovation will come from outside the industry and 33 percent believe they won’t need a bank at all to serve their financial needs.
With the current technology sprint, it’s often hard to make sense of it all. (The iPhone, after all, is only 10 years old.) Today, FinTech startups don’t compete with banks head-on but focus instead on specific services historically integrated within the bank’s core offerings. It can feel like death by a thousand cuts.
Let’s step back a moment and consider this from the customer’s perspective. Leading FinTechs are competitive because they focus on products and segments banks don’t serve well, such as micro-business lending, unsecured lending and roboadvisory. FinTechs also show particular skill at creating a frictionless, intuitive customer experience. Many offer faster payment processing. Others provide simplified, instant business loan processing by connecting directly to information sources for verification, instead of relying on customers to gather and provide paperwork.
In our view, partnering with innovative FinTechs instead of trying to develop solutions in-house is a no-brainer. Jamie Dimon, CEO of JP Morgan Chase, described it well: “(FinTech partnerships) offer the kind of stuff we don’t want to do or can’t do, but there’s someone else who can do it.”
So what should smaller financial institutions do?
Branches aren’t going away but most built for a different era. Should you keep it, close it, move it, remodel it, or add capacity to capture market opportunity. And if you remodel, should it be a simple re-fresh or a full remodel?
Jon Voorhees, who is now a consultant with Peak Performance but formerly was senior vice president for retail distribution execution at Bank of America, discussed these issues in a presentation at Esri’s annual mapping conference in 2014, including some of the ways distribution planning is integrated into the overall bank strategy:
- Market investment prioritization
- Branch & remote ATM planning
- Regulatory compliance
- New branch forecasting
- Customer spotting
- Attrition-retention modeling
- M&A analysis
- Risk mitigation
- Asset management
As BB&T and other banks look for every possible competitive advantage, no matter how small, GIS software is playing a key role in developing ever-more-precise views of data. While GIS tools have been around for years, the software has become more advanced recently and more and more banks are using it for an increasing number of projects.
“You could look at a spreadsheet with 30 columns and try to figure out your decision, or you could look at a map and see it all in one place and the decision becomes much more apparent,” said Jon Voorhees, a former senior vice president for retail distribution at Bank of America, who is now an adviser at Peak Performance Consulting Group in Austin, Texas.
Now, banks create maps using multiple layers of data, tracking everything from the rate of nonperforming loans to levels of homeownership in specific census tracts. Mapping software can also help banks monitor potential security threats and even manage where and how to deploy executive talent.
For years, community banks have tried, with varying degrees of success, to boost fee income through wealth management. Now, thanks to the robo-advisory trend, smaller banks can compete more effectively, even with larger, more established players according to a new article in ICBA’s Independent Banker Magazine, Say Hello to Your New Employee.
The article highlights the experience of Cambridge Savings Bank and quotes David Kerstein, president of Peak Performance Consulting Group.
“A robo-advisor allows banks to have the potential for greater control over their services, and it allows them the opportunity to be able to service more of their customers and to manage it under their brand,” according to Kerstein.
“Conventional wisdom would say that robo-advisors would be more important to younger, more digitally savvy customers, but that’s not necessarily the case. For Cambridge Savings, the Connect Invest platform has gained widespread interest; its average user is 47-48 years old. ‘It’s not just millennials.’ says Kerstein, a consultant to the bank.”
John Voorhees, consultant and advisor at Peak Performance Consulting Group, was one of seven experts asked to share their vision of what bank branches will look like in the future in this Banking Strategies article and as part of the Executive Report on the Evolution of the Branch.
Speaking specifically about how customers will be assigned, John states “The platform will consist of even more specialists, and platform bankers may be assigned a portfolio of customers when issues need to be resolved—think of the olden days when you could go see ‘your banker.’ Customers may be able to communicate with branch personnel via Skype and more banks will also have private soundproof rooms in which customers can have face-to-face conversations with offsite bank specialists via video-conferencing.”