Branch Transformation: Are Bank of America and Wells Fargo on the Right Track?

In a word, yes – and not a moment too soon. As thousands gather for Money 2020 in Las Vegas this week giving ear to a bevy of start-ups promising mobile payments nirvana, a small but growing number of retail banks are addressing those same consumer dynamics with much needed right-sizing of their branch networks. Celent has long asserted the need for a do-over of the traditional branch operating model that served the industry well for so many years and recently argued that a significant winnowing of US branch densities (among other things) will result over the next decade. The challenge for retail banks (and it’s a big one) is that while consumers are increasingly choosing to transact digitally, they engage banks in-person. This was seen clearly in recent Celent consumer research and the resulting report. Will this dichotomy persist? At least for a while and to varying degrees depending on one’s target market. The implications are profound. While most revenues are tied to the branch network (artificially in some cases) foot traffic is in steep decline. Celent identifies a triumvirate of multichannel imperatives arising from the growth in digitally directed consumers. Specifically 1. Right-size the branch network. Most branch networks were designed for a different consumer in a different era. They need to operate more efficiently and effectively. Celent has published extensively on this topic. 2. Learn how to sell in the digital channels. This is new territory for most banks. It starts with embracing digital channels as a key opportunity for customer engagement, rather than merely a vehicle for low-cost transactions. 3. Catalyze growth in self-service usage. This too requires new digital channel capabilities along with well-coordinated efforts to communicate those capabilities and why they’re relevant to consumers in order to maximize enrolment and usage. That a branch channel right-sizing is necessary is hardly debatable. How this right-sizing gets done is the subject of much debate. The Bank of America and Wells Fargo initiatives show similarities: • Both combine transaction automation with fewer, more highly trained “universal bankers”. • Both offer extended hours for most routine transactions. • Both are considerably smaller and less expensive than traditional branches.

But the approach to service differs considerably between the two models. Bank of America deploys ATMs with Teller Assist in its new Express Centers. Tellers still exist in Bank of America’s model, but they are located centrally and engage customers via real-time video. During business hours, tablet equipped staff can also assist. After hours, it’s all video. Wells prefers all customer interactions to be with in-person branch staff in its Neighborhood Stores. There’s no silver bullet when it comes to branch transformation. There will likely be a variety of design within banks and among banks. Both initiatives appear to be “test and learn” approaches, and may evolve as both banks gain experience. That’s exactly how it should be done in my opinion.

What do you think?