Branch Transformation is Not Just a Cosmetic Affair
Why a Branch Transformation is Not About Superficial Design
Abstract: Branch banking today is highly competitive. Banks and credit unions must design branches skillfully with customer experience and return on investment (ROI) foremost in mind. Community engagement, brand loyalty, and the incorporation of technology are all indicators of an institution’s relevance, and crucial for branch success. Simply put, the renovation of financial branches is no longer a cosmetic affair. What was once a matter of choosing the right carpets and wall color has now become a major undertaking requiring industry expertise and the coordination of numerous disciplines. A modern branch transformation is an exercise in efficiency and cost-saving due to advances in cash handling equipment, interface redesigns, and banking communications technology. For most, if not all, of today’s branches, these renovations are first generation. All of the considerations discussed below must be properly mapped out to project realistic hurdle rates and payback periods. For instance, a branch footprint can be overestimated if mobile apps are promoted after a branch is designed. Up to 30% of transactions may be transferred to apps, reducing the spatial requirements. This paper helps guide those without the requisite knowledge to a fuller understanding of which branch elements are of value to customers, and the ways in which these elements can be configured for optimal return on investment. The focus is on community banks and credit unions in New England.
The proliferation of commercial material addressing changes in financial institutions states that branches are shrinking, that technology is dominating the financial industry, and that branches must now sport an ultra-modern look (which contradicts New England sensibilities). While some of this is true, there is no single blueprint for the so-called “branch of the future”; every case is different, not just from one institution to another, but from branch to branch within a single institution. This paper will define the core requirements for a modern branch transformation regardless of branch size or location, ignoring non-functional/non-value-added features. Five definite required elements are:
- Replacement of teller lines with dialogue towers and cash recyclers.
- Branch staff being trained in the universal banker and customer-engagement role.
- Value added offerings; PTM’s/ITM’s, financial advice/consultancy and the Omnichannel.
- Retail communications, branding and merchandising.
- Technology bars, café-lounges and learning spaces.
The dialogue pod: Changing the customer experience.
2. Dialogue Towers
Dialogue towers have opened up the role of branch staff to possibilities not dreamed of just 20 years ago. Where old style teller lines relied on their fortified appearance to reassure customers that cash and valuables were safe, pods achieve the same effect via a new technology called the cash recycler. From being housed like guards behind bulletproof glass or steel bars, branch staff are now relationship managers, operating from open-plan workstations with no physical barriers other than the counters necessary for supporting computers and transactional papers. Pods can be designed for any aesthetic or regional sensibility. They can be purchased as a kit-of-parts component or be custom-made for very specific locations in certain branches. Various materials are used in their construction including wood, metal, plastic, glass and stone. They also represent the most rational solution to the extra space created by removing teller lines combined with smaller branch footprints.
A typical dialogue tower, showing privacy partition, multilevel counters, and computer monitor.
2.1 Dialogue towers may assume almost any form, but certain characteristics are usually present. These include multilevel arrays of counter space, privacy partitions between stations, computers with swivel-mounted monitors, storage drawers on the staff side, and branding elements on the customer side. They are usually stand-alone “towers” with open access on all sides, with the expectation that customers won’t venture into the business side unless invited. Staff are fully expected to operate on both sides of the pod, especially if the computer monitors aren’t mounted on swivel stands. The pod model is welcoming and makes a refreshing change for consumers. But the single most revolutionary component of dialogue towers is the cash recycler.
Cash recyclers represent a quantum leap in function and asset security.
2.2 Cash recyclers have brought an unprecedented level of secure cash handling to the banking world. They’re inconspicuous and are designed for enhanced security; certified built-in safes mean the cash can be stored inside overnight with no external vault required. Positioned in the center of the pod between the dialogue bankers, recyclers can process 10 notes per second (dispensed or deposited) in any combination of denominations. They can log serial numbers for advanced error recovery. Their capacity can be as high as 17,100 notes, with continuous fast processing of large banknote deposits uninterruptedly. They contain tamper-proof cassettes that are fully secure and can be organized by denomination. Recyclers can count, organize, bundle and strap cash at remarkable speed1. This frees up the dialogue banker, whose attention can now be directed at the customer. Dialogue towers allow engagement banking at its finest, where the branch employee, once chiefly preoccupied with counting cash, can now participate in deeper interaction. The dialogue tower is therefore a key differentiator that drives brand loyalty, enables cross- or up-selling, and attracts new business.
2.3 Dialogue towers need cash recyclers for security reasons and to function optimally. Recyclers can be installed independent of a pod setup in other areas of the branch, most notably at the drive-through window. Pods cannot be installed without recyclers; the recycler is the “engine” of the pod, and without it all the benefits are completely absent and any cash present is far too vulnerable to robbery2. This is due to the open nature of pods. They’re designed to remove the traditional barriers of old and allow universal bankers to leave the service side and physically greet customers as they approach.
2.4 Customer experience and return on investment (ROI) are the most important aspects of a branch upgrade. When planning to migrate to pods, financial institutions must consult with branch design professionals to ensure all vital elements are present. When the dialogue towers are properly optimized for a dialogue banking experience, it opens up other retail possibilities within the branch. It cannot be stressed enough that without a cash recycler, a dialogue tower is merely a differently styled teller station, incapable of supporting dialogue banking in the true sense of the term. In addition to the staff reductions allowed by the more fluid role of the so-called universal banker, there are technological and other modifications that when combined yield higher ROI. The following sections will detail these branch elements that improve long-term efficiency and profits.
Dialogue banking boosts business.
3. UNIVERSAL BANKERS & COMMUNITY
Consumer dialogue leads to cross-selling (in concert with retail communications and merchandising, which we’ll discuss shortly), which means branch staff must now be trained in an expanded range of services, making them more valuable employees. Combined with the efficient performance of cash recyclers, this requires less full-time employees, resulting in significant operational savings. The training of these “universal bankers” should include a piloting period to acclimate them to the role, as they’ll be expected to undertake new and unfamiliar tasks. Universal bankers should be organized hierarchically, allowing for smooth transition from novice to expert level as a universal banker’s career advances.
3.1 Dialogue banking requires a different skill-set to that of traditional tellers; cash-handling proficiency has been replaced by a demand for sales skills. With more time available to build relationships, universal bankers can introduce customers to an array of retail financial services while the cash recycler does the physical work. Deeper engagement can match customer desires to corresponding products and services. Community banks and credit unions have the advantage in this regard; they’re part of the local economy, and personal communications universal bankers and customers fulfil the human need to share better than less personally-accessible super-regionals and nationals. One of the chief tools of the universal banker is the computer tablet, as it is portable and can connect to any number of banking apps and websites.
3.2 Cross-selling, training/pilot programs and other aspects of this vocation need to be examined and strategized before dialogue towers are installed. It’s recommended that staff be included in the preparation for the universal banker model six months prior to launch3. A step-by-step analysis based on other financial institutions’ experiences with this transition is useful, as are consultations with branch design professionals to determine the extent to which the
branch must be redesigned for fully holistic dialogue banking. Staff may be resistant to change, necessitating an aggressive re-training program to determine those more able to make the transition. Universal bankers are more valuable than traditional tellers, so the potential pay raise will also be a great motivator.
3.3 Universal bankers’ strengths lie in versatility rather than physical territory, though universal bankers are certainly not confined to the pod. The “roaming” model covers the entire retail floor, where branch visitors can be intercepted and guided as they enter and explore the business environment. The universal banker quickly determines visitors’ needs, and delivers them either to a tech bar, advisor, loan officer, or attends to them personally. Concierges were also tested more recently to provide a premium service feel to customers, but these have been largely discontinued as their cost cannot be justified. Instead, universal bankers skilled in the art and minutiae of selling products can now determine exactly which branch zone or staffer is appropriate for a visitor’s needs. The concierge concept has been supplanted by that of the universal banker at this point in time.
Universal bankers can leave the dialogue tower and roam the entire retail floor.
3.4 The strength of dialogue banking lies in its ability to encompass and endorse community values and customs. When people interact on a more meaningful level, it’s an experience they want to repeat. At one time, the drive-thru4 was heralded as the greatest thing to happen to our consumption/mobility lifestyle, but digital banking has proved even more efficient. Efficiency and convenience will always feature high as consumer priorities, with the latter undergoing a shift in meaning over the next several decades; the value of “community” is poised for resurgence, not just in banking but in all commercial and civic aspects of society. Movements like Smart Growth America are championing “walkable neighborhoods”, mixed land use, and direct stakeholder involvement in designed communities. The physical branch will be of prime importance as these more sustainable communities are developed. New England is well positioned to thrive under the so-called “complete streets” model, as many of our communities were built during a time when high pedestrianism was the norm. This is worth bearing in mind from a brand positioning as well as a branch transformation perspective. The Solidus white paper, “Meaningful Community Participation for Banks and Credit Unions”, is recommended for further reading.
Walkable neighborhoods: driving the emergence of “designed communities”
3.5 In conclusion, cross-selling and authentic community participation are the most effective approaches to the changing branch role, but minus proper training the benefits won’t be realized. There may be resistance to a transition from traditional tellers to universal bankers, but the universal banker model is currently the one that best complements larger industry changes. Ultimately, customer service skills and industry expertise can together build brand
trust, which leads to customers consolidating their financial accounts within a single financial institution. With more financial “eggs in one basket”, consumers will be far less likely to leave a brand, creating loyalty as well as higher value customers. Branch banking is at a tipping point; without applying these changes in the next branch transformation, institutions will make themselves more vulnerable to extinction.
4. INCREASING ROI: COMBINING TECHNOLOGY WITH STAFFING STRATEGY
While superficial branch appearance can influence customer decisions and loyalties, it’s the deeper functional aspects of a branch renovation (like cash recyclers) that truly affect ROI. In selecting a reputable architect/design-builder, decision-makers should be clear about themes, colors and other non-functional details. A branch upgrade is not a design contest; it’s an opportunity for a financial institution to bring their business environment into line with the most current industry standards or, if they’re fortunate, benefit from consultation with an industry thought-leader who can implement “future-proof” modules that can be adapted in real-time. These modules include dialogue towers, branding/merchandising kiosks and display units, check desks and more. Staff roles, fixtures and millwork can therefore be designed around each other. When staff are distilled down to their highest value-per-employee ratio, the introduction of other value-added service features boosts ROI significantly. These include video ATM’s, in-branch consultancies, and financial advisors.
Automated branches free up time and space for expanded financial services like advice and consultancy.
4.1 Basic teller transactions were automated to some extent by the introduction of ATM’s at the turn of the 1970’s5. However, many customers needed more than a simple cash withdrawal, and so traditional bank tellers prevailed. With the latest ATM technology, customers are now connected to an audio-visual call center, where a remote banker communicates with them via a speaker/phone and a TV screen on the cash machine. This new generation of ATM is called a PTM (personal teller machine) or an ITM (interactive teller machine). These machines can accept as well as deposit cash, cash checks, transfer funds and accept loan payments, all paperless. The remote employee can also offer the customer face-to-face guidance and provide feedback on other issues they may have. The incorporation of video tellers into call centers means no more bored tellers waiting for customers to enter the branch, so F.I.’s save on full-time employee wages. When one considers that an average check transaction via “intelligent deposit”6 at an advanced ATM costs F.I.’s around ¢59 compared to $4 via traditional teller, this adds up to a significant internal rate of return. Additionally, remaining branch staff can now offer higher value services, such as financial advisory and cross-selling.
An interactive teller machine (ITM) with telephone and video screen. Able to both dispense and accept deposits7.
4.2 As branch staffing models adapt to a sales and service culture, employees with a retail mindset will be valued over those who lack people skills. Delivering a positive customer experience by personably conveying expertise in all financial areas is the chief differentiator for today’s financial institutions. The branch footprint is shrinking, but private consultation offices are being increasingly incorporated into the branch space. Universal bankers can now leave their pods and accompany customers for in-depth discussions on investments, loans, and other issues, such as insurance and financial product consolidation. The in-branch advisor/salesperson should be conversant with all the institution’s functions, with a heavier concentration in their area of specialty. They should also be able to extract deep customer data during interactions. Branch consultant and advisor skill-sets should include the ability to develop post-conversion (or post-customer communication) reports that help achieve higher conversion rates across the entire branch team. In other words, their communications skills should excel internally as well as customer-facing.
4.3 Financial advice and consultancy will function as gateways to the so-called Omnichannel experience8. This is because these services apply closely to the on- and offline linkages the Omnichannel opens up for consumers. For example, a bank may offer mortgages, and develop a mobile app that shows available real estate within a certain radius. The app encourages customer interaction from the outset, raising the probability that they’ll continue engaging with the F.I. as their home buying experience progresses. The app can also feature advice portals, and the ability to make appointments with an in-branch mortgage advisor. The visit to the branch for advice, the mobile app, and the home buying experience, can all be managed within a “leak-proof” continuous digital and real-life environment. The branch advisor can even communicate with the home buyer via the app. The home buyer can transfer funds, track the mortgage application process, and generally become more invested than ever in their financial institution.
4.4 It is estimated that by 2017, America’s 50 million Gen X’ers will constitute the largest source of new relationships for financial advisors, while 77 million Gen Y’ers will be the second-highest source by 20239. This next generation of financial investor/advice seeker will be tech-savvier and totally acclimated to the Omnichannel. The branch advisors themselves will be products of the Information Age and, like universal bankers, will be qualified to provide financial guidance across all aspects of their institution’s operations. Increasingly, advisors, consultants and universal bankers are being empowered to waive fees on the fly if it means converting service opportunities into sales events. Financial institutions enjoy a unique view into their customers’ most personal finances, and as the focus shifts from the Boomer investor to Gen X to the Millennial, this data will be crucial in maintaining growth. Millennials will be the first generation to have grown up with tellerless branches, PTM’s, and branches as “stores”. Smaller footprint branches, featuring fully-automated services, with hoteling office space for financial consultants, will be a familiar sight to them.
4.5 In conclusion, the advice/consultancy piece will replace lower-value teller cash transactions by combining interactive technology, new staff roles and emphasis on private consultative offices. Future generations of homebuyers, investors and account holders will be native to the new branch model, as will be the consultant-advisors themselves. Financial institutions that continue to employ the teller line model are at risk of becoming irrelevant and losing a large fraction of their customer base.
A customer experience map showing the different retail zones in a financial branch.
5. RETAIL COMMUNICATIONS, BRANDING AND MERCHANDISING
Community banks and credit unions are morphing from the institutional to the store model. Retail merchandising and commercial branding now play an essential role in communicating offers, services and products to branch visitors. Similar to the more successful store brands, financial institutions have become more sophisticated in the way they target prospects. The branch is now analyzed in terms of discrete retail zones, each of which represents a different stage of the customer journey, reflected by individual elements within each zone. Banks have not traditionally provided particularly compelling environments; people actually speed up when they walk past banks10. Today’s retail communications specialists therefore are faced with a challenge in attracting new customers and engaging existing ones. However, by using data-driven design, retail communications for banks and credit unions can be extremely effective. The “science of shopping” has arrived in the financial industry and F.I.’s are realizing the advantages in its application.
5.1 Experience mapping is used to model discrete sub-contexts in a customer’s journey through a retail environment. The map takes into account all activities branch visitors engage in and pieces together the various touchpoints to construct a holistic picture. This can then be translated into a diagram similar to the one above. The experience map is basically the financial institute’s floor plan with all the touchpoints, branding and messaging transposed upon it. This simple explanation doesn’t properly do justice to the complex process of researching data sets based on large samples of customer behavior. The experience map provides a kind of cross-channel panorama of where in the branch customers encounter the different service offerings and where best to site messaging related to those offerings. The map can be used to characterize the touchpoints both quantitatively and qualitatively, and is a useful tool in designing bank and credit union interiors. Retail communications specialists are best qualified for these types of analyses.
A modular check desk with retail communications materials incorporated.
5.2 Branding and merchandising serve two different functions. Branding reinforces company identity while merchandising makes people aware of the products and services the brand sells. A strong brand is built by providing good customer experience. As the saying goes, “A brand is what people say about you when you’re not there11”. Customer experience and branch efficiency are top priorities, but without the passion of a team that really wants their brand to triumph, customer response won’t reach its full potential. The financial industry is currently enjoying a renaissance in branding and marketing in concert with the shift towards higher efficiency and informal design. Graphic walls, interactive displays, enhanced branding and signage, all are being employed in ever-more creative and data-driven ways.
Retail communications can bring “dead space” to life and raise branch conversion rates.
5.3 Community banks and credit unions need to explicitly demonstrate that they’re part of and invested in their communities for authentic customer relationships and for proper dialogue banking to proliferate. An important aspect of this is the installation of graphic walls that combine branding with iconic features of local history or general interest. These graphic walls can take various forms, including flat-screen TV displays, 3-D fixtures, large photographs and even lifelike models. An interior designer will know exactly where in the branch this should be sited for maximum impact, as with other elements of the retail experience.
A modular display kiosk with digital messaging and brochure dispensers.
5.4 As stated, a branch transformation (a new build or renovation) is about far more than cosmetic appearance, but cosmetics are certainly important. The power of the new branch lies in its efficient layout and technology, both of which can be designed or selected to complement any desired color scheme, construction materials or architectural style. In addition to the graphic community wall, there should be strategically sited kiosks, displays and dispensers, each placed in optimal locations for their respective purposes. The universal banker’s station is an effective focal point for promotional displays, as customers can ask for and receive more information immediately. Retail communications professionals use experience maps to control customer flow through the branch, exposing consumers to targeted messaging at specific touchpoints. This enhances the brand experience and raises per-square-foot profitability.
5.5 Effective messaging with an emphasis on dialogue and communication educates branch customers in financial decision-making and makes them savvier asset holders. This builds on the relationship theme; engagement banking creates loyal customers who ideally will become brand advocates. Financial branch interiors are no longer as intuitively navigable as they once were, when the teller line was the first place people went to begin any financial process. For this reason, proper retail communications have become a crucial factor in exploiting efficient designs that may include remote video ATM’s, consulting offices, roaming floor staff, dialogue towers and even coffee bars.
Modular beverage center designed for a bank or credit union.
6. TECHNOLOGY BARS, CAFÉ-LOUNGES AND LEARNING SPACES
This final bullet point is concerned with the user-friendly and recreational aspects of a branch transformation; tech bars and café-lounge spaces. Technology bars offer branch visitors access to multiple financial channels, as well as secure public Wi-Fi where they can read the news, use email, and even communicate with people over Skype in some cases. The tech bar setup is quite uniform across the industry: A waist-high counter, either against a wall or as an “island” in the middle of the branch floor, with several mobile devices sitting on it. These devices are laptops, tablets and smartphones. The devices are pre-loaded with the F.I.’s own banking apps, and customers can simply log in and perform self-service tasks. If they need assistance, there will be universal bankers on hand to provide it. The branch may also offer coffee and other beverages, in an even less formal environment with easy chairs, couches and coffee-tables.
6.1 The so-called “coffee-shop branch” is a reality, with many of today’s institutions more resembling café-bars than banks. It could be said that internet cafés paved the way for lounge banking, with the ability to charge mobile devices and connect to the internet, as well as browse hard-copy magazines and brochures. In these financial institutions customers can receive training on mobile devices and even check in to an online queue where they can await an appointment with a universal banker. The devices are also carried by universal bankers for casual, barrier-free interaction with branch visitors. As ever-greater numbers of consumers use tech bars in branches, financial institutions will accumulate more data than ever before on their customers’ banking habits by tracking device activity. This bodes well for F.I.’s who have already carried out, or are currently considering, a branch refresh or a new branch build.
6.2 The concept of in-branch mobile devices might initially sound counterintuitive, but tech bars (as well as customers’ own mobile devices) add up to a vastly more productive financial experience. By creating firewalled opt-in applications, financial institutions can share more personal information with customers. They can also track customer activity to the point where branch staff is alerted when top-tier customers merely enter the branch, so they can be greeted and engaged with immediately. Currently, F.I.’s can be oblivious to the physical presence of prime customers and fail to initiate processes that lead to conversions. Similar to non-financial shopping apps, banks and credit unions can also now target customers with offers and promotions when they’re known to be in the branch neighborhood. Financial institutions that achieve Omnichannel interactions will enjoy access to a considerable range of user data that can be used to message them responsively in real-time.
6.3 There are several terms such as “VIP lounge”, “anti-bank”, and “café bank” being used to describe the phenomenon of banks and credit unions incorporating the coffee-shop element. The most common and practical version is a simple coffee and tea set-up based around a mid-range brewing system. The branch provides cups, sugar, milk, etc, and possibly gives away carry-mugs as a branding exercise. Furniture associated with this zone can be simple; a couple of chairs and a coffee-table, with a tablet on it. This ensemble creates a mini-lounge, a significantly less costly transition state than full-blown conversion to something more exotic. There are F.I.’s that have taken the concept much further, however.
6.4 Return on investment is all-important, but some banks and credit unions have decided that it’s worth it to go “all in” on a branch re-design and transform their image completely to that of a café-style institution. These branches are also open to using their space for other community activities, such as learning seminars, yoga practices, and even movie nights. These institutions aren’t necessarily lavish (though some are), but instead embrace an urbane, edgier image. Some are reminiscent of urban lofts, or premises converted from non-retail use, such as warehouses and abattoirs. Others are more like hoteling or space-sharing outfits, with a fast and fun attitude. There are branches that function as quasi-spas, where weary shoppers can relax and enjoy a drink, while lounging and logging on to their financial apps. These types of branches are most successful when located in neighborhoods with high foot traffic. The return to the walkable neighborhood may well prove a boon to this model, as well as to community banks and credit unions in general.
Cosmetic branch makeovers do not improve ROI and discourage customer loyalty. To add value to a branch and remain competitive, institutions must now look to processes that accelerate or automate basic services and free up time to engage customers more deeply. These processes include: Dialogue towers with cash recyclers installed; remote video machines; properly trained universal bankers; retail communications, branding and merchandising designed by industry professionals using experience maps; branch staff trained in the art of cross-selling and people skills; technology bars where customers can log into mobile devices inside the branch; data mining from banking apps, siting of private consultation booths or offices inside branches, and community-oriented areas such as beverage centers, seminar spaces, and spa-lounges. Interior design is still very much worthy of consideration, but decision-makers should transparently convey their personal tastes in this regard to contractors and designers. The process of selecting a company to perform a branch transformation or new build should not resemble a superficial design contest. However, application of the above listed functional elements is crucial to the success of modern financial institutions. Informed decisions on these types of upgrades have to be carefully considered; realistic hurdle rates, payback periods and internal rates of return cannot be calculated until branch offerings have been comprehensively assessed and marketing of all capabilities optimized.
To learn more about branch renovations or new branch builds, make an appointment for a FREE consultation with our financial industry professionals. Look out for our upcoming white papers, “Meaningful Community Participation for Banks and Credit Unions” and “Creating the Omnichannel Experience for Community Banks and Credit Unions”.
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 Specs for the RBG-100 Cash Recycler, Glory USA Inc.
 Source: New England Money Handling Systems, Inc.
 The American Bankers Association offers a Universal Bankers Certificate, which comprises 12 courses spanning approximately 25 hours of study. The courses are available for one year from the date of purchase.
 It’s interesting to note that the first drive-thru-incorporated business in the US was the City Center Bank in Syracuse, NY in 1928, and not a restaurant as one might expect.
 There’s some debate about when the first ATM was invented and who invented it as several people, beginning with Luther George Simjian in the late-1930’s, through the 1960’s and 1970’s with John Shepherd-Barron, James Goodfellow, Don Wetzel, John D. White and Jairus Larson all claiming “firsts”. In general, the popular version of the ATM was realized in various forms at the turn of the 1970’s.
 Image-enabled depository ATM’s that accept cash and check deposits via imaging, providing 24/7 transaction processing and credit upload within five minutes in most cases. Source: Sandy Dixon & Associates, LLC.
 PTM image of SelfServ™ 32 Interactive Teller, NCR Corporation.
 For a more in-depth overview of what the Omnichannel means for financial institutions, please see the Solidus white paper, “Creating the Omnichannel Experience for Community Banks and Credit Unions”.
 The Boston Consulting Group, 2012.
 Why We Buy: The Science of Shopping, by Paco Underhill. Simon & Schuster (June 2, 2000)
 Jeff Bezos, CEO, Amazon.