The role of the branch has changed- and there’s no going back.

Three articles crossed my desk recently that combine to tell an interesting story about branch banking. Each article conveys how retail branches are indeed relevant and point out some “musts” for community financial institutions (FIs).

Customer Satisfaction scores are dropping

First, Cornerstone Credit Union League dissected some results found in the American Customer Satisfaction Index (ACSI).   According to Cornerstone’s report, banks “slid” 2.6% from their previous rank, and smaller banks posted a 4% drop in satisfaction.  ACSI Director, David VanAmburg, told The Washington Post, “As banks try to get fees and aren’t successful at doing so [see operational excellence below], they have to cut costs – reducing the number of branches, downsizing staff – which results in lower satisfaction scores.”

The takeaway? Community FIs must concern themselves with customer satisfaction.  There is plenty of competition out there looking for an opportunity to take away business.

Why the physical branch still matters in an increasingly digital world.

SNL Financial’s Ken McCarthy recently reported to the FDIC’s Advisory Committee on Community Banking meeting.  In his report, he quotes the FDIC Division of Insurance and Research Chief Economist, Richard Brown, as saying, “Community banks tend to rely very heavily on physical offices.”

Brown’s comments reveal that he believes that there is both a substitutionary and complementary relationship between physical branches and technology.  Citing a statistic that 79% of households use tellers to interact with their bank, Brown states, “So it really gives a sense that the physical banking office is a complement to these technological changes, especially in a world of ‘who do you trust online.’  Having that personal relationship with bankers…seems to be important in establishing trust.”

The takeaway?  Branches add a personal sense of connection to FIs, and remain as important elements in customer satisfaction, so pay attention to them.

Are all banks the same?

Mike Fotis, founder of submitted a post asking the question, “Are all banks the same?”  He surveyed and plotted three measures of bank performance: product leadership, operational excellence, and customer intimacy. While he focused on big banks, his findings have an intuitive appeal for small banks as well. Mr. Fotis used the following definitions in his analysis:

  1. Product Leadership – Very strong innovation and marketing. This normally isn’t a long-term source of advantage as competitors just copy what works well.
  2. Operational Excellence – Great operations/execution, with a focus on providing a reasonable quality at a low price.
  3. Customer Intimacy – Customer service and attention rock! Aim to match and exceed customer expectations.

Mr. Fotis found very little differentiation among the big banks he reviewed. None of them substantially stood out as his findings showed that they focused first on products…and then on operational excellence, and customer intimacy.

The takeaway?  For community FIs (banks and credit unions), while competitive products are important, operational excellence and customer intimacy are the areas where success and differentiation can be more influential.

So there you have it.  Focusing on customer satisfaction is important, particularly in a competitive industry.  The retail branch remains an important tool to support customer satisfaction and omni-channel delivery.  Customer intimacy and operational excellence offer the most leverage for community FIs to stand out.

With branch visits down, high value transactions mean customer service is more needed in the branch than ever!

The next step is understanding how the branch fits within your distribution channels.

Fortunately, we have some ideas to share!

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