Branches in Finance – coming or going?

If the 1990′s was a roadmap for the future of distribution in banking, the recent growth in branch numbers by Bendigo Bank, Bank of Queensland, Aussie, ANZ and NAB to name a few, indicate a map well past its use by date.

The continuing evolution of distribution within financial services is a product of the business cycle. The fact is the transition of the customer from branch to Internet and call centres has occurred, but not as a mutually exclusive option. The increasing complexity of the distribution channels, the presence of CRM strategies, and the desire for cross selling of products continues to demonstrate the intense competition for the customer dollar and the enduring value of the personalised relationship.

The role of the branch is, and will always be, to create access to the brand to serve the customers needs. The key to the future success of branches rests on understanding their role in the overall strategy. The recent evolution of ANZ Mortgages to include ANZ Mortgage Solutions (Mobile Franchise), or Aussie to prominent shopping centre stores, demonstrates the need for interaction between mobile, virtual, and ‘bricks and mortar’ strategies.

The somewhat recent entry, by comparison with global oil and fast food retail operators, of the owner operator or ‘community bank’ model, has further complicated the overall clarity of the ‘best strategy’. The simplicity in the owner operator strategy is built on productivity, a more enduring performance commitment, stronger customer relationships and service. 

Branches impose a higher fixed cost base of operation that practically requires more revenue to generate profitability on a per unit basis. The future of the branch has many opportunities and challenges to consider. Whether the increased role of the owner operator has shifted the competitive goal posts time will tell.

As in travel and telecommunications, the total value of the branch, including back end value, is important to consider. Lessons on cross selling can be drawn from many owner operator regional networks and studies on the role of the personalised relationship. The branch role in financial services will continue to evolve. Specialists combining, longer opening hours, ownership structures, and product diversification all make for an interesting time ahead. 

 

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