The branch was supposed to phase out. It hasn’t and may never. What will the branch of the future feature? Self service and collaboration

 

It once was thought the future would look like it did on the Jetsons. You remember the cartoon’s slapdash mix of outer space hijinx and mid-century references—the flipped hair, martini lunches, and sculptural Populuxe design? Everybody flying around?

 

Nifty idea, yet the future rolled its own way.

In banking, different expectations have shaped a view of what tomorrow may bring. The rise of debit, person-to-person payments, remote deposit capture, the gradual decline of the paper check, and new, internet and handheld device-based habits all have implications for the branch, which used to be the only show in town and still retains the vestiges of former dominance.

As for how quickly transactions will become “branchless,” nobody is sure. Mike Redding, global director of development, Accenture Technology Labs, points out that the timing remains unclear for the arrival of a cashless society.

“While banks will need to be flexible and may have shorter building leases over the next decade, the multi-channel mix will be with the industry for the foreseeable future,” he offers.

Most executives that spoke with ABABJ agreed that multi-channel service will remain the norm,  although they conceded that when it comes to the emerging Generation Y and Millennial segments who favor virtual encounters for many sorts of entertainment and purchases, all bets are off.

Future here now?
At a recent New York City event, Accenture showcased future branch systems under the rubric of next-generation, high-performance banking, a mostly incremental vision based on many narrow technologies that are available today. The message? It’s not the pieces themselves that create a “hi-fi” experience. The trick is in how they’re combined. Featured were biometric authentication, RFID (radio frequency) identification for sales and service, and a digital pen and paper designed for electronic signature capture and simplified forms processing. Also in the mix were a spatial tracking system (so banks’ floor plans and product positioning can be more effective), intelligent interactive displays that reflect the interests of the watcher, use of wireless tablet PCs for client interviewing, and videoconference virtual experts for collaborative selling. 

In a future where most believe advice will be a key service differentiator for banks, Accenture showed financial planning tools that combined Second Life-style graphics with Monte Carlo predictive muscle. These would enable a sales associate to take the customer through scenario analysis.

(For example, as a visual of a primary residence gets bigger on the screen, that vacation to an exotic locale pops away and an image of camping replaces it. Send each of the three kids to college, and keep the big house?  Well, then, maybe vacation less often. Or, otherwise scale down. The Monte Carlo method helps with what-if analysis.)

Sales and service automation that simplifies customer information capture was also presented in an interactive exhibit.

 

Also discussed, though not shown in New York, was a branch command center that combines real-time reporting, metrics, alerts, and branch opportunities for simplified management.

Many see a branch of the future
Other vendors—including Hewlett-Packard, IBM, and Microsoft—have displayed these and other kinds of technologies in a similar context at trade shows and press events. That is, Accenture isn’t alone in its vision of the future branch. What was interesting, however, was just how noticeable a difference discrete technologies that worked hand in glove could make in a place so identified with tellers and manual routines today.

As Accenture showed it: Walk in the front door, and the RFID chip in your gold membership card alerts sales personnel that a VIP has arrived. Pick up a certain brochure—on car loans—and the images in the nearby display reflect your interest in cars and set the mood for the purchase of insurance. Fill out a form on a tablet and, in the back office, the information would be captured directly into systems. No rekeying, no asking the same questions of customers over and over.

 

The business processes shown were all smooth and unobtrusive, yet were directed at identifying opportunities and helping a bank act on interest while it’s fresh, alive, and likely to motivate the customer to act.

Leveraging customer interest as it happens is as much a part of today’s operational fabric of  Umpqua Bank as welcoming the customer into its eclectic, Americana chic branches or offering them coffee (its own blend). Sure, the Portland, Ore.-based, $8.2 billion assets bank is already doing great with a demographic that “seeks value and appreciates quirkiness.” (The “Worlds Greatest Bank,” as it calls itself, is known for its “stitch and b*tch” knitting circles, pajama party sleep overs, young artists night of music, and free ice cream—all part of community outreach.) Yet Umpqua isn’t resting on its laurels.

At a recent industry conference, executive vice-president Ric Carey presented images of an updated branch model that made use of a greeting video and electronic signage instead of brochures (with printing of a document an option). Next, he showed off some planned prototypes for future “store” rollouts.

Microsoft has chosen Umpqua as a partner and is working with the bank on IT redesign. Part of the Microsoft vision are transactions that are started on a customer’s PDA outside the branch (perhaps an appointment) and are completed at a community store, with customer identification and appointment agenda showing up upon walk-in.  “We have relationships with our clients and we encourage a neighborhood destination feel,” Carey noted. “But that doesn’t mean we can’t play with the transaction mix and find ways, with technology, to improve convenience and make things easier or more engaging for the customer.”

For Carey, who said the bank is a work in progress and a creature of employee ideas and community feedback more than formal marketing surveys, it’s all about experimenting. 

Small business still branching?
Over the next decade, various banks will adjust their formats to reach out to small business owners as well as consumers.

Chip Greenleaf, director of marketing and solutions, Hewlett-Packard Americas Financial Services Division, says that over the next seven years, many small businesses will still use branches for deposits, although over time he sees a teller zone and self-service zone for transactions and some sort of “advisory area” that has advisors who meet with clients on a scheduled basis, as well as some degree of self service—a video-accessible expert perhaps. In select locations, collaborative selling will be the dominant role. Whether they have the look of a coffee shop, financial services library, or educational center, these locations will be all about getting advice to time-starved business people and meeting long term objectives.

Chris Gill, manager, Deloitte Consulting, New York, says that within seven years, many small business customers will be doing remote capture. High-traffic branches will be outfitted with check image-capable ATMs. Both of these developments will be the beginning of the shift away from a dependency on teller transactions.

Moving toward specialty branches
Chris Skinner,  a bank technology expert and futurist who works out of his own consultancy, Balatro, points out that many shape-shifting ideas around branch design and format look good in the lab.

“Still, they need to pass muster in the real world,” he says. “For instance, I’m not so sure about identifying customers instantly. That might feel a bit Big Brother to some people.”  While he isn’t certain how individual sales technologies might direct the client experience in branches, he does think that physical locations will remain the biggest sales channel for the next several years. Given this, high-concept design that evokes a mood and sets up an allegience will continue to play a bigger role, much as it does for standouts like Umpqua or Washington Mutual and others building differentiation, in part, on high design.

Ultimately, Skinner thinks, branch networks will settle out at about one tenth of their current size, but the timing of that winnowing process isn’t certain.

What the consultant is beginning to see today, mostly in Europe, are specialty branches such as ABN Amro’s tech branch, situated in the High Tech Campus Eindhoven, a facility that Philips operates with other technology partners in the Netherlands city.

“Increasingly, we’ll see branches that have a concept format informed by demographics,” he explains. Nearly everyone who spoke with ABABJ agreed that that era of the cookie-cutter branch wouldn’t be tenable for long. Some banks might have one full service branch for every five supermarket or retail-based satellite locations, for instance. Others might serve certain segments in offices that are shared with service firms in related businesses.

Likewise, says Mark Seivewright, corporate senior vice-president Fiserv, Brookfield, Wisc., the cookie-cutter employee won’t cut it as the years slip buy.

“The topic of the future of the branch is near and dear to my heart,” says Seivewright. “A big part of success there will come down to people. Why is it, then, that those who are paid and trained the least are those with the most customer contact? That will definitely change when everyone is transacting remotely. The branch will be a place where specialists who know product lines and who can offer advice will help customers with finances.”

Making space, tech, and process work
Deloitte’s Chris Gill sees the co-location idea playing a bigger role in branching going forward. “You already have banks that lease out extra space to a coffee shop or some other service provider that can function as a draw,” he notes. “Increasingly, banks might work with partners of related services to create synergies that influence customer’s buying behavior.”

This efficient, targeted approach to selling will reflect the fact that even for aging Boomers and Generation X cohorts, transactions requiring tellers will occur less often.

Carl Abrams, financial services executive, IBM Research, Armonk, N.Y., pointed out that today, many banks are still hedging their bets, with an internet strategy and branch strategy co-existing but not necessarily connected. That will change as channel information finally becomes synchronized (this is the idea that Umpqua has expressed interest in). “Within the branch,” says Abrams, “underlying systems have improved and banks have attacked the silo problem of legacy core processing systems and layers on top of it.” Over time, as the branch becomes more a space for collaborative selling, more refined customer information will be instantly retrievable by sales staff, note both Abrams and Accenture’s Redding.

Abrams also sees transactions, most of which will occur elsewhere, yielding behavioral insights that banks will mine with business intelligence tools to develop offers.

Branch analysis complicated
Branch networks are tricky to manage today, and going forward they will only be tougher to keep right-sized and correctly formatted, says Aaron Fine, retail director, Retail and Banking Practice, Mercer Oliver Wyman, New York.

“Branching is currently a complicated issue, because it’s hard to see, exactly, what role any given physical location will play in keeping different customer segments engaged and loyal,” Fine notes. “You may choose a location and have plans for it’s use—such as a space for high net worth clients—but then, ultimately, the customers decide.”

Management of the branch network will become ever more important, says Fine, as banks have greater demands placed on them to be flexible and respond more quickly to shifting populations. Branches may need to open and close with more frequency.

As to the issue of the emerging Generation Y segment and its cyber habits, Deloitte’s Gill had this to say: “When there is a problem, nearly everyone has a greater comfort in being able to go to nearby location and talk to a person rather than dealing with voice response and waiting on a phone,” says Gill. “If chat improves, it could be better than the phone experience today. But that channel isn’t likely to displace the branch entirely.”

Likewise when it comes to a serious, life changing purchase the branch will likely remain a hub of activity. Within 15 years, however, it’s conceivable that mortgages could be financed at internet speed, says Jim Gahagan, global industry executive, financial services, with Atlanta-based e-commerce provider Sterling Commerce. He believes that housing finance could go the way of today’s automobile loans, which are seen as part of the car purchasing process.

When will the future get here?
In a philosophical sense all we ever have is the present. Yet, in terms of business, the general belief out in the field is that the rate of change is accelerating. Jim Carroll, a futurist who has spoken at banking trade shows, says that preparing for agility is the only “safe bet” in a world where Google is the number one brand and PayPal is popular among today’s extreme youth.

 

“Many execs get confused by Web 2.0 and get caught up on what will be done to adjust to a particular fad or mini-trend,”  says Carroll. “They need to give themselves latitude and have an experimental mindset with how their online work will support what they do in the branch.” BJ

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