The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Branch’ Category

BofA to Eliminate Wire Transfers from Branches, Moving Volume to Online Banking | netbanker

By co-incidence here is yet another chink in the armour of the branch network. Long ago Jim had the foresight to write what others could not admit to at that time, with the 40 year view of The Demise of Branches. Iin that far-sighted piece Jim aimed at the core raison d’etre amongst traditionalists, account acquisition, and developed potential approaches to offer a better value proposition than ‘just being there’.

In 2006, Banks were in major branch build out mode, to support their market share objectives. The payback period on those branches is extended to say the least. On the other hand, the payback period on branch elimination is almost immediate, but it has to be managed. It is a strategy that is aimed at the growing majority, but services must be made available online for that new majority.

BofA are aiming at a particularly work intensive branch activity – wires – I know and have done them – its a pain, and its work and time intensive. Its the ideal application to automate. Time to knock off those labour intensive branch apps that serve as an excuse to retain branches.

2010 will be the year when we see branches being actively reduced amongst the large banks. What will be interesting is to see to what extent they follow BofA’s lead and ensure the services can be offerred online. In that vein, who will be first to go for cash replacement with electronic purse/ smart card type offers?

Bank of America to Eliminate Wire Transfers from Branches, Moving Volume to Online Banking | netbanker

Beginning this summer, wire transfers will no longer be available in your local banking center…
What it means: When the nation’s largest online bank starts talking about reducing branches and takes steps to eliminate a traditional (and labor-intensive) branch-based service, you have good evidence that branch banking is on the wane.

Thoughts welcome!

Written by Colin Henderson

August 17, 2009 at 21:48

The Productivity Gap is closing in on Banks’ | Branches will be next

FT reports on a new Bain report concerning RoE at Banks, and the unliklihood that Banks’ can regain previous RoE levels.

This fits with the theme here of no more business as usual, post crisis. The spreads in this low interest enviroment are simply not high enough to accomodate spreads like we saw over the late 90’s and early 2000’s. Furthermore and separate from the spread issue, the growth in credit will not be there either because consumers are unwinding unwieldly debt levels that are now disproportionate to asset levels.

The course banks must follow is rejuvenated product suites, and of course reduction of cost base, which is why Bain leapt right to branches.

Banks’ may need to close a third of branches’ | FT

Business consultancy group Bain concludes that UK retail banks face a tough future in which their return on equity (RoE) could be 50 per cent lower than pre-recession peaks.

Bain said that over the past two decades, leading UK retail banks have posted RoE – profit divided by equity – averaging 24 per cent and are unlikely to see those levels again.

Written by Colin Henderson

August 17, 2009 at 20:27

Are we finally seeing the demise of the bank branch

Finally we are seeing hints of what we all know is inevitable.  It has taken a long time and probably this latest economic crisis, but the long view on branches suggests a damatic shift with less of them.

Slow but inexorable move to online banking

Yet slowly but surely, the internet is starting to make its mark on the sector as more people move their banking online. Lloyds is to shut up to 400 branches as part of its integration of HBOS. Its rivals are likely to follow suit.

A decade from now, the local branch could well be an endangered species as “cyber-banking” grows ever more popular and more branches close.

Written by Colin Henderson

July 7, 2009 at 01:37

We will not hear about bricks and clicks after this recession

Deloitte pick up on an interesting characteristic of banks here. Cost cutting occurs during downturns, but its spend spend spend when things are looking good.

Banks rarely get to the point of incremental efficiencies that they note here. Citi are a classic example as noted in the FT this morning.

This fits with the view that this change we are undergoing is not just another blip before we return to business as usual. There is no business as usual coming. The future is smaller, framed in different business models, contains a greater mix of small business, and smaller companies and with retail consumers working harder, longer and for less money.

All this points to realignment of the banks’ models to be more efficient, more effective in customer interaction, and more automated, with much greater reliance on online banking and mobile banking, with less on branch banking.

This time we will not hear about ‘bricks and clicks’ as we did in 2002.

Improving Efficiency: The New High Ground for Banks | Deloitte

The turmoil in the financial markets, coupled with the economic downturn, is fundamentally altering the financial services environment. In this new world, improving operating efficiency has become a competitive necessity. But while financial firms have typically moved quickly to reduce costs when the business cycle is contracting, far too often these efforts have been quickly forgotten when business picks back up.
In this report, we present research conducted by the Deloitte Center for Banking Solutions demonstrating the critical importance of operating efficiency to the fortunes of financial firms. Among the findings is that building efficient operations is not enough — steady, continuous improvement in operating efficiency are required. In fact, banks that have achieved continuous improvements in efficiency have also generally experienced far greater gains in their share prices.

Written by Colin Henderson

May 22, 2009 at 10:59

Branch redesign – saviour or anchor?

The always insightful Paul Penrose picks up on a terrific theme here that should as they say have legs.  Out of crisis normally comes innovation usually driven by forced choice than desire.  Banks are being squeezed in many ways, and one major one is resorting to reliance on regular retail and commercial banking as their core business (imagine that!)

The bank branch – weakest link or saving grace? | Finextra – Paul Penrose

Sean Park’s Sixth Paradigm blog refers to a recent editorial piece in the FT bemoaning the poor standards of customer service in high street bank branches.

Sean is currently setting up an investment venture called Nauiokas Park to invest in start-ups with the potential to bring innovative, disruptive approaches to bear on traditional business lines.

With that in mind Paul points out Sean Park and his investment venture focussed on innovative disruption in traditional business lines. 

The catalyst was this dour piece in the FT that while it may not all apply to every bank, no bank cannot see some part of itself here. 

Some classic quotes from this:

  • Public services at their best now outperform the banks – so government ownership could actually improve bank performance.
  • Banks use the internet as little as possible to avoid fraud; instead they use the post, in which letters are lost or stolen, and the telephone, which is overloaded and often fails to give results after interminable waiting times.
  • Banks claim to have cut costs by taking operations out of their branches into customer services, but the level of service has been cut even more. Banks are like hospitals. The more you cut nursing staff to save money, the less service you can give patients.
  • Banks have made it almost impossible to use branches. With great difficulty I discovered the name and telephone number of my branch manager, only to find that a letter I wrote to her had been intercepted by "customer services", who passed it to her a couple of weeks after deciding that they could not deal with it – nor could she, incidentally
  • The new British model of state-run banking might save banking jobs as well as banks themselves if it gave new scope to branches. Another possible model is one in which current accounts get a decent interest reward and banks are allowed to charge for services. "Free banking" has turned out to be ruinously expensive for many customers.

Anyhow, Sean goes on apparently to be setting up “a place where ideas and capital meet;  a space at the intersection of financial services, markets and technology.”

Relevance to Bankwatch:

The door is wide open for innovative design and shifts in financial services.  Clearly there are gaps in the current service model, some banks more than others, but all banks nonetheless.  Working harder at the current model sounds like Einstein’s definition of insanity. [Insanity: doing the same thing over and over again and expecting different results. Albert Einstein]

What of the design of the branch and the branch customer service model.  This puts me in mind of a piece done by Online Banking Report, 2 1/2 years ago entitled  “The Demise of the Branch” which took the view that the value in the branch is being eroded, and the long view suggests that alternative strategies are required if banks do not wish to be left in a few years time with a costly anchor around their balance sheets.

Written by Colin Henderson

November 11, 2008 at 00:22

McKinsey notes Banks lag in use of Web 2.0, for security reasons

 Interesting survey noted here at Finextra, completed by McKinsey.  It indicates web services, and internal p2p, collective intelligence activities are preferred over wikis’ blogs and podcast’s. 

More than 75 percent of the executives said they plan to maintain or increase their investments in technology trends that encourage user collaboration such as: peer-to-peer networks, which allow for efficient file sharing; social networking; and Web services, which make it easier for different systems to communicate with one another automatically.

Source: Execs prefer Web services, P2P to mashups, wikis and blogs | | CNET

Of particular interest to this blog, is that both North America, and Financial Services lag the general groups. 

Just to be clear, what they refer to as Web 2.0 is defined in the report, and it provides a useful list.

Relevance to Bankwatch:

Online Banking has the side effect of eliminates the personal interaction between Banks employees and customers, that used to occur in branches.  Yet Banks have focussed on branches as the key to retaining that contact, referring to ‘bricks and clicks’.  Little technology effort has been devoted to implementing ‘bricks and clicks’, aside from CRM, with mixed results at best. 

Web 2.0 technologies provide some hope to regain a degree of customer contact, and recognise the new drivers of customer loyalty, yet Banks, generally, choose to disregard the opportunity, citing, security or brand concerns as an excuse.


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Written by Colin Henderson

March 28, 2007 at 07:26

"TNS Canadian Facts" – online banking and ATM stats 2006

 TNS have been consistently measuring since 1994.  While their numbers always look low to me, they are relevant for trend watching.

60% of Canadians online, have signed up for online banking, and 37% use online banking in the past month.  53% visited a branch, and that’s the lowest number ever as the trend goes down.

The traditional bank branch continues to lose ground in Canada as consumers conduct more day-to-day transactions at self-service banking machines (ABMs) and over the Internet, according to an annual tracking study by TNS Canadian Facts, a Toronto-based marketing research firm.

Source: Finextra: Canadian bank branches losing ground to online channels

But they make the final point about preferences that I believe is too general, and doesn’t reflect all segments.  In addition, I believe this last point is as much the failure of Banks to properly implement online services in a trusted and meaningful way that would exceed the Branch experience.

“Canadians continue to prefer to go their branch to make RSP contributions and to acquire financial products, such as new accounts and mortgages, than to do so by phone or online,” she states.


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Written by Colin Henderson

February 13, 2007 at 19:21

FinServ Blog : Barclays — Serious about Retail Banking

From FinServ ….  Barclays are bringing in fresh non Bank, and people with less traditional bank background, to rejuvenate their branch network. 

…..  hired Helen Dodd from Tesco

Source: FinServ Blog : Barclays — Serious about Retail Banking


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Written by Colin Henderson

November 6, 2006 at 14:00

Posted in Branch

BankNet 360 – RBC Plans Major Expansion

I think this article from the Calgary Herald, misses the point, and demonstrates a lack of research.  

RBC’s plans contrast with those of U.S. retail giant Washington Mutual Inc., which said last month that it is de-emphasizing branches to focus on the Internet.

WaMu plans to close 63 branches in Atlanta and Chicago, for example, in favor of driving customers to cyberspace to open and manage accounts.

Source: BankNet 360 – TOP STORY: Oh Canada! RBC Plans Major Expansion

WAMU’s decision to scale back in Chicago follows a frenetic expansion plan only to realise the local market is hyper competitive.  Contrast that with Canada, where following cancellation of proposed Bank mergers, all the Banks went into deep branch closures.  With that behind them the opportunity in Canada is wide open to move into markets that are actually under represented by Bank branches.

PS:  The plan to expand its branch network by 100 or more offices between now and 2010, is not a major expansion.  That’s 25 branches a year, on a base of over 1,000.


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Written by Colin Henderson

October 17, 2006 at 22:55

Canadian Banks & Insurance | RBC, Scotiabank to Add Branches

In a reversal of recent trends, building branches is becoming popular, in order to attract market share and deposits. 

Royal Bank, the country’s largest bank by assets, may build as many as 112 branches in the next four years, Chief Operating Officer Barbara Stymiest said today at a CIBC World Markets investor conference in Montreal. Scotiabank, the third-biggest bank, plans to open 30 branches next year, Chief Executive Officer Richard Waugh said at the same conference.

Canadian Imperial Bank of Commerce, the fifth-largest bank, said last month that it plans to open or expand 70 branches in the next five years.

Source: Canadian Banks & Insurance

112 branches will cost $1.7 Bn, and add $170 million in annual expenses.  The increase represents a 10% increase in branches, so that suggests that the other 90% of branches have to support the 10% over the 5 years it takes for them to develop profitability.

I keep going back to the “23 branches in 3 months (using Internet)” story and the “Bank for every block (and empty)” story whenever I see this return to branch building.


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Written by Colin Henderson

October 5, 2006 at 21:01

Posted in Branch, Online Banking

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