Branch Banking in a Multichannel World: What Ever Happened to the "Branch of the Future?"

by Bob Meara, August 30, 2010
Industry Trends
Global, Asia-Pacific, EMEA

Abstract

Even though the majority of financial institutions surveyed indicate that improving branch sales and service performance is their top branch channel priority, few have invested in technology to help realize that goal.

In a new report, Branch Banking in a Multichannel World, Celent explores the current state and likely evolution of North American branch technology infrastructure. The current branch technology environment at most financial institutions is basic and largely non-automated at an unsustainable level. This does not include pilots or proof of concept activity:

Less than a third of surveyed financial institutions (28%) have operational CRM systems, and fewer still have analytic CRM (23%).

Account opening remains largely manual, with just 29% enjoying automated, paperless systems. Loan origination is similarly manual and relies on the movement of paper, with just one in five banks having automated systems.

Cash handling requires dual control, largely manual work at most financial institutions. Only a fourth of surveyed financial institutions use teller cash recycling. Those that do typically limit usage to only the most cash-rich branches. 

The smallest institutions have more modern core systems, but less automated branch networks. Midsize and large institutions operate multiple systems and are in need of platform consolidation prior to investing in more sophisticated branch automation systems. Larger institutions have been more apt to invest in transaction automation. More glaring differences arise between banks and credit unions. Credit unions have a distinct lead over banks thus far in terms of branch automation solution usage.

“Most financial institutions are under considerable pressure to both reduce costs and improve branch sales and service effectiveness,” says Bob Meara, Senior Analyst with Celent’s Banking Group and author of the report. “Credit unions appear to be way ahead of banks in terms of having invested in technologies to help bring this about. Banks have lots of catching up to do.”

The report begins by outlining the increasingly challenging retail banking business environment in North America and analyzes reported multichannel and specific branch channel priorities. The report provides an analysis of the current state of branch channel technology and physical environments. It then takes a predictive look at the midterm branch technology environment based on surveyed technology direction and adoption intent. Lastly, the report looks forecasts the likely evolution of North American branch banking over the next five years. 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America (Boston)
Erica Ferguson
eferguson@celent.com
Tel.: +1 617 262 8225

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)208 870 7875

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81.3.3500.3023

Table of Contents

Executive Summary

3

Branch Banking in a Multichannel World

7

 

An Unsustainable Model

9

 

Branch Channel Priorities

10

Current State Technology Environment

13

 

Core Systems

13

 

Branch Technology Environment

15

 

Branch Physical Environment

23

Midterm Branch Evolution

26

 

Midterm Technology Strategies

26

 

Technology Adoption

28

Long-Term Branch Evolution

33

 

Physical Design

37

 

Organizational Design

38

Conclusions

42

Appendix I; Survey Methodology

44

Appendix II: Technology Adoption Intent

47

Leveraging Celent’s Expertise

63

 

Support for Financial Institutions

63

 

Support for Vendors

63

Related Celent Research

64

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