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A wise man once said that a journey of a thousand miles begins with a single step. While the banking industry may be coping with roadblocks, delays and course-corrections caused by disruption, it’s the progress made along the way that is surely defining the customer banking journey today. With 90,000+ branches across the U.S., the branch channel is either an asset to a bank’s brand – an important touch point with a customer who may not visit all that often – or, a major liability because it hasn’t been maintained. The most pressing issue for the banking industry today is how to optimize the physical channel of experience in a meaningful way.
Market dynamics complicate matters. Regulatory relief has led to more mergers and acquisitions in the banking industry. While this is a positive marker for a healthy industry, the impact on a bank brand can be problematic. How do you manage the branded, consult-based experience of an evolving network in a world where it's all about mergers and acquisitions? Even if your bank has made major progress updating its branches, now you’ve suddenly doubled your network size. Those new branches have to be brought up to brand standards in both operational and visual manifestations. So, where do you start?
“For an industry in flux, banking’s fundamental first step for transitioning its physical branch network is to define, develop and deploy its North Star.”
The concept of a “future branch” for banks implies a state of being, something to arrive at or achieve. When imagined holistically, a future branch is less a final destination, and more of a roadmap that helps chart your course. A North Star is a constantly-evolving guiding principle that will help your bank create the ideal embodiment of the branch experience at any point in time. This framework for innovation cannot be leapfrogged or pushed aside because it will ultimately inform every step of your network transformation journey.
As more transactions migrate away from the branch, what to do with the physical branch has some in the industry scratching their heads. Like many others, maybe your bank has physical space you don’t need for the amount of foot traffic you’re seeing, but closing down branches seems reactionary and may not reflect your bank’s future state. While the number of in-branch transactions may be on the decline, the high value, consultative experiences still take place inside the branch. Banks also use physical presence in a geographic area as a brand beacon, embedding themselves as part of the community. What we recommend here is tenaciously assessing network formats and purpose.
What are the key considerations as you begin to evaluate your physical network? As the industry changes, we see branch size trending toward smaller spaces. At the same time, we see processes shifting because of automation such as processing routine transactions. One exciting development that is trending up is new purpose and functionality of space as the industry iterates, such as community rooms, cafés and the like. It is important to remember that it is not just a singular location, but an array of branches with different formats and purposes that you’re evaluating. This is where a North Star strategy comes back again. It helps banks define the ideal experience among varying formats and functions for branches.
When assessing your branch network, you are balancing experience with efficiency, asking, “How do I get the best experience possible with the least amount of spend?” On the efficiency side, you have the size of the format helping to define what can take place there – how much staffing, automation or enhancement you will have in this branch. On the experience side, you have brand essentials – interior and exterior elements – staffing and culture and in-branch innovation and enhancement. The biggest consideration in assessing a branch is size because the amount of available and utilized space affects all other efficiency and experience elements – it also has an outsize effect on cost.
Using the North Star approach, banks now have a process for evaluating internal and external forces of change and strategically deploying enhancements to the branch network. With expectations trending up and size trending down, banks have quite a lot to live up to. Unlike the early days of banking, branches are no longer a cookie-cutter facsimile of one another. Today, bank branches have diverse format and footprint requirements determined by a host of factors. From refreshing an existing space to transitioning and transforming them, enhancement opportunities exist in all shapes and sizes. Bank brands need the marriage of form and function for each branch.
While central branding elements will create a cohesive visual aesthetic, each bank branch should ideally represent both a size and scope to best serve the local market’s banking needs. That means some branches will be downsizing, while others will be expanding operations. In determining which formats to roll out in which areas, what banks are really doing is balancing expenditure and experience, ideally determining the minimum spend to achieve the maximum results for each location. Some of these branches will be retools and others ground-up builds, but regardless of format, banks will find that as size decreases, zones of experience overlap and require more radical shifts in design and staffing.
Each bank location has Attract, Engage, Transact, Consult and Staff Needs zones critical to the function of the branch. The Attract zone serves as a beacon for returning and potential customers. The Engage zone is where customers are greeted and begin their in-branch journey. The Transact zone is where consumer banking activities, like deposits and withdrawals, take place. Consult is where customers get financial advice and counsel from experienced team members. Finally, Staff Needs is a non-customer facing space for back-of-the-house activities.
Two particular branch types, the Micro and Cashless formats have tightly managed zones of experience and focus on maximum efficiency while serving the community.
Whether a bank enhances an existing network of branches or expands to new markets via merger or acquisition, leveraging its North Star – the always-iterating, ideal branch experience – is central to optimization. When updating existing networks or transforming new branches, there are two core categories of enhancements: visual and operational. Visual upgrades range from in-branch branding and communications to design elements like upgraded interior finishes and furniture. Operational enhancements, on the other hand, are more far-reaching and require deeper investment since they incorporate both visual elements and functional capacities, to transform how a branch operates.
Visual modifications tend to be more transitional changes in how a bank looks. Operational shifts are more 360-degree transformations in how a branch operates. Working with banks to maximize the physical branch channel, we find that approximately 80 percent of financial institutions fall into the transitional category. We understand that banks want to maintain a local community presence through local branches but don’t want or need a massive overhaul in some cases. These banks really need to make progress and unify the branch network. This is beyond refreshing visual elements to bring it in-line with the brand, but doesn’t go as far as revamping all of a bank’s practices and processes.
Often when banks are considering change to branch networks, much emphasis gets placed on full transformation, rather than on steps building up to a complete overhaul. That’s because transformation is more blue-sky thinking – focusing on what could be in the future rather than what should be in the next few months. Through acquisition or atrophy, the sheer volume of branches in need of an update could overwhelm any brand. Realistically, it’s just not viable from an economic or efficiency perspective to completely transform all of those spaces. What you need here is progress – a transitional, tiered approach.
Visual change in branch networks trends toward more surface-level elements. Signage and other forms of visual branding, along with furniture and finishes, can provide an upgrade and alignment to brand standards within a more manageable budget range. Operational enhancements build upon visual elements to usher in transitional change that aligns and begins to address the form and function of the branch. Finally, at the transformational level, the focus is on truly optimizing business models through network efficiencies – including staff roles and responsibilities, branch activities and transactions, and backend procedures.
As banks consider the practical realities of optimization, lower budgetary spend trends toward the visual elements – exterior signage and interior design. While lower financial investment is required at the refresh tier that doesn’t mean those revived spaces don’t pack a punch. Updating visual elements alone – like lighting, flooring and color palette – can have a dramatic effect on how a space feels. In transitionary enhancement, the budget incorporates visual upgrades as foundational, while functionality is assessed and augmented. With transformation, higher budgets allow for a space to be completely reshaped, incorporating new zones of experience and operational efficiencies.
Pedestal Bank: Refreshed spaces include updated color palettes and modern finishes.
Citizens National Bank: Transitional spaces use the same footprint, but begin to shift not only how the space looks, but how it functions. This transition introduces new zones of experience and takes away those areas that don’t function well. Citzens National Bank of Texas has since rebranded to VeraBank.
Origin Bank: Transformed spaces are a wholesale reimagining from top to bottom. These spaces look, feel and operate differently than ever before.
Now that we’ve looked at the array of improvements banks are making in branch networks and what enhancements will mean in terms of total spend, we need to address how to make decisions about these spaces. Decisions about tiers of transformation have a lot riding on them. With renovation costs at a premium, decisions must be made purposefully and strategically. So, how are banks doing that?
In today’s fast-moving environment, mergers and acquisitions in the financial sector continue to rise year-over-year. A loosened regulatory environment has provided more opportunity for banks to fill the operational gaps by merging or acquiring another bank. These mergers can only amplify an existing problem in banking: marketing is often not aligned with branch strategy. This means that different sides of the house working on creating the right experience to the right audience are not even tied together. Even without the specter of a merger, most financial organizations have one team dealing with physical spaces and another entirely different marketing team dealing with brand.
For branch strategy to be successful, banks must actively work to break down those organizational silos. In other words, your bank’s approach to branch experience must be coordinated with your approach to reaching people. Marketing is the team typically handling how a bank targets certain people in a certain way in a certain market. But are the strategic decisions on the branch level being made in tandem with marketing? For example, if your bank is marketing to high net-worth individuals, are you placing branches where high net-worth individuals are located? Further, is your bank creating experiences that high net-worth individuals want? That’s why bringing marketing into branch strategy is so vital.
Once marketing is married to branch strategy, banks can strategically align each branch’s experience with its market potential. For informed decision-making, you will need both robust data and meaningful analysis. On data, banks should start with a branch health index that’s essentially a State of the Union of the entire network. This includes everything from traffic flow and architectural elements to retail communications and operational technology in each branch. Data on branch health is gathered by traveling from location to location and scoring each branch on a series of key indicators. The buckets in which these indicators are organized often include Exterior, Interior, Architectural Conditions and Retail Communications.
So now your bank has achieved thing one: evaluating what you have. You can now move on to thing two: evaluating the experience of it. Assessing how customers experience a bank branch is typically determined by surveying. In general, that’s not something a lot of financial institutions have the internal bandwidth to do. So, it’s time to bring in experts to help develop and deploy a meaningful survey, gather all of the data and put an expert eye on grading it.
Once the branch health index and survey data are complete, you can marry all that information together, oftentimes in a database like AMP. A tool like this empowers decision-making by tracking and assessing current conditions of your entire network.
The flip side to internal data on branch health and consumer experience is an analysis of market potential, mostly done through an array of market studies. The market study approach evaluates promise and potential by developing insights from the marriage of different datasets. Valuation modeling allows banks to forecast revenue potential and prospect growth. Geographic information systems (GIS) provide rich local demographic data. Mobile user data tracks consumer traffic patterns allowing banks to design traffic density models and maps. Beacons use mobile data to evaluate and estimate how target audience members might behave in and around branch locations.
For successful branch strategy, market potential must align with market planning. Combining market research with internal member data and relevant competitive information allows for a comprehensive, informed perspective on strategic network optimization.
For many banks in the midst of disruption, the pace of change has become almost too much to keep up with. Unfortunately, being overwhelmed by options and demands doesn’t excuse you from having to maintain all of your channels along the customer journey. Although we have provided a roadmap for navigating the sites and signs along the network optimization and transformation journey, we understand that sometimes the prevailing winds of consumer expectation can weigh down your decision-making. Pace yourself and make progress. Most importantly, remember that while the physical channel can be the most arduous to evaluate and update, it’s the one overflowing with potential for fostering the consultative experience that banking has become known for.
“The function of an ideal is not to be realized but, like that of the North Star, to serve as a guiding point.”
~ Edward Abbey
Adrenaline is an experience design agency that creates and implements end-to-end branded experiences through creative and environmental design. We enhance our clients’ customer experiences across digital and physical channels, from their branding and advertising to design and technology in their spaces. After transforming an organization’s brand, Adrenaline extends it across all touchpoints — from employees to the market to in-store environments. And, we focus on serving industries that sell human experiences including financial, healthcare, sports and entertainment.