Branch evolution continues: a preview of emerging trends in branch design and service delivery.

• Author: Stewart, Deb

A RECENT SURVEY OF U.S. CONSUMERS by consulting firm Oliver Wyman suggests that, while the role of the branch may be evolving, it will remain, for the foreseeable future, a vital part of the way banks engage customers across channels.

Conducted this year, the survey showed that 85 to 95 percent of customers still open new accounts in a branch even though the majority now use a range of nonbranch channels for subsequent service transactions. And, even for customers who open accounts online and do all their banking there, the branch still matters. Over 70 percent of that group still states that having a branch nearby is an important factor in selecting a bank.

"An interesting note on these findings is that they differ very little by the customer's age," notes Tim Spence, partner at Oliver Wyman. "Even the majority of millennials express a preference for having a branch nearby. "It would be simple if all banks needed to do was to figure out how to manage an orderly retreat from their physical channels, but what they need to do is much harder," he observes. "Banks need to figure out how to evolve their branch designs, staffing models, and network while still answering the need for (1) locational convenience, (2) the psychological desire for knowing you can get face-to-face with a banker if you need to, and (3) a redefined, high-value consultative role in the broader channel mix."

Let's look at these challenges from three perspectives:

* Changing branch formats to better address consumer needs and control costs.

* Reducing the size of existing branches without relocating.

* Using branch space to better address the needs of communities.

What follows below are profiles of evolving branch strategies at sample banks in different parts of the country.

The Smart Branch

BMO Harris Bank, Chicago

Strategy:

"We must remain relevant to consumers," says Paul Dilda, head of North American Branch and ATM Channels, BMO Financial Group (assets: $97 billion), Chicago. The bank's smart branch model incorporates technologies that are a part of customers' day-to-day lives--smartphones, video calls, tablets--into the customer experience. "Our brand is human and intuitive and so is this branch," he continues.

Size:

At around 2,000 square feet, this model may be used as a de novo or to "right-size" branches in existing markets.

Technology:

"The biggest change in technology is the use of video," says Dilda. "Video tellers are live agents that support the same authentication protocols and transactions as an in-branch teller. They also perform some traditional platform functions such stops on cards or changing account information. If a sales referral opportunity arises or a transaction requires branch staff (such as card reissue) tellers will message a branch associate. That associate joins the teller and customer at the ATM for a warm hand-off."

BMO Harris is also relying on experts available through live video to deliver some products. Dilda adds, "In-market financial advisers have Microsoft Lync on their laptops. Branch staff can see if the adviser is available and initiate a video call. Financial advice is a relationship-based product, so we want to retain the local connection. One-time sales, such as mortgage products, may be handled by a central call center in the future."

Staff:

BMO Harris' goal is for staff never to handle cash in smart branches. A current exception to that is meeting some of the coin and currency needs of business customers. The staff operates as universal associates, which involves conversation, guidance, assistance and account opening. Staff will assist you with using video tellers if needed and can participate in video calls to expert specialists.

Integration with online/mobile channels:

Customer Wi-Fi allows branch staff to walk customers, on their own devices, through transactions like mobile check deposit. Customers can use their mobile phones to make cash withdrawals from ATMs. And bankers use tablets to educate customers so that customers can handle their own transactions from home.

Potential for full network application:

All of the elements of the smart branch are considered test-and-learn. "Select elements may move into...