The Evolving Branch

By Deb Stewart

A preview of emerging trends in branch design and service delivery.

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


“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.


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


“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.”


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 the network more quickly—mobile cash withdrawal, for instance. Video teller and other elements may take separate paths. Each branch needs to be relevant to the market it’s in, so different applications will apply to different markets,” Dilda concludes.


Financial Centers

Fifth Third Bank, Cincinnati


“Branches will continue to play a significant role in providing advice and assistance,” says Chad Borton, executive vice president and head of the Consumer Bank at Fifth Third Bank (assets: $136 billion), Cincinnati. “At Fifth Third, we consider our branches to be financial centers. Their role is to provide broader financial advice around investments, lending and small business.”


Branches will be nearly one-half the size built five years ago: 2,500 to 3,000-square-feet.


Smart ATMs can assist customers with about 70 percent of the transactions they would have conducted with a teller. Smart ATMs will be positioned in branch lobbies, with 24-hour access. These machines dispense money in major denominations: $1, $5, $10, $20, $50 and $100. They will give customers more opportunity for self-service.

Some Fifth Third locations have smart ATMs as well as universal bankers who can assist with transactions or complete transactions that cannot be done at the ATM. Other branches have only smart ATMs.

Video will be tested in multiple applications in future months. Video specialists will be piloted later this year and the addition of video teller capability in some ATMs in 2016.


“Each location will be staffed to best serve our customers,” Borton says. Some locations will have tellers, universal bankers and specialists; others may have some other combination.”

Universal bankers are cross-trained to handle both sales and service transactions. “This increases the quality of the customer experience while also increasing sales capacity. We have seen a lift in sales productivity in the branches where we have implemented this approach.” The bank has about 600 universal bankers.

Integration with online/ mobile channels:

Wi-Fi is available in select branches. Visual presentation on smart ATMs, mobile and desktop is similar, and Fifth Third is continually working to improve that integration.

Potential for full network application:

Each Fifth Third pilot will be examined with the potential for roll-outs tailored specifically for each market and branch location. All options are on the table in regard to branches as Fifth Third moves forward. The bank will still build some branches de novo. It will sell some branches or get out of the lease. And it may relocate some branches to a smaller location nearby.


Branch Evolution

JPMorgan Chase Bank, New York


“Customers across the JPMorgan Chase businesses, including Consumer, Business Banking, Commercial Banking and Private Banking, continue to use branches,” says Mike Fusco, a spokesperson for the bank, which has assets of $1.4 trillion.

“Ninety percent of customers visit a branch each year—this is consistent across age and income demographics. But rather than coming to a branch for everyday transactions, customers are now coming for advice, assistance or for help planning for their future. Our branch evolution reflects the continued need for branches—but different branches than we have had traditionally.”


New branches and retrofits of existing sites reflect a smaller footprint than in the past, about 2,500 to 3,500 square feet, versus 4,400 in legacy sites.


New ATMs are positioned upfront. “They look like a giant iPad, navigate like one, and dispense in any combination of currency: $1’s, $5’s, $20’s, $50’s and $100’s,” Fusco adds. “And in the near future, they will do even more self-serve transactions including accepting payments and check cashing.”

Other technologies focus on better management of cash. New ATMs have cash recycling capabilities and tellers are using new cash recyclers.


“Although self-service transactions are up front in the branch, our branches do still have teller windows,” Fusco adds.

Unlike legacy JPMorgan branches that were staffed with 60 percent tellers and 40 percent advisory staff, retrofitted branches—rich with self-serve technology—have 60 percent advisory staff and 40 percent tellers.

Although new ATMs are able to do 90 percent of teller transactions, tellers walk the floor to help guide a customer through a transaction on the new ATMs.

Assistance with other transactions is done at the branch’s access bar. These transactions may include PIN changes or getting new cards through Instant Issue.

Potential for full network application:

JPMorgan Chase continues to update its branch network with new technology. More than 1,600 new ATMs have been installed in over 500 branches, instant- issue machines are available in 2,200 branches and by the end of the year more than 1,200 branches will have new cash recyclers.

“We’re confident in our new designs and innovations because we regularly conduct focus groups with our customers to ensure we are making changes to best meet their needs,” Fusco notes. “And then we develop new technology in our innovation lab and test the technology in a room set up like a branch. Customer focus groups from across the country are used and their feedback drives changes.”



The Fox Tower Branch

Umpqua Bank, Portland, Ore.


Umpqua Bank (assets: $22.6 billion) calls its branches “stores.” Its latest store is called Fox Tower and is located in the heart of Portland’s retail/shopping district. “With overtones from men’s fashion, guests are welcome to be comfortable in the well-appointed lobby or enjoy a cup of our specialty Smith tea in the library with an array of curated books and periodicals,” says Lani Hayward, executive vice president of creative strategies.

“Guests may also reserve one of several rooms equipped for small meetings and video conferencing. These rooms cross over as exchange rooms where store associates meet with clients and dial in experts when needed from other areas of the bank,” Hayward says. “Business owners and individuals have been using the space since day one. Our job is to allow for successful meetings to occur and to create dialogs that turn guests into customers.

“The lobby is open with floor-to-ceiling windows furnishing a view into a wide range of amenities, including the Local Spotlight display featuring products for sale from a featured area merchant, a large interactive app wall, and a refresh bar serving Umpqua’s own blend of sustainably harvested coffee,” she says.


2,782 square feet.


Fox Tower develops several areas of technology for Umpqua. Hayward says, “We’re honing our approach to digital merchandizing at two levels. “Attract-level communications” entertain and inform without going too deep into content. Every guest walks by a large-scale app wall as he or she enters the store. The wall presents simple product information as well as mobile apps selected by the staff. A deeper level of content is delivered on smaller screens, including touchscreen desktop computers. These feature product demos for online tools, informational videos and events calendars.

Fox tower is Wi-Fi enabled, serving both guests who wish to borrow the space and associates who want to service customers using pad-based applications from wherever they are in the space. Servicing via iPads is now in its second beta test, with the goal of complete removal of teller row in Umpqua’s next generation of stores.

Umpqua has been piloting video conferencing with business-line experts since 2007. Fox Tower makes that experience more fluid. Instead of being on-demand, meetings are now pre-arranged and presentations prepared. “It’s a more consultative approach,” Hayward continues. “A great example is our Bay Area private bank team that often uses this method to connect clients with financial planners located in other geographic areas. Or in reviewing business plans for a potential commercial loan where some of the partners are located elsewhere.”


Umpqua has been using a universal associate model for over 20 years. The ability to earn specialty certifications in areas such as business banking or investments lets staff better serve customers and progress within the organization.

Integration with online/mobile platforms:

“While we know not all customer interactions happen in our store, our online and mobile touch points connect you back to your neighborhood team and to community happenings in addition to doing remote banking,” says Hayward.

Plans for roll-out in total or by component:

Due to a recent acquisition, Umpqua’s branch network doubled in size since last spring. The bank’s focus for the combined network is on optimizing space to best serve the needs of customers. That might mean augmenting the space with Umpqua’s unique touch points, often downsizing, or in some occasions closing the store in lieu of a better location. Three store models are falling into place:

–Larger-scale brand marquees: These are 2,500 plus square feet brand discovery centers and are often associated with nearby commercial, home lending or private banking center. Fox Tower is an example of this type.

–Knowledge centers: Built with the purpose of having personal expertise right around the corner, these neighborhood advisory stores average around 1,800 square feet and are in the heart of where people live work and play.

–Micro-exchanges: This is a new concept with locations containing about 300 square feet of space and targeted to a dominant segment within a market—business banking or students for example.

“Every time we build a new location, we seek to advance the experience, experimenting with new service design, technology or activation techniques,” Hayward says. “Design attributes, such as getting associates out on the floor side-by-side with customers, go across all store classifications. Since 1995 we’ve held fast to the thought that if you’re going to build branches, you have to give people a reason to go in. That’s more important than ever,” Hayward concludes.


The common threads

Branches are evolving in several common directions:

–They don’t all look alike: Different branch configurations address differing market needs and reflect the neighborhoods they’re in.

–They connect to digital channels: From branch associates routinely using tablets for education and transacting to open Wi-Fi, to visual integration across channels—the branch is a part of the customers’ whole bank experience.

–They are smaller: 2,000 to 3,000 square feet for these full-service branches.

–ATMs are playing a more expansive role: Banks estimate that 70 to 90 percent of teller transactions can now be completed on these devices.

–Video is on the rise: Remote tellers are addressing transaction needs while video experts are enhancing the advisory role of the branch.

–The mix of staff and roles is changing: Universal associates commonly service both transaction and advisory needs. In branches using tellers, the mix of teller to advisory staff has shifted sharply to advisory.

This evolution of the branch and of the network is going to be constant: What is happening today is just the beginning.



Deb Stewart of Charlotte, N.C., is an independent consultant working for the financial services industry. Telephone: (704) 759-1633; email: [email protected]