Overview:

Introduction

Until recently, banks seemed to be neglecting their branches in favor of remote channels. However, they are now appreciating that branches are a highly effective channel for acquiring customers and selling products. Banks have therefore put in a lot of effort into improving the quality of the customer experience on offer in their branches. This report investigates the impact of these changes.

Scope

*Understand how and why banks are reassessing their branch strategies.
*Presents results from Datamonitor's Financial Services Consumer Insight Survey to highlight consumer preferences regarding the branch channel.
*Analyses the latest trends in branch design and configuration, the use of technology and the role and function of staff.
*Assess the outlook for branch networks.

Highlights

Branches are moving away from a primarily transactional role towards a sales and advisory function. Many consumers prefer to use branches when buying or seeking advice on financial products, particularly more complex products, such as mortgages.

New technology, such as touchscreens, video conferencing and digital signage are all helping to make the branch experience a more enjoyable and worthwhile one for customers. Open-plan architecture, retail-inspired design and clearer layouts have made branches more welcoming and easier to navigate.

Although mergers and regulatory action in the wake of the banking crisis could lead to some branch closures, banks will continue to invest in their branch networks, as they are central to restoring trust and confidence in the industry. Consumers increasingly want to access their bank through a variety of channels, including branches.

Reasons to Purchase

*Learn about the latest trends in bank branch design and strategy.
*Read case studies of providers who are introducing innovative developments into their branch networks.
*Understand what the branch of the future might look like, and what roles it might fulfill.

Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
Branches remain a vital communication and distribution channel for banks 2
Branches are increasingly geared towards the sale of complex and advised products 2
Branch design is changing radically 3
A retail-inspired approach to branch design is allowing banks to increase product sales 3
Technology is helping to enrich the customer experience 4
Digital signage can help to boost product sales and reduce boredom while waiting 4
Jyske Bank has put digital signage at the heart of its service proposition 4
Many banks view branch staff as being more vital than ever to their service propositions 5
A number of banks have placed a considerable investment in staff training 5
TD Bank is moving towards offering specialist sales and advice in its branches 5
Banks are taking an increasingly analytical approach to optimizing their branch networks 6
Branch layouts are moving away from a standardized look to one that varies by location 6
Branches remain the most effective channel for building relationships 6
Customers want to access their banks through a variety of channels 6
The branch channel will continue to evolve 6
Banks must rethink the purpose of their branches 7
Banks need to improve the quality of the in-branch experience 7
Table of Contents 8
Table of figures 9
Table of tables 10
Evaluating the customer experience 11
What does customer experience mean? 11
The evolution of customer experience 11
The importance of generating a satisfying customer experience 12
Providers are starting to focus on customer experience management 13
A lack of integration can cost providers dearly 13
Most banks now have in place extensive programs to monitor customer satisfaction 14
Customer loyalty is the key to profitability 14
Customer advocacy is an extremely powerful medium for winning new customers 15
Loyalty and advocacy are closely correlated with profitability and growth 16
Financial providers need to improve the quality of the customer experience they provide 17
There is much room for improvement in the standards of service that banks provide 17
Banks should focus on differentiating their customer experience 18
Emotional attributes are vital to creating a unique experience 18
How a bank handles moments of truth has a disproportionate impact upon the customer experience 18
Creating an attractive customer experience can enable banks to charge a premium for their offering 19
Rethinking the closure of branches 20
Rumors of the death of the branch have been greatly exaggerated 20
Bank branches seemed to be on their way out in the 1990s 20
Banks have been forced to think again about migrating away from the branch 20
Branches remain a vital communication and distribution channel for banks 21
Branches are increasingly geared towards the sale of complex and advised products 22
Regulatory demands are making it increasingly difficult to sell complex products via remote channels 26
Banks are encouraging customers to migrate to remote channels for routine transactions 26
Many consumers remain resistant to the charms of online banking 26
A proportion of online bankers still prefer face-to-face contact with their bank 27
Branches are a valuable channel for attracting retail deposits in the wake of the banking crisis 28
The new face of branch banking 29
Branch design is changing radically 29
A retail-inspired approach to branch design is allowing banks to increase product sales 29
Branch design is helping to reinforce brand image 29
Branches are being tailored to meet the needs of different customer segments 30
New trends in layout are helping to facilitate the customer journey through the branch 31
Zoning is helping to improve the operational efficiency of branches 32
Several banks are pushing ahead with the transformation of the traditional branch 33
Umpqua Bank in Oregon has turned its branches into community hubs 33
Barclays Bank has tailored its branches in response to its customers' needs 34
Lloyds TSB's redesign emphasizes the commitment of each branch to its local community 35
Helm Bank in Colombia is pioneering a multi-sensory approach to brand identity 36
Jyske Bank in Denmark has worked hard to create a welcoming atmosphere 37
Deutsche Bank's Q110 'Bank of the Future' offers a complete retailing experience 38
There can be risks in adopting a retail-led approach to branch design 39
Washington Mutual reverted to a more conventional layout following its takeover by JPMorgan Chase 40
Abbey abandoned its partnership with Costa Coffee after just a few years 41
There is some difference in opinion about the wisdom of abandoning traditional branch design 41
The Datamonitor view on branch design 41
Technology is helping to enrich the customer experience 42
Touchscreens facilitate a more intuitive interaction between bank and customer 42
Barclays Bank is pioneering the use of touchscreen technology in its flagship London Piccadilly branch 42
Umpqua Bank uses touchscreen technology to build customer engagement 43
Touchscreen technology can be used outside a branch to engage the interest of pedestrians 44
Using video links can help create a more personalized experience for customers 44
Umpqua Bank is experimenting with video links to help increase face-to-face contact 45
First Atlantic is also investing in video tellers to improve efficiency 45
ABN Amro is piloting unmanned branches where all communication is conducted remotely 46
There are potential downsides to the use of video technology 47
Increasing levels of automation are contributing to greater operational efficiency 47
BNP Paribas has replaced teller positions with multifunction ATMs in most of its branches 47
Garanti Bank in Turkey has made widespread use of self-service kiosks 47
Sparkassen in Germany has installed movable kiosks in some of its branches 48
Digital signage can help to boost product sales and reduce boredom while waiting 48
Digital signage is highly effective in engaging the attention of customers 49
Bank of America reduced perceived waiting times through the use of digital displays 49
Jyske Bank has put digital signage at the heart of its service proposition 49
Behind-the-scenes technology can also improve the customer experience 50
TD Bank in the US is speeding up transaction processing times through the use of technology 50
The Datamonitor view on the use of technology 51
Many banks view branch staff as being more vital than ever to their service propositions 51
Meeting-and-greeting helps to improve security 51
Changes in branch layout and technology have also necessitated a change in staff function 52
Banks could be doing more to promote product sales through their staff 52
The quality of branch staff has become a marketing tool for banks 52
Changing staff priorities means a change in recruitment criteria 53
A number of banks have placed a considerable investment in staff training 54
Umpqua Bank has placed great emphasis on the quality of service provided by its staff 54
TD Bank is moving towards offering specialist sales and advice in its branches 54
Barclays Bank has resurrected the branch manager 55
Branch opening hours are gradually becoming more customer-friendly 55
The Datamonitor view on the role of branch staff 56
Banks are taking an increasingly analytical approach to optimizing their branch networks 56
Branch network optimization provides a powerful analytical framework for assessing network performance 56
Banks prefer to open branches where there is the greatest number of potential customers 58
Branch location is an important determinant of choice of bank 58
Branch layouts are moving away from a standardized look to one that varies by location 58
The Datamonitor view on branch networks 59
The future of branch banking 60
The branch channel will continue to evolve 60
Branches remain the most effective channel for building relationships 60
Branches can help to target high-value segments 61
Customers want to access their banks through a variety of channels 62
Branches have a role to play in restoring trust and confidence in the banking industry 62
Fallout from the banking crisis may lead to further closures 63
Bank mergers could force more branch closures 63
The decades-long expansion in US bank branch numbers could come to an end 64
Banks with larger branch networks may outperform those with smaller networks 65
Banks must rethink the purpose of their branches 65
Banks need to improve the quality of the in-branch experience 66
APPENDIX 67
Supplementary data 67
Definitions 72
Digital signage 72
Self-service kiosks 72
Methodology 72
Further reading 72
Ask the analyst 73
Datamonitor consulting 73
Disclaimer 73

List of Tables
Table 1: Method of applying for mortgage 67
Table 2: Size of UK bank branch networks over time 67
Table 3: Sources of information used when researching mortgages 68
Table 4: Method of applying for mortgage, by type of mortgage 68
Table 5: Method of applying for mortgage, by age 69
Table 6: Method of applying for mortgage, by household income 69
Table 7: Method of applying for unsecured personal loan 70
Table 8: Proportion of non-online bankers who cite a preference for dealing with people in a branch as a reason for not banking online 70
Table 9: Proportion of online bankers who prefer to have face-to-face contact with their bank rather than use online services 71
Table 10: Impact of channel preference upon trust 71
Table 11: Number of branches of US commercial banks over time vs size of US population 72

List of Figures
Figure 1: The branch remains by far the most popular channel for mortgage applications 3
Figure 2: Jyske Bank makes effective use of video to encourage product sales 5
Figure 3: Summary of main developments that will affect branch networks in coming years 7
Figure 4: Value-added increases as providers move towards an experience-based economy 12
Figure 5: Consumer behavior varies from antagonism to advocacy according to consumer attitudes 15
Figure 6: Many providers now regard NPS as a key metric 16
Figure 7: Branch numbers in the UK have remained relatively stable for several years 21
Figure 8: A high proportion of mortgage holders sought face-to-face advice on their mortgage 23
Figure 9: The branch remains by far the most popular channel for mortgage applications 24
Figure 10: In-branch mortgage application is dominant across all age groups 25
Figure 11: A preference for dealing with people is a major reason for non-online consumers to avoid online banking 27
Figure 12: Nearly a third of consumers who bank online still prefer to deal with their bank face-to-face 28
Figure 13: Banks around the world are redesigning their branches to be more visually appealing 30
Figure 14: Customer experience of a branch visit revolves around five key stages 31
Figure 15: Banks are starting to take a more systematic approach to branch layout 32
Figure 16: Umpqua Bank sees its branches or 'stores' as vital to its brand image 34
Figure 17: Lloyds TSB has opted for a local feel in its branches to maximize customer engagement 36
Figure 18: Helm Bank has created a totally immersive branch experience 37
Figure 19: Jyske Bank of Denmark has turned its offerings into tangible, tactile objects 38
Figure 20: Q110 from Deutsche Bank gives customers the chance to buy consumer goods in-branch 39
Figure 21: Many customers found WaMu's new-look 'Occasio' branches confusing 40
Figure 22: Barclays is pioneering the use of an advanced touchscreen interface 43
Figure 23: Interactive window displays can help to attract passers-by 44
Figure 24: Umpqua Bank allows customers to communicate remotely with advisors via video link 45
Figure 25: First Atlantic keeps its tellers backstage 46
Figure 26: Garanti Bank has gained a reputation for using advanced self-service devices 48
Figure 27: Jyske Bank makes effective use of video to encourage product sales 50
Figure 28: Deutsche Bank's Q110 branch advertises which of its staff are currently on duty 53
Figure 29: Highly detailed geodemographic analysis is available to banks deciding on branch location 57
Figure 30: Summary of main developments that will affect branch networks in coming years 60
Figure 31: HSBC's Premier branches serve the needs of its HNW customers 61
Figure 32: Impact of channel usage on trust 63
Figure 33: The growth of branch numbers in the US has far outstripped the growth of the general population 65