The return of the branch?

The return of the branch?

THE RETURN OF THE BRANCH? 2

n Nearly half of all banks are expandingtheir branch networks, while just one infive are consolidating.

Fully 46% of survey respondents expect toincrease the number of bank branches theyoperate over the next three years, comparedwith 21% who expect a decline. More thanone in ten banks polled expect to grow theirbranch networks by more than 30%, whereasjust 3% anticipate a decline of that proportion.About three-quarters of executives believethat investment in their bank branches willeither stay the same or increase – and one outof five believe investment will increase bymore than 20%.

n The Internet is the dominant growthchannel, but branches are playing a key role in handling more complextransactions.

Fully 94% of respondents believe that onlinebanking will increase over the next three years,highlighting its importance to the business.Ironically, however, it has taken the maturingof the Internet age for banks to realise thatbricks and mortar are no longer simply costcentres but, if managed imaginatively,conduits for value-added business. Sixty-threepercent of executives surveyed say that theircompany’s branches are operated as a profit

centre, compared with just 19% who say it isrun as a cost centre. While online banking is animportant means of facilitating bettercustomer service, customers still have a strongneed for physical branches to do theirbusiness, which provides banks with a majoropportunity for cross- and up-selling.

n Many banks are prioritising self-service,enabling more tellers to become sellers.

More than 70% of survey participants say thattheir firms plan to increase the proportion ofadvisers engaged in selling products andservices, rather than focusing on transactionalprocesses. Different banks favour differentmodels to do this – some have no tellers orcash machines and focus entirely on advisoryservices; others use self-service technologyheavily to automate mundane transactions,thus releasing time for staff to focus on value-added activity. Fully 75% of respondents agreethat they plan to automate more transactionswithin their branches, for increased customerconvenience. Some 61% of participants expectthe number of self-service machines (forwithdrawing and depositing cash and cheques)to increase over the next three years. However,overall staff numbers in banks are likely to fallas this new technology encourages morecustomers to serve themselves.

Executive summary


The return of the branch? is a BT report, written in co-operation with the Economist

Intelligence Unit. The research, which explores the future of the retail bank branch, is

based on the following research activities:

n A European survey of 190 banking executives was conducted by the Economist

Intelligence Unit in June 2006. Thirty-three percent of all respondents are C-level

executives, from a range of functional roles. A range of company sizes are represented:

40% have global assets or revenue in excess of US$200bn, while 34% have revenue

under US$50bn. All respondents are based in Europe.

n To supplement the survey results, the Economist Intelligence Unit conducted in-depth

interviews with eight senior banking executives and industry experts.

Our sincere thanks go to the survey participants for sharing their insights on this topic.

September 2006

A decade of innovation in the high street has left many banks’ retail branches looking tired and out oftouch. While other retailers competed for the attention of customers, banks and building societies(mortgage banks) seemed oddly content to sit back. Many even made the mistake of thinking they knewbest. Fed up with being pushed around, many of their customers deserted them in favour of Internetstart-ups that promised to listen and do as they were asked.

Belatedly, European banks are waking up to the fact that their branches are not just cost centres butsources of new business and potential profit. In a survey of 190 senior banking executives, conducted bythe Economist Intelligence Unit, nearly one-half of respondents say their companies expect to increasethe number of branches they operate over the next three years. This is a significant turnaround comparedwith a decade or so ago. Then, most banks regarded their branches as little more than cost centres. As a result, many were closed, even though customers were inconvenienced.

This BT briefing paper highlights the changes underway in the European retail banking sector. Among the key findings of this report are the following:


n About one-third of banks are setting up branchestargeted at specific customer demographics, as banksfinally embrace proven retail techniques.

Along with the rise in the number of branches, banks are alsofinally trying to improve the atmosphere within branches. Thestyles of branches are also varying, with specialist advice centresspringing up alongside bigger self-service-oriented branches.For once, banks also profess to be listening to their customers.More than 60% of those questioned in our survey say theirfirms are responsive to shifts in their customers’ needs. Forinstance, while the majority of firms still say they do not havebranches that are specifically customised for a certain customerdemographic, such as 18- to 25-year-olds, 36% say they eitherdo have such branches or plan to introduce them soon.

n Banks are setting up shop in more convenient locations,but rural users are losing out in the rush to capture newbusiness.

Just as retailers aim for the biggest footfall, so too are banks.The number of branches in shopping malls, along the highstreet and within inner cities is expected to rise, with at least30% of respondents expecting an increase. However, peopleoutside of metropolitan areas are being hit by a doublewhammy: a decline in the number of available branches, alongwith a rise in the number of fee-charging cash machines. Fully29% of respondents expect the number of branches to declinein small towns or rural locations.

n Technology is playing an important role, but theemphasis is on easy wins.

Bank branches are finally embracing technology, but few aredoing so aggressively. Along with more cash machines and self-service kiosks, about seven out of ten banks already have or aresoon to install customer relationship management (CRM) tools.Also, 49% provide or plan to provide mobile-phone phone-based text message alerts for their customers.

As new technology relieves bank tellers of the drudgery of handlingbasic transactions, many will be re-trained in order to advisecustomers on new products and services. Tellers will become sellers– or so their employers hope. For this to happen, however, bankswill need to do more than spruce up their branches. They mustembrace new ways of working as well as new technology, so thatthey respond to customers’ needs. And they must marry their newfront offices with the software that manages their relationshipswith customers, so that they can anticipate what their clients want.

MANAGING RISK

From tellers to sellers

At the height of the Internet boom, everybody waspredicting the demise of the bank branch. Sooneror later, observers reasoned, customers of all ageswould be banking online or over the telephone. Sowho needed branches?

The trends up to that point seemed to support thatlogic. For example, research by the University ofNottingham shows that, between 1995 and 2003,banks in the UK closed 22% of their branches. Intotal, just over 4,000 outlets owned by banks andbuilding societies (mortgage banks) across thecountry were shut during this period, while only1,000 or so new ones were opened.

At the same time, the number of households withaccess to the Internet has mushroomed in recentyears – to the point where nearly 50% of the totalpopulation in the European Union goes onlineregularly. The result, according to the UK’s Alliance& Leicester, which likes to be known as an onlinebank, is that nearly one-half of all Britons withbank accounts now manage their affairs online atleast twice a week.

Yet, despite all this, our survey found that not onlyhave most banks and building societies stoppedclosing branches, many have re-discovered a lovefor bricks and mortar. In quick succession earlierthis year, HBOS (which owns Halifax and Bank ofScotland) said that it was spending £100m onopening at least 50 new branches as well asenlarging a similar number; HSBC is spending fourtimes that amount to open 50 new branches andto refurbish 200 of its network of more than 1,500outlets.

Not to be outdone, Abbey (which is owned bySpain’s Grupo Santander) plans to open at least 50new branches, while Northern Rock intends toopen around four new branches a year until it

reaches a target of 100. Other banks, such as TheRoyal Bank of Scotland, also plan to open newoutlets in selected cities. All told, the openingspree amounts to the biggest addition to the stockof bank branches in the UK since the 1970s, whenbanks last recognised the benefits of courtingcustomers by expanding their branch networksand, in doing so, investing in their brands.

True, compared with the pre-Internet age, physicalbranches are less important to a bank’s overallbusiness than they once were: only 67% ofrespondents to our survey say that a branchnetwork is important or very important to theirbusiness, somewhat fewer than thought so threeyears ago. After all, a number of banks runsuccessful (and profitable) businesses with nobranches at all. Yet those banks that do havebranches are beginning to appreciate just howunder-used as assets they were.

Introduction

From contraction to expansion

How do you expect the number of bank branches your company operates to change over the next three years?

increase

stay the same

decrease

by more than 30% by 20-30% by 10-20% by less than 10%

46%

28%

21%

4 THE RETURN OF THE BRANCH?

6 THE RETURN OF THE BRANCH? THE RETURN OF THE BRANCH? 7

Why the sudden change of heart? Partly, it seems,banks are listening to their customers: in polls andfocus groups customers are telling their banks thatthey still like to do business in branches. Far fromcutting off clients from their banks, as manyfeared, rising use of the Internet is encouragingpeople to use more than one channel to carry outtheir business. So, as well as checking theirbalances online, customers are visiting branches todeposit cash or to ask about new products andservices.

Partly also, it seems, banks realise that themechanisation of csed notes and then re-issuethem almost immediately to those withdrawingcash – is leading to a sea change in the usefulness

of bank branches. Not only are customersincreasingly serving themselves and so cuttingbanks’ costs by reducing the number of tellersneeded for mundane transactions, but this trend isalso freeing up tellers to do potentially moreprofitable tasks such as giving advice and sellingproducts and services.

As Eric Mackor, head of branch development forABN AMRO in the Netherlands, says: “Our aim isto have fewer tellers and more sellers.” Mr Mackoris not alone. More than 70% of respondents saythat their companies are increasing the number ofadvisers within their branches focused on sellingproducts and services to customers.

Most banks are reducing staffing level and shifting from tellers to sellers

Is your company increasing or decreasing the number of employees in the following areas at its bank branches? (% of respondents)

Refocusing the bank branch

The shift from tellers to sellers will probably stillresult in banks employing fewer people overall,even though a larger number of staff will spendtheir time giving advice instead of handlingtransactions. To achieve this, many will have to bere-trained. Our survey shows that banks alreadyrecognise this trend. Fully 37% of respondents saytheir companies conduct regional training sessionsas required, while 34% say they carry out trainingwithin each branch as needed.

The survey nevertheless found that nearly 40% ofrespondents expect their companies to employfewer people within branches in three years’ time.

This is almost as many (45%) who say that theirfirms have already slimmed down their workforcesover the last three years. Not everyone is cuttingstaff, however: one in five banks expect to havemore people, on average, manning their branches,a touch more than the percentage that haveincreased staff levels over the last three years.

Yet there is growing evidence that the number ofbranches operated by banks and retail financialinstitutions in general is set to continue rising.Some 46% of those questioned say that they expectthe number of branches their company operatesto increase over the next three years. More thanone in ten firms believe their branch network willexpand by more than 30% over that period.

Tellers, handling routine transactions

Customer service, handlingroutine enquiries

Advisers, focused on cross- or up-selling

decreasing staying the same increasing

Location, location, location

While the number of branches in inner cities mayremain roughly the same, customers could findnew outlets opening up in more convenientplaces, such as shopping centres and malls.Indeed, 36% of respondents believe that thenumber of branches in such locations is likely toincrease. This is slightly more than the proportionwho feel that the number of branches in highstreets could rise. When it comes to location andthe uses to which branches are put, flexibilityseems to be the key. Some 36% of thosequestioned say that the aim of their firm is toprovide a mix of approaches for customers, eachcustomised for different locations, from innercities to urban shopping malls and even rural areas.

Unsurprisingly, banks are following shifts in thepopulation and the wealth created. Even thosebanks that have recently shut down branches informer industrial centres, where demand hasfallen, are opening them in other, more vibrantparts of the country.

Take the UK’s Clydesdale and Yorkshire Banks,both owned by National Australia Bank. The banksbucked the trend when competitors were pruningtheir own networks a few years ago and are nowplaying catch-up. Last May, Clydesdale andYorkshire said that between them they plan to

close around 100 of their branches, leaving themwith about 340. This was largely because manyoutlets were in semi-rural locations or near otherbranches where it was hard to attract an averageof more than 4,000 or so customers per branch.

Since then, most of the banks’ remaining brancheshave moved closer to the national average of9,000 customers per branch, says Steve Reid,

Inner cities and shopping malls are winning outover rural locations

How is the number of branches your company operates changing in the following types of locations?

Inner cities High Street Shopping Small towns centres/malls or rural locations

increasing staying the same decreasing


the banks’ general manager for retail banking andwealth management. Clydesdale has alsosuccessfully launched new outlets – calledFinancial Solutions Centres – in bustling regionaltowns such as Chelmsford in the south of England.These specialise in offering integrated business

and private banking servicesto operators of small tomedium-sized businesses.“We realise that many peopleand businesses are looking fora one-stop shop where theycan get 'joined up' adviceacross a whole range ofproducts and services,” saysMr Reid.

The concern for people livingoutside of metropolitan areasis the shrinking number ofbranches for them to do theirbanking, which coincides witha rising number of cashmachines that charge for cashwithdrawals. Citizens Advice, aUK charity, notes that more

than four out of ten cash machines now charge afee for transactions. It says rural communities areamong the worst affected, with some peoplehaving to travel miles to the nearest free cashmachines or face a high charge.

Northern Rock has taken a similar step toClydesdale. The bank, which specialises inmortgages for homeowners, has rationalised thenumber of its branches so that they are nowconcentrated in larger towns and cities. Over thelast two years it has opened new specialist centresacross the UK in places such as Chester, Derby,Norwich, Swindon and, like Clydesdale, inChelmsford. All of them have sizeable, and oftenexpanding, populations. Interestingly, none ofNorthern Rock’s new outlets contains counters orcash machines. They dispense only advice andprovide specialist services for those seekingmortgages and personal loans. The bank plans to

open about four such centres a year until itsnetwork of outlets rises from its current total ofjust over 70 to around 100.

Northern Rock is not alone. More and more banksare considering opening outlets which offer adviceonly. Others make a clear distinction betweenareas in their branches where automatedtransactions take place and private rooms wherecustomers can meet staff in comfort in order toseek advice and to ponder the merits of productsor services. As routine transactions becomeautomated, the distinction between the two typesof function or branch is likely to become evenmore marked.

Technology rules

Wherever their local branch is located, customersare likely to have to do more for themselves inyears to come—in effect, acting as their ownteller. Some 61% of respondents to our survey saythat the number of self-service machines (kiosksfor withdrawing and depositing cash and cheques)will increase over the next three years. This is ontop of the changes of this type that nearly 60% ofrespondents say their firms have alreadyexperienced over the last three years.

NCR, a manufacturer of cash machines andbanking technology, reckons that on averagemore than 50% of transactions carried out bytellers at most bank branches could be moved toself-service points. Not only does this reducebanks’ costs, it also frees up tellers to offer adviceand carry out more profitable tasks. Brian Bailey, adirector within NCR’s financial solutions division,says one European bank has managed to shift asmuch as 60% of deposit and payment transactionsto self-service machines. To facilitate themigration, the bank’s tellers spent part of theirtime showing customers how the equipmentworked; now they are free to answer queries andoffer advice which may lead to sales.

Ironically, says Mr Bailey, emerging markets suchas Turkey, Romania and Poland have much toteach bankers in more mature markets such as the

A loan with your groceries?

If banks recognise that they should become more likeretailers, then how good at banking are supermarkets?Answer: mixed to middling. It is ten years since Tesco decidedto shake up the market for financial services in the UK, yetsupermarkets still pose only a “limited competitive threat” tothe country’s high street banks, according to a report byBankEcon and European Card Review published in June.

Not only have supermarkets chosen to ignore the market forcurrent (checking) accounts, usually regarded by banks as agateway to other profitable products and services, but,between them, supermarkets in the UK probably account foronly about 5% of the country’s total market for unsecuredlending (such as personal loans and credit cards).

More surprising still, only one big supermarket offersresidential mortgages despite the fact that such loansaccount for 80% of total personal borrowing in the UK. TescoPersonal Finance, which is run in tandem with The Royal Bankof Scotland, made profits of £50m during the six months tothe end of August 2005. But Sainsbury’s Bank, which is 45%-owned by Halifax Bank of Scotland, is still losing money.

What went wrong? According to the report, it is partlybecause the supermarkets underestimated the differencesbetween selling groceries and retail financial products, andpartly because they have been reluctant to tackle marketsthat have not already been prised open by other rivals.

Professor Steve Worthington, of Australia’s Monash Universityand a co-author of the report, says: “The supermarkets havebeen very selective in the services offered. They have focusedon credit cards, savings and insurance—markets alreadyshaken up by others such as Direct Line.” In his view, noretailer has competed head-on with the banks by offering afull range of products based around current accounts.

Nor perhaps in UK are they likely to in the near future. SinceMarks & Spencer sold its own financial services offshoot toHSBC in 2004, retailers have been put off by the pitfalls ofbanking. It may take a retailer as big as Wal-Mart, whichwants to start a quasi-bank in America and owns Asda in theUK, to make them think again.

UK (see box on MultiBank). With youngpopulations, fast-growing economies and arising middle class, these markets are ripe forinnovation. They are perhaps the mostsuccessful in the broad deployment ofintelligent deposit ATMs, creating moreconvenience for their customers and reducingqueuing, and are now looking at how they canfurther optimise the remaining teller activity.

“Banks are now evaluating techniques fordealing with customers pioneered by the airlineindustry,” says Mr Bailey. “For example, in thesame way that passengers flying with short-haul carriers identify themselves using self-service check in machines before they drop offtheir luggage at a desk, so banks have anopportunity to enable their customers to pre-stage their transactions.” In other words,customers use a self service interface at theteller line and do much of the introductorywork, such as identifying themselves using acard or PIN and selecting their requiredtransaction, before actually using a member ofthe teller staff to execute the transaction.

In the future, too, banks could follow theexample of retailers in encouraging customersto check themselves out. As happens already atsome supermarkets, a teller would supervisethree or four transaction points wherecustomers visiting a bank branch would doeverything themselves, from depositing orwithdrawing cash, to shifting money from oneaccount to another, paying bills, topping uptheir mobile, or simply altering a standingorder. For the most part, banks are ready forthis transition. Fully 75% of respondents to oursurvey agree with the statement that theirorganisations plan to automate moretransactions within their branches. A further62% of those questioned say they are veryresponsive to shifts in customer preferences fornew technology. The same goes for extendingopening hours at branches too.



But are banks and their customers really ready fora change? There can be little doubt about thebenefits of new technology. Most visits to banksstill involve simple tasks that can easily beautomated: 51% of respondents to our survey saythe most common transactions among retailcustomers are cash deposits; 44% point to cashwithdrawals, 32% to money transfers and 32% todeposits of cheques.

Banks also realise that, to succeed, they need tomarry all the elements. “We see the branchnetwork as an important part of our retail offeringand a source of new customers. But we have tocomplement that with our CRM tools,” explainsMr Reid.

1,500 of its branches across the country. Gone arethe cryptic signs written in “bankese” and theubiquitous black pens on chains; in their place iswhat the bank hopes is a more customer-friendlyapproach to doing business. Says Jim Hytner,Barclays’ marketing director: “Banks have for a longtime come across as unfriendly simply by the waythey communicate to customers. The chain on thepen sums up the relationship banks have had withtheir customers for too long – basically we don’ttrust you to leave this pen behind after you use it,yet we expect you to entrust us with your lifesavings.” Instead of chaining its pens to the wall,Barclays now gives them away free to customerswho want them.

That said, the bank still has more to do inintegrating Woolwich, a former building societythat it bought for £5.4bn in 2000. In June, Barclayssaid that it was re-branding 373 Woolwichbranches as Barclays and closing down about 10%of the total in locations where they were too closeto each other. Eventually, around 2,000 of thebank’s branches will sport “Woolwich zones”,specialising in mortgages – a sign of theimportance that branding has in competitivemarkets such as mortgages.

Automatic seller machines

It is not just within the branch itself that banks arechanging their style. Many realise that they aremissing out in other areas too, particularly when itcomes to identifying customers and capitalising onopportunities, however brief, to sell to them. Takethe ubiquitous automatic teller machine, or ATM(another unfriendly acronym that Barclays haschosen to ban). Under the guidance of technologyfirms, banks are examining ways of using cashmachines to strike up a dialogue with theircustomers. For example, if cash withdrawals areone of the most common transactions in branches,why don’t banks use the few seconds it takes toclear a transaction to talk directly to the customer?

Multi bank starts from scratch

In recent years, the Polish economy has expanding strongly, withmore and more families having money to spend and save,providing significant demand for financial services. As a result,firms such as BRE Bank are responding with new ideas. In 2001, itlaunched MultiBank, an up-market institution aimed at thecountry’s rising middle class.

From nothing five years ago, MultiBank has since become one ofPoland’s leading online banks with an affluent and growingclientele. MultiBank realised, however, that it needed more thanjust an Internet link and a call centre if it was to become a trustedinstitution in its own right. So now the bank has 60 branchesthroughout the country, many of them in Poland’s thrivingregional towns.

“We wanted to combine the best in friendly banking with thelatest in new technology,” says Bartosz Brzozowski, a director atthe parent BRE Bank. To achieve this, the bank set about creatinga network of branches that were in tune with the aspirations of itsaffluent customers. Modelled on the homes of its clients,MultiBank’s branches smack more of Ikea than the premises of atraditional, high street bank.

The reason is simple. “Everything is designed to have a positiveimpact on the customer,” says Mr Brzozowski. While there aremachines for dispensing and handling cash, much of the branch isgiven over to comfortable areas where customers can browsethrough brochures and meet representatives of the bank.

With the housing market in Poland taking off, many ofMultiBank’s customers are eager to take out mortgages. Othersare interested in the bank’s credit cards or stockbroking services.Many such products break new ground. For example, the bank’scredit cards can be secured against a customer’s home, so givingthe bank extra security and the borrower a keener interest rate.Off-set mortgages and accounts which consolidate a customer’sbanking and stockbroking are also becoming more common.

Yet an increasing amount of cash still circulates in Poland’sbanking system – partly, it seems, because of the rise of theshadow economy and higher taxes. Does this mean that banks willcontinue to rely on their branches to handle cash? Yes and no,according to Mr Brzozowski. To cut costs, institutions areencouraged to introduce new technology, such as machines thataccept used bank notes and re-issue them to customers wantingcash. But in the long run the branches of up-market institutionssuch as MultiBank will concentrate less on transactions and moreon dispensing advice and selling high-value products and servicesto the most demanding of customers.

Banks are focusing on automation

How has the average number of self-service machineswithin each of your company’s bank branches (eg, cashmachines, self-service kiosks) changed from three yearsago, and how do you expect it to change over the nextthree years? (% of respondents)

more, on average same, on average fewer, on average

Compared to three years ago Expected in three years’ time

Up close and personal

If the technology already exists, what is holding theindustry back? One concern is that, by gettingcustomers to do more for themselves in self-servicekiosks and the like, banks will lose face-to-facecontact with the very people from whom they seekmore (higher value) business. Once that day-to-daycontact with customers is lost, banks fear there is arisk of losing them altogether.

To overcome this problem, Alliance & Leicester hasturned to a system pioneered in America. Theensure that they get access to the right service inorder to meet their needs. This could be self-service equipment or a specialist sales advisor. Theresults are encouraging, says Tim Neal, the bank’ssenior manager of retail development. “Thewelcomer is in a position to speak to every singlecustomer who comes through the door. He or shecan engage them at a human level to see what they

require. If, for instance, somebody comes inclutching a travel brochure, it is a clue that theymay have some specific financial services needsthat we may be able to help them with,” he says.Not only is the system welcomed by customers, itquickly becomes apparent, too, according to MrNeal, how many opportunities to help and advisecustomers were lost under the previous branchlayout.

Like those of competitors, Alliance & Leicester’snew branches do more than simply break withtradition. “The whole look and feel is retail. Wehave turned to retailers for our inspiration: thewalls are constantly changing to different colours,there is music. The branches are much more like ashop than people’s idea of a bank,” adds Mr Neal.

Barclays, the UK’s third-biggest bank, is moving ina similar direction. Earlier this year the bankunveiled a new format, which is to be rolled out


Many banks would like to, but have yet to linktheir ATMs to the software that manages theirrelationships with customers.

Those that have done so are often surprised by theresults. In late 2003, Singapore’s OCBC Bank wasone of the first to connect its network of ATMs toits data warehouse and system of customerrelationship management (CRM). The bank hadalready extended its CRM system to its branchesand to its call centre. As a result, when using thebank’s ATM machines customers can now skipcertain sections and so personalise the steps theytake – rather as if they were on their computer athome. For example, instead of having to gothrough every sequence or screen shown at theATM, a customer can go to the equivalent of “mytransaction” to withdraw a regular amount ofcash. OCBC also uses the software to send a rangeof personalised messages to customers via theATM. Such messages cost a fraction of direct mail

shots and produce better results. The bank foundthat this way the take-up on offers for credit cardswas 50% higher than by conventional mail as wellas a lot cheaper. In a market such as Singapore,where time deposits are popular, OCBC also sendsmessages in this way to remind customers thattheir deposit is soon due to expire.

It may not be long before banks in Europe adoptsimilar tactics. For example, ABN AMRO alreadygreets customers by name when they use cashmachines in the Netherlands. The next step, saysMr Mackor, is to pass on messages such as: “Yournew credit card is ready for collection at your localbranch.” Before long, too, the bank could besending personalised marketing based on itsknowledge of a customer’s banking and credithistory—for instance, "If you would like an adviserto call you tonight to explain a new product orservice, answer Yes now”.

However, a number of customers are likely to beput off by such tactics, regarding them as anintrusion and many would resent the fact that“Big Brother” seems to be prying into their affairs.If they are wise, banks will allow such customers toopt out of the system or risk losing themaltogether.

It is no surprise perhaps that 70% of respondentsto our survey say that their firm already has or willsoon install sophisticated CRM tools that will allowthem to make better use of opportunities tomarket products and services to individualcustomers. Just under one-half also say they areset up to deliver text alerts by mobile phone.

Thereafter, however, the picture becomes lessclear. Few respondents (28%) say their firms have,or intend to have within the next three years,remote access so that staff can bring in experts forconsultations with prospective clients over theInternet or via video links. And although areasonably high proportion of banks haveimplemented technology to speed up the waystaff handle transactions, such as cheque scanning

technology (37%), only 13% have started usingwireless terminals, which enable staff to servecustomers anywhere in the branch.

Being able to identify customers quickly and easilyis the key not just to better relationships but alsoto increasing sales, reckon many observers. TheAuto-ID Labs, Accenture and IBM are among anumber of technology firms working on RFIDapplications. This is a system that, among otherthings, alerts businesses when a valued customerwalks through the door or shows an interest in aparticular product or service.

The system is usually triggered by an electronictag embedded in a customer’s card orincorporated within, for example, productliterature. This allows a company to update acustomer’s profile automatically if the customerdeparts with a brochure on, for example, productsto help them manage their wealth. The idea is thatvalued customers are not only given preferentialtreatment, but that staff are forewarned and can

therefore prepare themselves for a conversation.By downloading a simple version of the customer’sprofile, an adviser can quickly focus on thatperson's needs.

Are such systems about to be rolled out by mostbanks across Europe? Not yet it seems. Few banksseem ready to spend hard cash on equipping theirbranches in this way, partly because they firstneed to spend a sizeable sum revamping them.Only 2% of respondents to our survey say theyalready use RFID tags, and less than 10% reckontheir firms will install them within the next threeyears. Other technologies, such as biometrics,might receive a boost in the future, especially if,for example, the UK government’s plans forbiometric identity cards move ahead. For the timebeing, however, implementation is limited.

Different branch styles are emerging

Which of the following most closely matches your company’sintention for the majority of its branches?

We aim to provide a mix of these approaches,

customised for different locations

We aim to focus on self-service, by supplyingnumerous cash machines

and self-service kiosks forcustomers

We aim to create larger branches with

numerous till points forrapid service

We aim to create smaller branchesthat provide a more intimate service

37%22%

10%

6%

4%

Other


Conclusion

The pattern then is clear. Guided by technologycompanies, banks are not only beginning to reaprewards from the investment they have made inCRM systems. They are also learning how best tocapitalise on their branches – or, as some Americanbankers with retail backgrounds prefer to callthem, their “stores”.

Without doubt, customers will continue to drifttowards the convenience of online and telephonebanking: 62% of respondents believe that Internetbanking will continue to increase significantly overthe next three years, whereas only 19% expect anykind of increase in the usage of bank branches. Afurther 34% believe that there will be no change inthe usage of bank branches.

At issue is not whether customers continue to visitbranches but what they do when they get there.New technology, and customers’ increasingfamiliarity with it, will cut the cost of handling cashand so free up tellers for re-training. Branches willbecome places where their customers do business,not just shuffle paper and carry out mundanetransactions.

The investment that is now going into banks’outlets is certain to involve more than a nod in thedirection of retail trends. Banks will need to drawheavily on the experience of successful andenlightened retailers. If they do not, like manytired brands before them, banks risk underminingtheir retail franchises.

The five technologies most likely to be adopted

Which of the following technologies do you anticipate willbe implemented within your company’s bank branches?

Customer relationship management tools

Cheque scanningtechnology

Video displays

Mobile-phone-based alerts

Virtualised call centre

yes, we already have this

yes, within the next three years

yes, but no timeframe has been established

no

The return of the branch?

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The return of the branch?