Buried amid all the so-called “smart branch” or “branch of the future” talk is the best-kept secret in all of this: The small branch. Small branches are featured in virtually any article you read about smart branches, but the benefits of smaller branch footprints is still under-emphasized, in my opinion. The focus is often on technology, or the “boutique” or “VIP lounge” experience, but the significant reduction in square footage compared to yesteryear’s branch is now taken for granted. Here are some reasons why it shouldn’t be.
First, smaller branches are super-convenient; because they’re smaller, they can be built into just about any nook or cranny available. They can therefore out-maneuver a neighborhood’s less-agile competition, and be used as an inexpensive foothold in new markets. Second, smaller branches mean smaller bills; construction and operating costs can be radically reduced, especially if the project is LEED-certified, and the branch layout has been designed for maximum efficiency. The small branch revolution was inevitable, and the savvier financial institutions are reaping its rewards. The so-called hub and spoke model is becoming completely dependent on small branches for market expansion as financial CEO’s realize the power of the micro-branch from a brand positioning and recognition perspective.
Customer Experience Concerns with Small Branches are Unfounded
There have been some concerns about customer experience on the part of community banks and credit unions considering the small branch approach, but this is a no-brainer; if you’re aware that customer experience always comes first, and that micro-branches have to be properly designed with this in mind, then it’s no longer a problem. Convenience and customer experience overlap pretty deeply, and when one considers the chief components of a successful modern branch, it becomes obvious that those components can be built into a relatively small space, like 1,000 square feet or even less. We know this is true, because we have built such branches ourselves with excellent results.
The must-have elements of a modern branch can be boiled down to:
- Advanced ATM/PTM (personal teller machine, with audio/video link to call center)
- Dialogue Tower
- Consultancy Space
- Effective Retail Communications
- Beverage/Tech Bar
→ 1. Advanced ATM/PTM (also called an ITM, or an AIT). It costs just $0.85 for an ATM transaction compared to $4 for an interaction with a bank teller. A check can be deposited at an advanced ATM for $0.59 compared again to $4 for a teller deposit. These numbers tell you all you need to know about transactional ROI. With a smaller branch, there would only be one or two people staffing the teller line, and these would ideally be universal bankers (or universal agents as they’re also known). The teller line itself would be a dialogue tower (see element #2 below), which makes all the difference. Advanced ATM’s and ITM’s save space, time and money. Small, automated branches (with zero or just one or two human staffers) function successfully via this technology, and can quickly top an F.I.’s profitability charts over much older, larger, more established branches.
→ 2. Dialogue Towers. The dialogue tower has revolutionized modern branch banking. The word “tower” may be misleading; a dialogue tower isn’t some tall, looming structure from which the bankers look down upon their customers. Quite the opposite, in fact. Dialogue towers allow more open and transparent communication than traditional teller lines, as the space around the banker is unencumbered by large barriers or other security features. This openness is made possible by the introduction of a cash recycler, which is usually positioned centrally in the back of the tower.
Cash recyclers are the banker’s best friend; they can process (receive and dispense) up to ten notes per second, in any denomination, and even log serial numbers. They do the work while the client enjoys a dialogue with the banking agent. They enable the more casual interactive space due to their being in effect a 24-hour safe. Their alarms can be connected to the bank’s monitoring system, and they’re made from material as resilient as any in the cash storing industry. Cash recyclers also keep an electronic journal of all transactions. In fact, if it wasn’t for the cash recycler, there’d be little to no “dialogue” taking place at the dialogue tower at all.
Dialogue towers don’t require huge amounts of space, which leaves plenty over for other elements within the small branch. The increased personal communication enables a client-centric strategy to occur naturally. This is infectious in the more intimate atmosphere a small branch creates. The concept of community is being revived by dialogue banking, and the value lies as much in the relationship-building aspect as in the potential for cross-selling. There’s a whole different vibe to a branch where the banking agent comes around the counter to greet customers as they enter, especially if there’s fragrant coffee available and real financial advice.
→ 3. Consultancy Space. With most of the branch’s cash transactions being taken care of by automated processes and relationships built around dialogue towers, there’s some wiggle room that can be filled by a micro-office, or consultation booth. The F.I. can deploy a financial professional to keep the machines or universal bankers company while dispensing advice either as-needed or by appointment. If you’re thinking this concept is pure fiction, a simple Google search for “micro-branch”, “smart branch” or just “small bank branch” will yield dozens of images of these smaller branch designs.
There’s no end to the variants on consultancy space. From a simple table and seats, to privacy screens, to glass-walled mini conference rooms with sliding doors. The tech bar (element #5 below) can be used to “take a number” and reserve a place in the consultancy queue, if necessary, and customers can enjoy a drink from the beverage center while they wait. Tech bars, or customers’ mobile devices can also be used to offer customer feedback surveys whose data can be used to shape future strategy based on branch experience. We are at a point in retail banking where the average customer is capable of using an ATM, or depositing a check via image capture. Thus, the individuals staffing the branch are of much higher value compared to transactional tellers, who lacked the global perspective of the universal banker and merely provided those basic services that customers now do for themselves. Whether the microbranch has a sitting financial adviser or universal bankers that can retire to a consultation space, their job is to build a dialogue with the customer with a view to providing a longer-term, higher ticket product or service. It stands to reason that these type of purchases demand face-to-face engagement, making the physical branch still important, but for different reasons than previously.
→ 4. Retail Communications. Small branches need to stand out amid the noise of the marketplace. Branding and retail communications should be bold, legible and succinct. Your broad array of services have to be advertised front and center, along with any luxury features such as VIP lounge membership and beverage centers (see element #5 below). A VIP lounge might sound unlikely for a small branch, but you’d be amazed at what can be achieved using industry programmers to design efficient layouts. We have an interior team here at Solidus with experience designing hundreds of branches, many of which punch way above their weight – or square footage, to be exact.
Interior designers or programmers use customer experience mapping to determine optimal placement of retail communications and merchandising kiosks, as well as locations for graphic walls, branded environments and other touchpoints. Customers desire clarity and direction in their branch experience. Basic transactional areas like ATM’s have to be easily distinguished from where more complicated activities like loan applications and advisory services take place. Industry designers have a considerable selection of dispensers, kiosks, branding fixtures and graphics options available in different materials that can bring your visual brand identity to life. A proper approach to this entails as much regard to efficiency and ROI as aesthetics, so don’t be fooled by branch designers bearing stylish “gifts” that have zero substance inside. Customer experience and branch ROI are the two chief considerations in these changing times.
→ 5. Beverage/Tech Bar. digital transactions cost on average 17 cents each, compared with 85 cents for an ATM transaction, and $4 for an interaction with a bank teller, according to Digital Trends. For this reason, F.I.’s should be focused on developing user-friendly banking apps, and teaching customers how to navigate the cyber landscape via in-branch tech bars. Tech bars are increasingly synonymous with beverage centers (coffee, tea, etc) where customers can learn the technology while sipping a refreshing drink and charging their own mobile devices.
It’s possible to deliver a “VIP lounge” experience even in the confines of a mini-branch. Just one or two in-house mobile devices can create a fortress of geekitude to salve the aching feet of Saturday shoppers and technophile drop-ins alike. Some community banks and credit unions may have no seating at all at their beverage center/tech bar (like an Austrian or German Café), and there are some that comprise just two chairs and one tablet. We know because we’ve built them. As the drive to redefine America’s walkable spaces and retail zones continues apace, micro-branch banks will multiply. The shrewder financial institutions will currently be consulting with branch location specialists to pinpoint locations where new small branches can be most effectively sited.
The small branch revolution may have been rightly folded into the smart branch revolution, but the profitability of smaller branches is not being discussed enough. The smart branch is designed for customer experience and ROI, and the small branch is the ultimate accomplishment within this concept. Be quick, not dead; branch transformation is evolving in a very specific direction for very good reasons. Make sure your financial institution is part of it.