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Strategy

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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If the podcast does not appear, please click on the word “Podcast” in the title of this article) 

 

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.

 

Lou Carlozo, BAI. Bank branches. Where the three key words before were always location, location, location – today they might as well be decisions, decisions, decisions.  Should branches be closed, should they be transformed, should they be re imagined. or should branches turn into something altogether different that uses the best world of customer satisfaction and automation.

 

To learn more about the current and future state of branches we will be talking with bank branch expert Jon Voorhees.

 

Welcome to BAI Banking Strategies, where each week we will focus on key issues facing financial services leaders.  We’ll bring you objective opinions and actionable insights that will help you power smart decisions. I’m your host, Lou Carlozo, Managing Editor of BAI. Come on in!

 

Thanks for tuning in. It is great to have you on the podcast today and we are at the end of Season 2 so we want to thank everyone who has tuned in so far. While we’re off you can check out the archive of podcasts at www.bai.org  and as always, our podcasts can be heard through Apple iTunes podcast app, Soundcloud and Google Play.

 

And today with us here we have Jon Voorhees, a Consultant/Adviser for Peak Performance Consulting Group. Most recently focused on the consumer banking industry, Jon has used his expertise in retailing, consumer goods and the automotive industry.  If you’ve read his posts on BAI Banking Strategies you know he is clear spoken and gets right to the heart of things.

 

Jon, great to have you on the program today.

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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?

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For years the industry’s eyes were on Wells Fargo as a cross-selling winner. That reputation went down in flames with last year’s sales scandal. But banking’s eyes continue to scan Wells, which recently introduced a revamped performance management and rewards program that the bank’s leadership described as a beginning, subject to revision based on ongoing experience.

 

“The devil is in the details,” and the potential improvement lies in careful monitoring were points of agreement among experts interviewed by Banking Exchange  who looked at the summary released by the bank earlier in January.

 

“It’s a very positive step,” says David Kerstein, president of Peak Performance Consulting Group. “I’m pleasantly surprised that they have taken such aggressive steps. I think this is the right way to go for the industry, not just for Wells Fargo.”

 

He says it would be essential to use such tools as mystery shopping to have an independent view of how well the program works where customer meets banker.

 

“You have to be sure that you are building customer relationships and doing the right thing,” says Kerstein. “Wells had lost sight of the overall customer,” he adds, in its earlier emphasis on cross-selling. If the bank can make the team dynamic work and produce the longer-term results it hopes for, that will be a very positive development, he says.

 

Further, if employees can truly work as a team, and the incentives pay off in that context, “turnover may be reduced,” Kerstein adds.

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David Kerstein, president of Peak Performance Consulting Group, was interviewed by S&P Global (formerly SNL Financial) about FinTech and the whether they are competitors or partners. He said that digital disruption isn’t new, citing past developments like automated teller machines and automated call centers. The difference, he said, is that today’s developments are much more rapid.

 

Nonbank competition can be a sore subject among community bankers as the banking landscape — along with customer expectations — is continually changing. “If you think about it, banking and technology have been tied together for all of our lives,” Kerstein said. “These were developed not by the core banking providers, but by what we would now call fintech firms.”

 

Today, wealth management is one area where small banks and fintech companies are teaming up. He said he sees ample opportunities for robo-advisory companies to team up with community banks to simplify and standardize wealth management platforms, citing SigFig Wealth Management LLC’s partnership with Cambridge Savings Bank.

 

Fintech companies such as PayPal Inc. and LendingTree Inc. have put pressure on banks to up their digital game, and teaming up with fintech companies rather than competing with them is a sensible solution, Kerstein said.

 

“There’s a huge number of fintech initiatives that are really building their business propositions around providing services to financial institutions to make quicker loan decisions or provide more efficient investment advice,” he added. “Small-business processing has been complex for financial institutions. It’s been difficult to maintain the skill sets, just given the amount of training that it takes and the skills of loan officers.”

 

For more, see the full article.

 

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