Sweden's example suggests the future of the branch network: smaller offices with personnel who are flexible 'teller-sellers.' We examine different proposed branch configurations currently being evaluated by five U.S. banks.
BRANCHES THESE DAYS ARE LOOKING DIFFERENT. Customers are visiting them for different reasons then in the past. Branch traffic continues to decline as rapidly advancing consumer technologies support many more transaction types than they used to.
So in the midst of these changes, what is the new role of the branch? Do different situations/goals call for innovative branch approaches? Is the 3,500-square-foot de novo branch standard obsolete? If so, what will happen next?
In recent years, some international markets have changed more rapidly than markets in the United States in both consumer behavior and financial services delivery. A recent paper from the global management consulting firm, Oliver Wyman, suggests that the accelerated evolution of banking in Sweden may provide a useful preview of what banking in the United States may look like in the future (acknowledging differences in market structure and regulatory environment).
The study begins by looking at Swedish consumer behavior and its similarity to the United States. Eighty-five percent of Swedes are active users of Internet banking, mobile banking or both. Debit and credit cards are broadly accepted and heavily used--with cash representing only 20 percent of retail transactions. Paper checks have mostly disappeared from Swedish consumer households in favor of simple-to-use automated clearing house and person-to-person payments. Eighty percent of customers at one Swedish bank have not visited a branch in the last six months.
Swedish banks responded to these changes in two ways: First, they have reduced the number of branches-35 percent fewer per capita as compared to the United States; second, they have reduced the size of their branches--many are less than 1,500-square-feet with open floor plans to encourage casual banker-customer interactions.
The largest Swedish banks have eliminated manual cash handling from 65 percent to 75 percent of their branches. Staffing levels are generally lower and job responsibilities are more fluid. Most bankers are "universal"--that is, they switch between sales and service. Customer-facing technolo-gies--including self-service terminals, Internet and mobile banking demonstration stations, video teleconferencing, and digital merchandising--are prevalent.
Some leading banks have moved to segment-based delivery with a significant portion of Swedish branches serving only small- to mid-sized businesses or mass affluent.
"So, we asked ourselves if Sweden provides an alternative universe or a glimpse into the future of U.S. retail banking," says Tim Spence, partner at Oliver Wyman. "It's important to recognize that differences in market structure, culture and regulation [compared to the United States] have played a part in the rapid changes in Sweden. But similarities between the United States and Sweden suggest that we may arrive at the same end state but take different paths because of our areas of similarity.
"First, the profile of demand for consumer financial services in the United States and Sweden is quite similar. Second, the developments that enabled the retail transformation in Sweden--the secular shift toward electronic payments and access to and adoption of Internet banking being the most critical--are already underway in the United States. For example, 84 percent of Swedes use online banking compared to 60 percent of U.S. consumers, with the gap closing quickly.
"Similarly, the voluntary shift from paper to electronic payments is well underway. While over 40 percent of U.S. consumer payments are paper-based (compared to 20 percent in Sweden), they have been declining at 2 percent to 3 percent year-to-year in the United States for the past five years. At the current pace, the United States would reach parity with Sweden within a decade," Spence continues.
The study points to many potential impacts from this transformation--one section forecasts that U.S. branch formats and operating models will evolve radically, as they have in Sweden, in four primary ways:
Branch networks will become less monolithic and more tailored: Individual branch locations will receive different treatments and staffing levels based on market opportunity, customer segments they serve and proximity to other, larger locations.
Branches will become much smaller and more flexible: "We expect...