US channel trends
With all due respect, the US financial services sector has not been the obvious place over the years to look for innovation. However, the tide of change has swept over this sector, as it has others around the world. While this has not particularly manifested itself in the back office, with most US banks using core banking systems that have been around for decades, there is a lot more going on at the channel delivery level. Indeed, in some areas, the US banks have moved beyond many of their non-US counterparts.
Drivers for change
The branch has been a focus for many US banks in the last couple of years. Around 40-45 per cent of US customers are served by community banks of between five and 40 branches. These have not been immune to the arrival of online banking and there has been a steep drop in the number of customers using branches. Nevertheless, the customer relationship nature of their business means that the branch is still seen as important but there is a need to make them more efficient and to improve the ability of staff to service and cross-sell to customers. Larger banks have been part of the movement to overhaul branches as well, albeit sometimes moving slower, not least due to the scale of their branch networks and of any resultant projects beyond pilots and subsets of outlets. The fall in branch footfall in US banks over the past five
years has been around 50 per cent, with a similar percentage drop in revenue per member of staff. This is why there has been so much activity of late in the US. There is, of course, a pure cost play when a self-service transaction is clocked at a cost of cents, compared with $2 to $4 via a human teller. However, for many institutions, there is more to it than that, with the technology allowing safe, more consistent, more widely available service and opening up opportunities for greater innovation. Devon Watson, Diebold’s vice-president, new business and solution incubation, commented: ‘The ATM network is an under-utilised asset’. If used properly, ATMs – whether in-branch or elsewhere – can enable much more targeted
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cross-marketing than with traditional methods. The bank should be able to know who the customer is, where they are and what they are seeking to do, with the ability to respond to this with tailored adverts that include the ability to click through to an advisor. Wells Fargo has been a high-profile advocate of smaller, more automated branches. In 2013, it opened its
first
‘neighbourhood banks’ branch, in Washington DC’s NoMa district. At around one-third the size of its normal branches (about 1000 square feet), it is touted at around 25 per cent less to build and 40 per cent less to operate. It has just five staff, compared to the usual ten to 20. While plenty of banks have tried smaller branches in the past, without much success, the technology has moved on and is a key part of the strategy. In Wells Fargo’s case, the walls ‘toggle’ to allow a switch of the space from a fully- staffed branch to a 24-hour ATM-only office. Those ATMs, accessible via a customer’s debit card, support 80 per cent of the bank’s retail transactions. Across the globe, ATM numbers are predicted to rise from today’s 2.6 million to 3.7 million by 2018 so there is no sign of a cashless society any time soon. For the branch, the emphasis is to drive down costs, making the outlets much more of a sales-oriented environment and pushing the vast majority of branch transactions onto a machine. This is hand-in-hand with a trend to reduce the size of the branch, perhaps from a traditional 3000 square feet to around one-third of that, as shown by Wells Fargo.
US Financial Services Technology Market Report |
www.ibsintelligence.com
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