Branch Boom: Folly or Forethought?

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8 August 2005
Bart Narter

Abstract

Celent estimates that over the past twelve months banks have spent about US$6 billion to establish new branches with $450 million allotted to new branch technology.

Branch banking is making a comeback from its near demise during the Internet heydays. During 2004, around five branches were opened per business day. Internet banks have not taken the retail banking world by storm, though they have taught bankers a lesson or two.

In a new report "Branch Boom: Folly or Forethought," Celent examines the state of retail branches and finds that the recent boom has resulted in a slight deterioration in branch scale. The report provides the next steps a bank should take.

Is the renewed enthusiasm for branch banking folly or forethought? Banks’ massive investment in branches has raised concern that the market may become saturated and that banks may not get a good return on investment. According to Alenka Grealish, co-author of the report and manager of the banking group at Celent, "Regardless of the alarms, bankers cannot stop investing in their branches. However, they must invest wisely. It would be folly to continue viewing branches primarily as transaction centers." Transactions are going to dwindle over the next ten years. Based on check usage and remote deposit trends, Celent estimates that check-related transactions will drop from 364 per day per branch in 2002 to 178 in 2010. The implications for banks are profound: fewer chances to interact face-to-face with customers and the obsolescence of the traditional branch layout.

Bart Narter, co-author and senior analyst, observes "The foresight is the move to a culture and infrastructure oriented toward sales and service. The banks that will excel over the next five years will: harness customer service and sales technology and operate cost-effective branch networks."

This report is the fourth in a series by Celent on important branch banking trends. The first two in the series were Branch Automation Solutions: The Convergence of Teller, Platform, and CRM Part I and Part II, May 2005. The third report in the series was Does Size Really Matter? How "CRM Lite" Deployments Are Enabling Successful Smaller Banks, July 2005.

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Reports
Location
Asia-Pacific, EMEA, LATAM, North America