As blatant homage from Gabriel García Márquez’ “Love in the Time of Cholera”, it seemed fitting given the media blasts about Ebola, the measles and the flu in the past few months.
After watching a couple of episodes of “The Walking Dead”, you’ll start stocking up on water and canned goods. One of the critical things that people don’t talk about, however, is how you are expected to access your finances if you can’t go to the bank. ATMs are great but I’m not going to stand in the street using an ATM if “fast zombies” are coming my way. I’d want a locked lobby that only non-zombie customers can access.
Getting back to under-performing branches (called in the industry “zombie branches”), when I was at Bank of America, the company, like most banks, had a very robust real estate planning group. My team supplied this group with all sorts of geographic and demographic statistics to help guide the placement of new branches.
Flash forward to the age of the Internet of Everything, and a time where your iPhone can take check deposits, pay for purchases and transfer money. How would a “real estate” strategy work today? If you were running your own bank, how much emphasis would you place on bricks-and-mortar and how would you ensure that the locations you choose are well-placed and likely to be where your current and future customers will be? Some branch network planning folks recommend vetting existing branches by looking at metrics such as deposits per square foot or similar measures.
But all of these metrics presuppose a cogent way to “assign” a bank customer to a branch. If you never use branches, how might that work?
Banks face a two-pronged problem: the first is the plethora of channels they offer to serve customers. With the addition of online and mobile to phone, email and physical locations, financial services customers can do many things without ever walking into a physical location. The second is optimization of the existing branch network. As demographics, traffic patterns, and the world of work changes, brand networks also need to change. What was once a flourishing business district may now be in decline. A major employer moved operations to another country, leaving a once conveniently-located branch in a “dead zone.”
Channel usage and evolving expectations also have bearing on branch real estate strategy. Examining the usage of various channels within a customer base may show a proliferation of remote banking users who only need a physical location for very specific tasks. But where to locate this branch and how do you staff and train employees for a “someday” interaction.
Some banks have already played with the idea of micro-branches – small footprint locations with limited services – to counteract the high investment needed to keep a fully-featured branch profitable. Some have even used “pop-up” branches – taking a page from retail, a pop-up branch is a temporary location usually designed to take advantage of a unique location or temporary situation requiring banking services (like a festival, concert or convention).
If you have a branch location dependent upon a group of geographically-concentrated businesses who only need you sometimes, wouldn’t a mobile bank branch that shows up on Fridays (or payday) make more sense? Why invest in a permanent branch location that’s only needed occasionally?
Many of the larger banks seem to agree. ATM locations are no longer tied solely to physical branches as much as they were. And, if you just need to check on the status of something, wouldn’t videoconferencing or a phone call suffice? Again, development of these technologies is happening already.
Combining large amounts of insight about customers, footing those with likely investments to serve those customers and then enacting a cogent branch strategy to suit makes sense.
And, of course, if fast zombies are coming, a good old fashioned bank vault would be handy.
What factors should banks be considering for their real estate strategy?
For more information please contact Eric Levy at firstname.lastname@example.org.
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