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Strategy

This article was originally published in BAI Banking Strategies on July 9, 2018.

 

Technology is redefining financial services delivery, customer experience and money movement. But with so much change, it’s a confusing world. Bank and credit union leaders now ask themselves: “Where should we focus? Should we expand our technology partners beyond our core providers? And how can we predict which investments are most likely to drive profitability?”

 

The confusion is understandable. Technology adoption is moving faster than ever before. Look at the historic trendlines: It took about 25 years for color TV to reach 90 percent penetration of U.S. households; microwaves took only about 20 years; cellphones about 15; and the internet even less. Furthermore, the explosion of new fintechs—each with a hot new approach—makes us wonder: Do I need to ride this wave? Or risk being left behind?

 

How can you make sense of it all? Here are our ten building blocks for your digital strategy.

 

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The retail banking industry is undergoing another major shift, and the future looks high-tech, sophisticated, and, for big banks, very urban. So what has changed?  This video from the Wall Street Journal tells all!

 

Thanks to the WSJ for quoting Jon Voorhees of Peak Performance Consulting Group in their article about the changes in branch banking, highlighting the experience of Bank of America.

 

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Most financial institutions invest significant energy conducting business unit and corporate strategy reviews in preparation for their annual budget, but many senior executives believe this process does not deliver sufficient pay-off for the time invested. The most frequent complaint: lots of business updates on past progress, but too few implementable new initiatives that will really drive the business forward.

 

How do the best performing organizations do it?

 

  • Avoid incrementalism, the “last year plus 10%” syndrome. Start with the goal you aspire to achieve, and work backwards to determine the strategies required to accomplish it. The most effective organizations don’t just identify and fix known problems — they identify the future results they desire and create solutions to achieve them.

 

  • Once you have made the commitment to change, be realistic. You can’t make the changes necessary, or assign the resources required, without an objective assessment of the market opportunity, financial potential, internal capabilities and resources required.

 

  • Remember that focus is the essence of strategy. It’s not just what you decide to do, but also what you decide not to do. In most organizations the greater problem is usually deciding which good ideas are of lesser value and should not be implemented, or which current activities should be stopped in order to re-direct resources to ensure that higher value opportunities have appropriate resources.

 

  • It’s all about execution. The best performing organizations implement rapidly and effectively. They recognize that a good plan effectively implemented is far superior to a great planning document which is not a living part of your business. Identify accountabilities for key objectives and make sure they are on track. Update your plan regularly to insure it is relevant and effective — after all, your business is not static but dynamic and changing.

 

  • Identify risks. Do a “pre-mortem” – step into the future and write the obituary, the reasons why the plan failed. Then establish strict controls over the risk factors you identified.

 

  • Communicate, communicate, communicate. Everyone needs to know what the goal is, what their part is in accomplishing the objective, and how effective the organization is in achieving results.
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BAI Banking Strategies just published their annual list of the 25 most read articles of 2017.  We are pleased to be a regular contributor to BAI thought leadership and gratified that four of our articles made the “most read” list.

 

The top branch article of 2017, and No. 2 on the overall most read article list, is Peak Performance Consultant Jon Voorhees’ piece, Seven elements of the ultimate branch format.

Is there an ideal branch format? In whatever bank publication you pick up today, it seems someone has an opinion on the one ideal branch design. It’s smaller, heavily automated and uses digital signage. The real answer is: “It depends … on lots of things.” But there are seven key elements — read more here.

No. 9 on the list:Location! And 9 other things to consider when opening a branch.

It seems as though every banking journal today has an article about branch closures or consolidations. Less reported is that banks still open about 1,000 or more new branches annually. In fact, banks opened nearly 6,000 new branches in the five-year period between 2011 and 2015, according to the latest FDIC update—and are on pace to unveil nearly 900 more this year. Here are 10 insights on the factors that drive a successful branch launch.

 

No. 22 on the Top 25 list of 2017 is Lou Carlozo’s interview of Jon Voorhees for the June 2 BAI Banking Strategies podcast. On this episode of the BAI Banking Strategies podcast, Lou Carlozo, Managing Editor, interviews Jon Voorhees of Peak Performance Group about the closing, opening and evolution of bank branches. Voorhees also reveals how banks can close branches and still experience low customer attrition rates.

 

Rounding out the list with number 23 is an article by Peak Performance President David Kerstein: How smaller financial institutions can succeed with digital.

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?  More here.

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Branches have lost much of their reason to exist because routine transactions such as depositing checks and transferring money are increasingly done on computers or phones.

 

But banks need branches because many customers still pick their bank based on whether it has a nearby branch. Important product sales still happen there.

How many branches do you need? Which markets, or locations, should you decrease — and where should you invest?

 

In this Wall Street Journal article, Peak Performance consultant and former head of distribution strategy and execution at Bank of America, Jon Voorhees, discusses how BofA closed branches, and re-focused on growth markets.

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Financial Institutions are re-configuring branch networks to meet changing customer demand, closing bank branches and investing in new channels.

 

Jon Voorhees, Peak Performance Consulting Group consultant and former Head of Distribution Strategy at Bank of America discusses strategies to improve customer retention, sales performance, and cost savings.

 

Teller volumes have declined by about half in the last several years. With far fewer volumes going through largely fixed cost facilities, the cost per transaction done within the four walls of a branch will only climb.

 

Since the recent Great Recession, only about 5% have closed. When you take into account the number of new branches still being opened, the net decline is only about 4% in the last five years. So the question for banks is why aren’t you closing more?

 

Many banks have discussed the need to cut costs and close branches but few have been aggressive in doing so. The main reason more banks aren’t closing branches is fear pf customer attrition, but with the right data, analytics and implementation approach you can move forward with confidence.

 

 

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