Retail Banking Strategies

What was on the mind of our audience at the BAI Retail Delivery Conference? Here’s a summary of the questions from the audience, and the answers from the panelists (Jay Freeman of Wells Fargo, Ric Carey of Umpqua Bank, and Jeff Talpas of BBVA Compass):

1. Will the Branch of the Future result in big changes coming rapidly, or will change be gradual? There was general agreement that the pace of change will continue at about the current rate
   - whether you consider that gradual or rapid is in the eye of the beholder. The key take-away is that change is coming, and we need to experiment with solutions and prepare for a changed world.

   The panelists cautioned that it is not “one size fits all”. For example, the smaller, automated, neighborhood stores work well in downtown Portland or Seattle. But in more rural communities, the traditional branch concept is not changing or at least not changing rapidly.

2. How do you see the role of in-store branches vs. traditional branches?

   Only Wells Fargo had any significant experience with in-store. There was a lack of excitement among our panelist for this format.
   

3. With the new economic times and regulatory expense, how long on average does it take to bring a de-novo to profitability?

   Umpqua reported that their new Neighborhood Store format was profitable at 11 months. It takes less than 8 weeks to build at a cost of about $400,000.

4. It is understood that creating more branches is the basic means to book more customers and increase deposits, but should they always be profit centers?

   Enthusiastic “yes” from all the panelists, with the caveat that certain non-controllable expenses should not be included in the formula.

5. How do you develop distribution organizations that are prepared, and have the skills, to support the changing role of the branch? Given the evolving role of the branch, how have your hiring practices and training initiatives changed?

   Start hiring and training for the changes you know are coming. Our hiring has changed over the years, and continues to change as our industry changes. (See the last page of the presentation for more detail)

6. How are Umpqua’s neighborhood stores staffed?

   Smaller number of staff with more of a sales and service orientation. These are community centers, with events, exhibits, and coffee bars to make them a destination. They serve smaller markets
   - often just a few blocks in an urban area. These are not principally transaction sites, although they have transaction capability.

7. What do you think about customer acceptance of teller automation, i.e. self checkout like grocery stores, video, virtual teller, etc.?

   Umpqua is experimenting with all of these concepts now. They use their Innovation Lab to test new ideas
   - many of them technological, and many not. Through a partnership with Cisco, they are testing video conferencing and are expanding utilization in their branches.

   In a related discussion, BBVA Compass described their mobile application with geo-location capability (take a picture on your smartphone camera or the street and the application will automatically recognize where you are and locate the nearest branch, ATM, etc.). They also described their new CRM application, which will bring to their US branches the very sophisticated capabilities already in use at BBVA in Spain.

8. Everything I read tells me that Millennials do not want to use a physical branch. The branch may not be dead, but it will be soon unless we find a way to entice the Millennials to come in?

   “Millennials” are not homogeneous. Jay Freeman and Ric Carey were emphatic on this point. As they stated, “It’s a fallacy to think none of them want to use branches. You’d be surprised to find out how many do not want self service, or do not have the degree of computer literacy you normally think of with this age group. Plus, many of them will change as they grow older, have families, and mature. Just look at your own behavior and needs now, compared to when you were in your late teens and early 20′s.”

   The panelists agreed — avoid the trap of thinking about customers as numbers or statistics, but rather look at what they want, how they behave as individuals.