It’s that time of year again. This is when we look ahead to stick our necks out and make bold claims predicting the year to come.
While we don’t claim to be soothsaying, we do have the crystal ball and know how to interpret its readings. So here, in a two-part series, we outline trends and share our thoughts on what is to come. This way, you can interpret and translate accordingly for your 2021 strategic plans.
While saying the branch will change is an obvious statement on the surface, as any retail setting inevitably ebbs and flows with the times, these are most unusual times. It’s no mystery that the COVID-19 has altered the course of banking, retail, and the economy as a whole.
What began to unfold in mid to late March 2020 was reactionary. It was a triage of our retail facilities (and employee facilities) as impact was still unfolding. While the impact of the pandemic is still very much at play in our daily lives, enough time has transpired to understand its effect on our businesses. 2021 retail strategies need to incorporate COVID’s legacy.
Aside from the simple and expected sanitization stations, the branch needs to evolve for a post-pandemic world. If an “open concept” branch was just a trend
previously, it is a necessity now. While there may come a day when social distancing is not mandated, it will remain a practice with a long hangover in our collective consciousness. Your branch layout needs to accommodate for it.
While some believe that traditional Teller Lines still have a place in the branch, Teller Towers are at the forefront like never before. These pods, with the right Banking Equipment, enable a more open floor plan while eliminating the old-school queuing.
Rise of the Machines
No, we’re not talking about robots inheriting the earth. The right blend of technology will modernize your branch, enhance the overall retail experience, enable social distancing naturally, and make traditional in-branch transactions that much more efficient.
The right blend of technology, both in and outside of your branch, will enhance the overall customer experience. This, in turn, will further justify the need for branch visits.
Teller Cash Recyclers work perfectly affixed to a Teller Tower. It enables Universal Tellers to man these stations while also giving them the flexibility to walk about the branch.
Interactive Teller Machines have been a much discussed and much contemplated piece of technology. Now, they have as much justification as ever before with the Renaissance seen in the drive through. ITMs in your drive-through give visitors the transactional need while also allowing for an interactive experience, albeit virtually.
The Omni-Channel Dilemma
It is no secret that digital transactions have risen since the pandemic hit last Spring. The reliance on digital methods became the only option when branches closed. Those who were reluctant to take advantage of simple transactions and information via Online Banking portals or Apps were forced to do so out of necessity and lack of options.
What is more surprising, though, is that in-branch transactions, particularly those involving account openings, has nearly, if not entirely rebounded to pre-pandemic levels.
So the question is: Do you invest in the Branch, or do you invest in your Digital Channels?
When you come to a fork in the road… take it. By this we mean, you should be investing equally in your offline and online channels. You always should have been.
Digital products and technological marvels get all the headlines. A more balanced omni-channel approach to your clients, however, has always been the right answer.
Sure, budgets may swing in favor of digital one year, then back to the retail branch the next. This is all a balancing act in what should be an equally weighted customer touchpoint strategy that unfolds over the course of many years as part of a well-executed three, five, even ten year strategic plan.
Executing this accurately, thoughtfully, and strategically, gives you a well-executed customer experience.
Experience Good Experience
If you have any web or app developers on your team, or if you’ve ever in a development meeting, you’ve heard words like “frictionless” and “UX.”Gone are the days of bloated and cavernous digital engagements. A digital design wants as few dead ends and wrong paths as possible, providing a frictionless experience. UX, or User Experience, is king when it comes to designing a new website and smartphone application. Extensive planning happens before any code is written or deployed.
Your branch should be no different. If the idea of a good customer experience in your retail setting is news to you, it is not too late. The branch is going through an evolution the wake of the pandemic. Now, more than ever, you truly need to be thinking engagement and experience first when it comes to your branch.
The branch is important, and while digital channels should not be seen as a replacement for functions in the branch, they should be complimentary and designed equally from a UX perspective.
Give your visitors a reason to continue to come in. Whether it be traditional transactions or advisory sessions, the branch is still an important piece in your omni-channel strategy.
Allow the right technology to perform transactions. The right staff on point to answer the right questions, and, more importantly, open accounts, is where your branch should really shine.
Blending transactions and advisory services into a seamless retail experience is the right approach.
If you would like to jump into addressing some of your glaring branch shortcomings, our Re-FI Design Program is the perfect anecdote to an outdated branch.
The Great Migration (Back to Work)
Just as giant herds of wildebeest seek greener pastures, your employees too will return from whence they came.
While the pandemic continues to steal headlines and as I continue to write this article, cases are as high as ever. Branches hours are changing daily, but there is light at the end of the tunnel. Whether it’s due to warmer temperatures, vaccination roll outs, or herd immunity, many believe the pandemic’s peak is upon us. The downward curve is fast approaching and health and business experts alike agree that the post-pandemic world is within reach.
Your employees, who are still working in their home offices, kitchen tables, or closets under the stairs, will have to physically return to their places of employment. It could be on a flex schedule or full-time basis. No matter what, though, they are returning and you and your organization must be prepared for them.
Aside from some bottles of sanitizer, chances are that your corporate offices are not prepared for a proper return. Do your current offices need to be renovated accordingly? Are you looking into the future for an entirely different office building? If so, we have created the “L5 HQ” program, which is meant to assess your corporate office needs.
The Cost of Things
The cost of doing business, specifically in the Design-Build world, has been greatly impacted by the pandemic. As we look ahead to 2021, there will be carryover from 2020 along the following fronts:
One of the ironic impacts from the pandemic has been the boom to the construction industry. If you have not done something to your home, the chances are, your neighbor has. Ever since the first wave of lockdowns commenced back in March, there was a massive rise in DIY projects. All of a sudden, desires arose to landscape yards, update kitchens, overhaul master baths, finish unfinished basements (guilty), and build out those home offices.
While on the surface, this all sounds residential and not commercial, an impact on labor is seen across sectors. You see, the crew doing your home project may also be the sub-contractor at the complex up the road.
Thus, we have a national labor shortage, with states like New York, Florida, California and Texas particularly feeling the pinch.
This is where planning ahead and having the right General Contractor for your branch or headquarters project really count.
The right GC has existing relationships with the local sub-contractors who pour the concrete, set the framing, and manage all the other elements that make up your building. Subs tend to allow themselves to be hired out by those they trust, and those who feed them continued work. A local General Contractor typically does not have the pull and project load compared to a national outfit.
So, if there is a labor shortage, that must mean that there are many projects abound and materials are in short supply. When supply is short, costs go up. Timber in particular has struggled to keep up with demand. While our projects continue to stay on budget, we are aware of the national timber shortage and have seen it impacting jobs across the country.
Regardless, post-pandemic prices have not dipped, but are instead rising slightly. There will likely be a leveling off by mid-summer. Projects in the construction industry have stayed steady, however.
Q&A RE M&A
I sat down with our lead consultant, John Hyche. His reputation as a thought leader in the industry has continued throughout his nearly 30-year career. John is no stranger to Mergers and Acquisitions, having been involved in heading many consulting engagements with clients over the years.
I asked John his thoughts regarding Mergers and Acquisitions and the below is a summary of his thoughts:
Mergers and Acquisitions will continue to be a trend within the industry. While the pandemic and post-pandemic world has its influence, the trends and reasonings behind the topic are consistent.
They can be broken down into 3 broad categories.
The first we’ll call “The Smaller Players.” These community based FI’s are typically operating a small handful of branches in their comfortable corner of a given market, with assets in the single digit millions to low double digits. They are surrounded by larger players, both in asset size, branch network and most importantly, efficiencies. The smaller players may ultimately find themselves at a precipice, where the cannot grow. Conversely, they may fill a niche for a local larger player, and so a M&A play commences.
The second scenario we’ll call “Merger of Equals.” This is when two like FI’s see complimentary components with one another. They may be similar, but also are seen as filling in gaps to one another. Whether it be geography (east side of town vs. west side), innovations, product offerings, customer base, etc. A merger of these “equals” is seen as a much faster growth route than doing it organically. This makes a lot of sense, but a critical component to the post-merger success is the personnel, with many organizations struggling to right-size their staff after the fact.
The third broad scenario we’ll call “The De Novo.” This is a new FI, from scratch. The advantage that a De Novo bank or credit union has is they can build whatever type of FI they want. They are not burdened by being branch first, tech first, on an old core system, or operating in the wrong trade areas. While De Novo FI’s may begin existence by filling a void in the market, ultimately, they may cause enough of a fuss for the bigger players in the market to begin to entertain an acquisition play. In fact, this may very well be the de novo strategy all along.
So there you have it, our Crystal Ball for 2021.
If you’d like to learn more, need to discuss your corporate office, or interested in our M&A Consulting Packages, Contact Us today.