The UK-based research practice predicts that spending on branch renewal will grow at a compound annual growth rate of 21% between 2003 and 2006, reaching $1.4 bn in 2006. According to the research, approximately 26% of branches will be renewed by 2006.

Despite predictions that the Internet and other automated channels would spell the end of branches, customers still seem to prefer face-to-face contact and banks have realised that the Web may not lend itself to selling high-value or complex products.

Banks will aim to utilise customer interactions by turning branches into sales and services centres and automating simple transactions. This will lead to greater investment in CRM technology in order to provide staff with sales and servicing tools, as well access to customer data and product information.

Datamonitor says banks are focused on browser-enabling the teller front-end and automating processes, particularly product origination and cheque imaging. In the long-term, banks will shift away from the teller counter and introduce self-service devices.

Christine Skouenborg, financial services technology analyst at Datamonitor, says banks will begin to execute strategies this year but branch renewal is a long-term undertaking and there are opertaional issues as well as technical implications.

"Banks will need to tackle low skill-sets in branches and optimise branch staff productivity while focusing on how to deliver the best retail experience to the customer," she says.