How Can Banks and Credit Unions Save Money by Transforming Their Branches?

A modern transformed bank branch in Rhode Island.

Outdated branches don’t just look bad; the technology and background processes are inefficient and costly to the financial institution (FI). Modernizing branches is an expensive but critical task if FI’s are to remain relative in today’s market. FI’s may feel intimidated by the cost of transforming their branches, but there are changes they can make to staffing models, efficiencies, and strategy that will offset those costs. You can easily measure the cost difference between a traditional versus a transformed branch but there’s no cookie-cutter number. You have to go in and look at each financial institution’s unique data because it’s the data that drives costs. The number and type of transactions determine everything.

Table showing the relative costs of a traditional bank branch vs. a transformed bank branch.

The table above shows the savings that can be achieved by moving 30% of teller transactions onto technology that costs much less per transaction.

A transformed branch—or a traditional branch whose technology receives an upgrade—is much more cost effective than an older branch with antiquated equipment, or one that completely lacks an ATM strategy.  New equipment exists today that can make transactions much more efficient.  Mobile or ATM transactions usually cost around 50 or 60 cents per transaction but the cost of someone actually doing a teller transaction inside the branch can be as high as $3 to $4 per transaction.  If a bank has 100k transactions a year and can shift 20% to 30% from $3 or $4 per transaction down to 50 to 60 cents, that’s where some of the money for a transformed branch will come from.  The key is in moving transactions from the internal walk-in of the branch to a different channel.  The difference in cost is tremendous.  Organizations can pay for branch transformations if they’re willing to make the changes to be more efficient.

Universal bankers are the new staffing model that is creating a new banking experience for customers.

The right staffing model can improve efficiency in branches and create a positive customer experience.

  1. Staffing ModelStaffing models and the average time required for a basic transaction.
  • Determine the transaction efficiency of a traditional branch.
    • Number of employees on staffing schedule/in staffing model.
    • Number of transactions per week/day/hour
    • ~17-20 transactions per employee/hour. This should be a universal constant.
    • Time-per-transaction
  • If the FI can’t meet this figure then something is wrong.
  • Best practices: versatile, focused, organized, knowledgeable, and engaged.
  • Universal bankers give better ROI than specialist staff or tellers.

E.g., a branch that does ~10,000 transactions per month with five or six people on the teller line should be doing between 17 and 20 transactions per teller per hour.  10,000 transactions can actually be achieved with just 3.5 tellers on duty per month, not five or six.  FI’s can learn how to calculate the appropriate staffing levels at peak times using certain tools that can bring their costs down considerably.

Ultimately a universal banker model is most efficient, as it promotes more cohesive activity across the team and means people are always available to process transactions if the branch suddenly becomes busier and lines are forming.

Key questions:

Are you processing transactions as efficiently as you can?
Are you overstaffed?  Overstaffing does not provide a better customer experience.

Modern technology employed in a new bank branch in Hartford, CT.

Staffing models, technology and business processes all contribute to overall branch efficiency.

  1. Efficiencies

Efficiency Ratio = Operating Revenues or Income ÷ Operating Expenses.

The efficiency ratio can determine where and if an organization needs help.  If the ratio is above 60%, it is possible to save some money.  Some FI’s may be operating in the high 60s, (67-69%), the 70s, and occasionally even as high as the 80s.  If the efficiency ratio is in the 80s the organization is operating in a very inefficient way and needs a lot of help.

Common Pain Points:
Customer experience.

Physical, logistical, and philosophical branch transformation all have to happen in order to improve efficiencies across the board.  The easiest way to achieve this is to create a strategic roadmap that addresses technology, staffing, process improvement, and customer experience.

A strategic roadmap will tell organizations what they can save and how they’re going to pay for the transformational journey they need to go through.  Some organizations can save a million dollars a year by working through the roadmap in a holistic and organized fashion.  This is not a haphazard process; there are specific chronological steps to success that experienced transformational experts can deliver.

Bank branch designed and built using data and strategy.

Data-driven strategy should always drive branch design and not the other way around.

  1. Strategy and Cost Savings

An FI’s strategy usually focuses on areas where the institution is strongest, on areas that need to grow, and on the type of customer with which the brand resonates.  Branches in markets dominated by younger, urban clients are prime candidates for self-service and assisted self-service technologies, while suburban or rural branches serving older demographics are more successful with teller pods and cash recycler technology.  Whatever the strategy, the branch should be a destination where people can be educated, engaged and fulfilled.  Ultimately, strategies succeed or fail based on how the FI’s management team and staff implement them.  But FI’s “don’t know what they don’t know”, and this especially refers to processes, technologies and human aspects that are costing the organization money.  Strategies can include:

Cash Recyclers
Staffing Model/Customer Experience
Marketing of Products & Services
Demographic analysis
“Traditional w/ Tweaks” Branch Model

Migrating basic transactions away from the teller line and onto more efficient channels is a key aspect of the transformation process.  Migration means moving to channels such as:
Online banking.
Self-service ATM.

True change has to come from the organization’s philosophy at the highest level.  Simply installing the technology is no guarantee of success in achieving migration targets.  If you’re not seeing the kind of migration you want after the equipment is in place then you have to dive in with an expert and determine whether or not you’ve set things up properly:

Cut-off hours:  Is cut-off set too early in the day?
Policies: Do maximum amounts set for drive-thru ATM contradict ATM inside branch?
Proper education of employees:  Are they comfortable and conversant with the technology?
Education:  Are staff taking a hands-on approach to teaching clients how to use technology?
Proper notice given to clients of impending changes:  Emails, flyers, notifying date of change?
Appropriate location in branch:  Is the technology visible and obvious to customers/members?
Tech matched to correct channels: Are cash recyclers in retail and not the commercial lane?
Technology warm-up:  Cash recyclers should be ready to work in seconds, not minutes.