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Ketharaman Swaminathan

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Ketharaman Swaminathan - GTM360 Marketing Solutions

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Secret Of Survival Of Bank Branches

06 February 2015  |  5297 views  |  6

From personal experience and anecdotal evidence, there's no question that retail banking customers are increasingly moving to digital channels to conduct everyday banking transactions like balance inquiry, statement download, and so on.

Notwithstanding the pronounced shift in customer preference to digital channels, bank branches are far from dead. In fact, according to some reports, they're making a comeback.

Is it really because, as Nessa Feddis, SVP, ABA, says in this article, "When people are conducting a complex transaction like opening an account or applying for a home or business loan, they often prefer to do it in person."?

I don't know.

Is a home or business loan even a complex product?

I don't know.

But I do believe there's another angle to understanding the longevity of bank branches that has little to do with what customers want. Namely, what banks want. Specifically vis-à-vis demand generation and sales.

To take demand generation first, let me narrate a personal incident.

I'd visited the branch of my public sector branch to foreclose a few fixed deposits and collect the proceeds by way of a demand draft. My banker asked me why I was losing interest by prematurely closing my FDs. I told him that I needed the money to buy a house. He asked me why I didn't take a mortgage instead. I told him that I'd forfeit the great deal I'd got if I had to jump the hoops required to qualify for a mortgage from his (public sector) bank. To my utter surprise, he approved the loan on the spot and promised to disburse the money within one hour!

Voilà, the banker had created a new sales opportunity where none existed before. Not just that, the bank was able to make the "Next Best Offer" virtually in realtime. All this happened during a face-to-face interaction.

There's no way this bank - or any bank - could've spotted this opportunity or made the offer via telephone, online banking, mobile banking or any other remote channel. HBR refinforces my belief: In its article titled Know What Your Customers Want Before They Do, the authors note, "... financial services firms find that a human being is often the best channel for delivering offers."

Moving to the actual sales process, some of the activities involved in the sale / purchase of a mortgage include:

  1. Share builder reputation
  2. Whet the project w.r.t title, litigation, permits, etc.
  3. Provide references of friends and neighbors who have taken mortgages from said bank
  4. Ease documentation
  5. Exchange local gossip

It's a no-brainer that a branch is the most conducive environment to do these things.

(There's a school of thought that says that sales people should only provide help and refrain from getting into the aforementioned activities. I find that advice to be unadulterated BS: As a career sales and marketing professional, these things help in building relationships and, when it comes to commoditized, big ticket products like mortgages, it's often the relationship that swings the deal in favor of one bank versus another).

Therefore, whether it's creating sales opportunities or selling products, a branch is the best place to do it. No doubt it's also the costliest place for doing so but progressive businesses are more obsessed about increasing revenues than cutting costs.

For all their talk of customer preferences, banks will eventually decide their channel mix on the basis of which channel(s) deliver the greatest growth and profit potential. And, for the moment, branches are still high on their list.

Therein lies the secret of survival - maybe even comebank - of bank branches.

a member-uploaded image TagsRetail bankingTransaction banking

Comments: (13)

Stanley Epstein
Stanley Epstein - Citadel Advantage Ltd - Modiin | 07 February, 2015, 08:28

Ketharaman, you are 100% correct. Banking is about relationships NOT only about technology. Technology helps but at the end of day it is really the interaction between the BANKER (not the banks sales rep) that bonds that relationship and creates a loyal client/ bank relationship. That is the problem with today’s banking. There are very few true bankers left (with knowledge of the big picture, honed from overall banking experience); only the so-called “specialists” who are not specialist at all. And the place for this interaction? Why, the bank branch of course.  

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A Finextra member
A Finextra member | 09 February, 2015, 08:47

What do you think, could the relationship be done with a video teller machine? The real banker could help customers via video conference face-to-face. He could even help customers in different locations because he can be present at any place where the bank has a video teller machine installed.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 09 February, 2015, 10:55

@StanleyE:

TY for your comment. I largely agree with your view. That said, as a technology marketer, I do believe that relationship and technology are not mutually exclusive! I remember a technology from a company called Zoot or something like that which suggests what targeted offers bank tellers can make to customers standing in front of them. As I remember, it was rated as a Top 10 fintech product by Forrester or some other leading analyst a couple of years ago.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 09 February, 2015, 11:11

@UlrichR:

TY for your comment. We recently had to carry out a series of interviews lasting 6-8 hours with an outstation job candidate. Common wisdom dictated that we used VC. However, when we totted up the bandwidth and other costs, we discovered that to-and-fro air tickets actually proved cheaper! Not to mention the in-person option delivered a much better experience. The point is, the digital-only model may not be as low cost as it's made out to be. Like I pointed out in my comment here, "@JamesP is spot on: If the digital-only model really had such a low-cost footprint as it's touted to be, why're UBER, OlaCabs and other "asset-light aggregators" raising 100s of million / billions of dollars of capital?”

IMHO, the choice of channel mix has to go beyond cost alone and look at revenue and profitability: So, to answer your question, it depends upon the revenue / cost / profit of multiple bankers and higher close rate of the branch option versus that of a single banker, multiple video tellers, bandwidth and lower close rates of the remote option.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 09 February, 2015, 12:19

Interestingly, in its latest ad campaign, India's leading TELCO Airtel doesn't even try to claim that its VC solutions are cheaper.  

https://twitter.com/GTM360/status/557545907705905152

The focus is on time saved via VC, which is not a benefit in our context of in-person or video teller at branch.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 20 February, 2015, 16:12

I seem to have august company now! Branches hold strong in face of digital onslaught - FDIC. Most tellingly, as the FDIC has observed, "... there is little evidence that the emergence of new electronic channels for delivering banking services has substantially diminished the need for traditional branch offices where banking relationships are built." Just that I tend to believe that the "need for traditional branch offices" is felt more by bankers than by their customers. 

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Anjul Sharma
Anjul Sharma - FRESHMINDS - LONDON | 23 February, 2015, 09:53

I'm so glad this wisdom has now come to light with concrete data. I'm sure it also holds for other mature markets as well e.g. the UK where I am based. I believe that handling and thinking about money can catalyse a whole host of emotions but the process of online and mobile banking is far too rational and unemotional. Branch banking, on the other hand, can create space for these more emotion inspired interactions (although there are many rational elements to branch banking too).  After all, people and staff are very good at intuitively figuring out what and how to sell to a prospect in a way that an algorthim or an app on a phone is not.

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James Piggot
James Piggot - Finastra - London | 23 February, 2015, 12:07

Just to clarify I'm not defending branch networks, I think there is a place for an Apple Store type boutique branch that acts as a marketing/sales/expert advice center. Somewhere where I can go and get advice and learn about the products on offer from the bank which I then originate via digital channels. This is something banks are attempting to create in various countries, with mixed levels of success it has to be said.

I would not use the FDIC survey to try and predict the future, the fact that contraction of the US branch networks appears to be slower than elsewhere may be partly because the US is lagging behind when it comes to reducing the use of cheques and cash. They may leapfrog the current technology (EMV and contacless cards) and move directly to mobile/digital payments, and possibly close a whole raft of branches when they do move across.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 24 February, 2015, 12:49

@AnjulS: TY for your comment. Given my experience with the on-demand offer of mortgage described above, I totally agree with your view about humans being good at intuitively figuring out what and how to sell to a prospect. That said, that statement is only applicable to humans as God made them but, at the risk of souding harsh, not necessarily to some bank-groomed humans. Just today, I visited the branch of a bank - not the public sector one described in my post - and happened to notice a poster for a new product. I'd to go from pillar-to-post to find out details of this product and its relevance for my needs. Long story short, I was reminded of one of those old "How many people does it take to screw on a lightbulb?" kind of jokes!

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 24 February, 2015, 13:07

@JamesP:

TY for your comment.

Mobile RDC helps customers handle cheques without visiting a branch. Likewise, ATMs for cash. Mainstream adoption of Mobile RDC and ATMs in USA seems to rule out any significant correlation between greater use of cheques / cash - if that's the case - and branch usage in USA.

I agree with your Apple Store analogy. To continue my previous comment, merely having people at the branch is not enough. For banks to truly realize ROI from their branch networks, banks must have the right caliber of manpower and support them with the correct tools.

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Anjul Sharma
Anjul Sharma - FRESHMINDS - LONDON | 24 February, 2015, 14:28

Hi Ketharaman

Oh I am totally with you on this one! The success of branches is so dependent on the right combination of initiative, knowledge, insight and intuition. God and the banking hierarchy has a lot to answer for!

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 24 February, 2015, 15:10

@AnjulS: I'd think God has done His bit! It's now entirely down to bank C-Suite!!

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Anjul Sharma
Anjul Sharma - FRESHMINDS - LONDON | 24 February, 2015, 15:45

Yes I believe so and they are not always able to work miracles.

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As Founder and CEO, S. Ketharaman provides overall direction and leadership toward setting and achievement of GTM360's goals and objectives.

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