Micro Branches | The Next Big Idea?
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Enhancing your branch strategy with the most flexible of solutions – the micro branch.
Branch density is the goal. Space to build is the challenge. What makes a financial institution’s branching strategy successful? Many experts point to density “more locations and brand”. Agreed! However, what if the target community doesn’t have any suitably sized site options within the desired market? Or, what if there is not a lease space available in this market?
Are more branches an opportunity? Or a risk?
This begs a follow-up question: What about branch network density? Should a financial institution continue to invest in branch density given the advent of new technologies that may lead to a decreasing need for branches? On the other hand, what if digital and mobile channels, video tellers, and smart cash equipment don’t decrease the number of branches, but rather enhance the capability of the branch to better serve consumers? Is it possible the micro branch can be a solution for these facility questions?
What is a micro branch?
Essentially, It can be whatever you dream up! As long as it has a small footprint, is heavily branded and uses smart technology. For instance, it can be a shipping container converted into a permanent freestanding branch (see image above), equipped with an ATM and a universal banker office. Or it could be a 1,000 to 1,500 square foot freestanding branch equipped with video tellers, assisted self-service or ATMs and staffed with a few universal bankers.
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All kinds of possibility.
These imaginative facilities can contribute to branch density through a downsized, refined package while still offering similar services as larger branches. We have the technology; let’s use it!
The micro branching movement is putting the spotlight on a new way of thinking about service facilities…here’s how:
- Speed to market – Micro branches provide financial institutions the opportunity to enter the market quicker because design and construction durations are much shorter.
- Cost does matter – Because of the reduced branch size, these facilities require less real estate, and the cost to build and maintain is lower compared to a more conventional cornerstone (hub office) or community branch.
- Staffing – Micro branches typically have a reduced staff. The staff is focused on high-value customer interactions – while technology handles the more mundane transactional components.
- Resiliency – Micro branches provide agility in decision making for financial institutions needing to quickly adapt to the market. For example, a container facility can be converted to a cashless location, or due to a shift in market dynamics, the micro branch can be converted to a loan or mortgage facility.
- Dream big with less – Micro branches give financial institutions the opportunity to venture into markets that previously were not considered a possibility due to lack of site options. For example, in a dense retail area, where room is snug and will not accommodate a community size branch, a permanent container facility or small prefabricated facility may be a quicker and more effective solution for the market.
- Deliver the deliverables – Micro branches are outfitted to deliver the intended service solutions for targeted communities. In fact, these facilities give greater flexibility for branch density strategies by providing the financial institution greater access for entry into specific markets of interest.
- It’s on the menu – Micro branches can have full-service capabilities such as cash handling technology (ATMs or ITMs), and even drive up lanes. Furthermore, micro branches can be constructed “your way” with the same high-quality construction, and architectural brand identity, as seen with a traditional facility.
Customized for the community. The beauty of the micro branch, besides its lower cost, is that it can meet the desired financial needs of a community, creating better opportunity for consumer loyalty and satisfaction. As is the case with all branches, micro facilities are targeted for specific market and community conditions. And, having the ability to enhance the product and service offerings to a community while contributing to branch density. The micro branch is an option that gives financial institutions greater flexibility to enrich its intended branching goals and improve its presence in communities once thought to be out of reach!
The micro branch reduces the risk of branch density and rewards institutions willing to explore the possibilities.
The relevancy of branches for an FI is something to greatly consider. Maybe this article will help.
Financial Resources FCU | Micro Branch of the Future
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Financial Resources FCU “Micro” Branch of the Future
Much is written about the “Branch of Future”, but a version of it may be in operation, today in New Jersey. LEVEL5 is proud to announce Financial Resources FCU’s new micro branch in Jersey City, NJ. This start-of-the-art branch focuses on automation and brand to serve its consumers and community.
The 1,100-square foot facility is located in the Newport Tower on Washington Boulevard near the subway. The branch is powered by NCR’s Interactive Teller technology, which allows the Credit Union to operate the facility 24-hours a day. NCR’s Interactive Teller machines (ITMs) provide the normal operation of an ATM, but with a video option that allows consumers to interact with a live representative.
“Advancements in retail technology, like ITMs, are allowing the community-based financial institution (FI) to compete, at scale with much larger FIs,” said Mike Colvin, Executive Vice President of LEVEL5. “Financial Resources has taken the next leap in consumer experience with this new branch allowing convenience, service and brand in a much smaller footprint.”
The branch’s two ITMs are connected via video back to the Credit Union’s call center. This allows the physical branch to operate with fewer staff, while consumers, using the ITMs, interact with live Financial Resources’ member reps in the call center. The in-branch staff, no longer encumbered by teller fixtures and balancing cash, are focused on service and sales to meet the needs of its consumers. In summary, routine transactions are handled more efficiently through technology, allowing for more complex interactions with branch staff.
Frank Almeida, COO of Financial Resources added, “Though routine banking needs are now being automated, we have found the human component to still be a primary need of our members.” Mr. Almeida continued, “The value of the branch and our use of ITMs is not to replace the importance of the human interaction, but to enhance convenience outside normal hours, and have the ability to provide depth for all their financial needs.”
The branch’s focus on convenience is also evidenced by the use of two-way video in the conference room allowing consumer-access to Credit Union specialist at other locations. Furthermore, the Financial Resource FCU brand is on full display throughout the space inclusive of video displays to educate consumers on how the Credit Union can integrate with their daily lives.
Mr. Almeida offered, “We chose LEVEL5 for our newest branch because they understand consumer experience, new branch technologies, and are experts in bringing together all of the components in the design-build of financial facilities.”
Smaller branches are not just a trend they are a new reality. Check out this new freestanding branch that is heavy on automation in a small footprint.
Jetstream FCU | Micro Branch
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Doral Branch is 2nd Branch Project with LEVEL5
LEVEL5 is pleased to announce that Jetstream Federal Credit Union has awarded our firm a second Micro Branch design-build project this time in Doral, FL. Jeanne Kucey, President and CEO of Jetstream stated, “LEVEL5 completed a Micro Branch for us in Miami Lakes, Florida in 2015. Their experience in design and construction is quite evident in that facility. We have a beautiful facility to serve our members. The project in Doral has an extremely short time duration and LEVEL5 was chosen because of their capabilities to get us where we need to be and also to build a first class facility for our members in Doral. There was only one choice for us and that was to use the best and that is LEVEL5.”
“I couldn’t be happier or more proud of our design/construction team” said Mike Colvin, Executive Vice President / Principal of LEVEL5. “They are being challenged with a tight deadline and have moved forward swiftly with an excellent design and process to enable our client to meet their stated goal. The ultimate sign of client satisfaction and confidence is additional business, and we are excited to work with the Jetstream team again in 2016.
Micro Branches are the next big thing for FIs. What is a Micro Branch? This article should help:
Branch Transformation | An Omni-Channel Experience
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- Branch Transformation
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A new distribution network emerges…Omni-Channel
Today’s financial services environment is characterized by change. The drivers of change include consumers, technology, and delivery systems. Moreover, financial institutions must change with these elements to remain relevant and competitive in today’s omni-channel economy. In addition, balancing service to younger and older segments and their preferences for how service is delivered will define success for the financial institution in the future – and keep in mind, that the customer is the judge of service quality.
Location, location, location
One of the biggest questions that we hear is, “How do branches maintain their relevance in an increasingly technological age?” Surveys underscore that 60 – 80% of new banking relationships are established through the branch network. Furthermore, a recent Ernst & Young study says 65% of sales occur in a physical location i.e. a branch. However, once the relationships are made, regardless of the financial institution’s size, customers migrate through a variety of delivery channels, with each customer seeking his or her most comfortable and effective method of interacting with the institution.
So…how does the branch fit today and tomorrow?
Omni-Channel Delivery – defined
What we are describing is the distribution system that financial institutions will employ tomorrow (that is, if they haven’t already started) – the omni-channel distribution network. This network combines automated, physical, and virtual channels into a flexible, and consistent branded customer experience.
Furthermore, the physical branch synchronizes these channels by establishing customer expectations and the institution’s brand image in the market.
It’s always on. The automated channel includes the institution’s ATMs and Interactive Teller Machines (ITMs). These channels are often self-service or assisted service and can operate 24/7/365, locally. The virtual channels include the phone system, web-based, and mobile platforms. These channels may be self-service or offer some level of assistance and operate 24/7/365…globally.
Evolution of Physical Channels
In the omni-channel network, the physical channel contributes to service density by providing visibility, accessibility, and the institution’s full range of products and services. As always, convenience is a driver in the consumer’s choice of financial institution. Remember…65% of consumer sales occur in a physical branch. So, convenience is aligned with a habitual consumer commuting pattern between where individuals live, work, and shop.
The branch must find its purpose. As the retail branch evolves, it will be developed with a specific target market and “business case” as the motivation. Branches will have a reduced footprint, scaled to meet market and customer demands and styled to match those same preferences. Space within the branch will be open and flexible to facilitate change as needed to respond to changing market conditions.
The four types of branches
The branch of the future (or today) will be scaled and styled to accomplish several purposes. Many markets will include a cornerstone branch. This office is usually a large-format facility staffed by universal bankers and subject matter experts, and additional amenities. This office is the institution’s “statement” in the marketplace. (Here are some examples.)
Community branches are smaller than the cornerstone offices, but offer a similar level of service. They are focused on customer service and sales, staffed by universal bankers, and showcase the institution’s technology and automation. They offer the ability to schedule subject matter experts either by appointment of through an automated or a virtual connection. (Here are some examples.)
Micro branches are often found in storefront locations or leased space. These offices can be transaction focused, but are staffed with fewer employees and more technology to boost efficiency. They are heavy on technology, automation, and branding. Micro branches rely on automated channels (ATMs, ITMS, etc.) to provide most of the transactional capacity, with employees available for sales and service as needed. (Here are some examples.)
Finally, the self service branch is fully automated and heavily branded and has no employees. You can imagine a full service ATM installation or, more likely in today’s economy, an ITM creating an outpost of service for customers with extended hours capability.
Conclusion: Branches still matter
Although the role of the branch is changing, retail branches remain an important element in an institution’s omni-channel delivery strategy. As financial institutions evaluate their current networks or contemplate new branches for branch transformation, they must be keenly aware of the market they intend to serve and the business case that supports the decision.
In the future, branches will be smaller and will focus on customer service and sale of more sophisticated products and services. The branch will work in a hub and spoke relationship with a variety of other delivery channels to offer the customer a wide variety of access points to the institution to deepen wallet share and long term stickiness with the institution.
In the omni-channel network, the branch plays a different and even more valuable role than ever – providing connection with the customer and community.
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