Pub. 1 2013 Issue 2

www.uba.org 6 Rebooting the Branch: Reinventing branch banking in a multi-channel global environment By Ryan J. Dent, PwC, Banking & Capital Markets Partner The rise of the digital consumer and the high cost infrastructure of physical banking locations are leading to a declining ROI for many branches. If the branch model stays on its current course, it could become a financial burden to banks, cutting into cross-channel profitability. U se of online and mobile technology in today’s marketplace is rapidly changing the way many companies do business. The banking industry is no different with a significant number of customers seeking technology solutions to help meet their banking needs. The result: The convenience and portability of digital channels is causing customers to visit physical bank branches less often. According to a 2011 survey, 62% of respondents said the Internet is their pre- ferred banking method. Only 20% selected branch banking ― a sharp decline compared to 2007 when nearly 40% of respondents preferred to bank at a branch 1 . Given the cost infrastructure of today’s branches, many banks can’t drive the increase in revenue necessary to maintain a positive ROI without transforming their branch model. Considering that the cost of a branch transaction is 20 times higher than a mobile transaction and more than 40 times higher than an online transac- tion, the disparity is crippling 2 . The cost of a branch transaction is approximately 20 times higher than a mobile transaction and more than 40 times higher than an online transaction. This disparity is crippling the current branch model 2 . However, declining revenues associ- ated with branch economics driven by decreased traffic and cost inefficiencies shouldn’t signal the demise of the branch. Branches play an essential role in complex product sales and relationship building for both retail and small business customers. They remain the most popular channel for mortgage applications and similar product sales where face-to-face interaction is para- mount. In addition, branches convey a community and market presence, reinforc- ing brand recognition and trust 3 . The branch of the future likely has a critical place in a bank’s overall chan- nel strategy. But branches may not