Rethinking your Branch Channel – 6 Key Questions

  • March, 2014

Bank’s channel strategy was to adopt a ‘me too’ strategy to channels, products and customer interaction. Banks differentiated their branches with bold coloured signage rather than unique products or customer experience. The world has changed. Banks must now design their branch network strategy that is appropriate for their customers, location, business model and style. While the management of channels may still be siloed in financial institutions, customer interaction must be looked at holistically across all channels. Branch transformation is a significant investment that warrants a process of consideration and analysis. There is an array of choices to be made. Here are the big questions!

1. Who needs your branches?

Many customer activities have moved to self service channels which better suit most of the interactions those customers require. Some customers use the branch because of need and some prefer branches. Profile your customer base understanding the customers you have and the customers that you would like to have. Do you have customers that prefer face to face interaction? Do you target small businesses that require regular notes and coin transactions? Remember that customers are not the only stakeholders in the branch, it may be a key route for your marketing department to deliver messaging or it may perform other functions in the community.

2. Where should your branches be located?

To paraphrase an analyst, banking is no longer a destination, it is something you do. Most bank front offices are in the same location for the last 30 years while retail and social patterns in towns and cities have changed. Banks need to choose branch locations that align to the work, social and daily activities of their target customers. Banks should consider co-location with supermarkets, train stations, universities, coffee shops or business centres. Understanding locations will enable an understanding of the ideal size of the branch network.

3. What is the role of the branch?

Any channel can fulfil a variety of functions, what functions should your branches perform?


Historically the main role of the branch was to perform transactions, this role has diminished greatly and will continue to diminish. Whether it will ever disappear from the branch is open to debate. Transacting within a branch environment is not always a bad thing as it enables transactions that are less suited to other channels. This may be because of the requirement to accept or dispense cash or negotiable instruments or because it is an unusual or exceptional request. Every financial institution invests significant resources in exception processing e.g. where a customer wants to withdraw more than their daily limit, has damaged notes or has lost a card. The use of trained staff in a branch can guide customers through these complex interactions. This enables financial institutions to make the self service channel simple and easy to use.


Customers have a number of ‘life events’ such as retirement planning, home purchase, family financial planning etc. that continue to be attractive to perform in a branch. Financial institutions are driven to add value to the banking functions that have become commoditized, the branch can be part of that solution.


Statistically products such as cards that are originated in a branch have a higher return for the financial institution. Regulation has increased the complexity and apprehension of many customers to open some types of accounts without guidance.


Research has indicated that even the customers who do not use the branch as their primary interaction channel chose institutions with a branch network. The branch presence in the community can be used to increase trust and brand recognition.

4. Should all of your branches be the same?

Having all branches the same creates a consistent user experience. The reality is that the majority of customers will always visit the same branch. The customers in a branch in a central business district are likely to be quite different from the customers in a university campus branch. Financial institutions need to strike the balance between an unmanageable branch network and meeting the needs of local markets or segments. Increasingly financial institutions may adopt a hub and spoke approach whereby a flagship branch may be ‘full service’ with smaller more targeted branches in the environs. It is not only the location, the size and the services that should be considered, opening hours may vary from place to place. A recent trend is branches where the functions evolve through the day. A flexible work environment is key to enabling the role of the branch to evolve.

5. Who will work in the branch?

Your staff are the most critical component to the branch. They have the ability to instil trust, solve problems and convert your customers to promoters of your brand. Who you put in your branch depends on the products and services provided. The main choice is whether to have employees with the flexibility to perform transact, sales and service tasks or whether to create areas of specialization. Staff costs are a significant cost for branch operations. It is critical that the focus is not on reducing cost and is actually on optimizing the return on investment in staffing. The staff in Motel 8 and The Four Seasons provide a different experience, when you understand your positioning you will align your employee selection, training and service delivery model.

6. Should a branch be more than a branch?

A shopkeeper does not get coins to have coins, they get them to enable sales. As financial services enable commercial activity, cohabiting with primary activities can deliver improved results. . Financial institutions should look to partnering with local business centres, supermarkets, tax advisors, car showrooms etc. to connect financial services to the transactions that they support. A financial institution may decide to open up a meeting room in a branch for use by community groups, driving footfall, brand awareness and loyalty. Branches can be a key component of a financial institutions below the line marketing.