Maximising returns from branch investment

Andrew Nye , director, head of retail banking, financial services, Atos KPMG Consulting says that firms that get things right from the outset stand the best chance of maximising branch investment

Despite the prophecies of its early demise, the branch continues to be the major customer contact point for retail banks. Future predictions indicate that the branch will remain the dominant channel, and banks are investing heavily in branch renewal.

The challenge is to ensure the return is profitable and sustainable. Key drivers of profitability are increasing customer self-service, offering additional sales functionality and effective management of branch infrastructure renewal.

Broadening self-service is central to current branch initiatives. This trend began with customers serving themselves for cash withdrawals via ATMs. Internet banking users embraced self-service more fully and the uptake of broadband is increasing self-service via the internet as well as supporting a broader range of applications. Customers have also become familiar with the use of self-service channels for non-banking transactions, such as rail or airport ticketing.

Banks, in the US, have already introduced more self-service functionality in branches (and non-branch kiosks) to allow customers to print statements, make balance enquiries, research rates and product offerings. In the UK, Abbey is piloting touch-screen applications with ATMs in ‘pillars’, at remote locations, to expand self-service to encompass customer-led sales such as providing product information. A natural evolution would be to use in-branch systems for sales ‘self-service’ such as completion of applications before face-to-face meetings with a sales representative.

The branch’s position as a prime sales channel may have been strengthened rather than undermined by recent channel trends. Customers have always appreciated the extra security provided in the branch with personal assistance on site if required. Issues such as security concerns with internet banking and customer feedback of impersonal service by call centres only reinforce the position.

Replacement of ageing infrastructure is a precursor to transforming the branch into a high value self-service centre. From recent experience, infrastructure renewal will present a significant logistical challenge.

Key lessons to learn include:

• A flexible approach to implementation must be adopted — across the scope of activities e.g. initial communications, site surveys, network installation and go live of the new IT components. Planning must be comprehensive (with in-built contingency) to prevent disruption and re-scheduling with associated delays.

• Third party relationships and management are critical — cabling partners, construction partners and IT partners are key to achieving branch renewal and they need to be intrinsically involved in the programme so they are well informed and can flex to meet changing demands. More issues are caused by third parties not turning up as planned or causing disruption through other elements of the implementation. Best practice here will significantly reduce costs.

• The ability to manage a distributed and mixed estate of desktops is a key issue — most banks renewing their branch infrastructure are likely to be running different versions of the desktop though the rollout period.

Being able to rapidly distribute new versions of software, particularly virus patches, requires a robust software distribution methodology and toolset. Building this capability is key to successful management of the estate during the rollout and to support business as usual operations.

Ensuring the business is fully involved is fundamental to the success of branch renewal programmes. The technical upgrade must be complementary to the business objectives, such as customer self-service. The transformation should not be under-estimated, as both business and IT divisions must adapt current skills and offerings to effectively create and support the new branch environment.

The organisations that get these things right from the outset stand the best chance of maximising the returns from their branch investment.