Our quarterly Consumer Financial Monitor data measures financial sentiments, engagement, product satisfaction, and confidence in financial institutions among a global sample of 20,000 consumers. Our Q1 2012 report is now available on our homepage for members to view. While 2011 was marked by low consumer confidence driven down by continued economic uncertainty and poor bank communication strategies, our new Q1 data shows that there are some positive early signs for 2012:

• Consumer confidence has improved. While global consumer confidence still remains low, it has increased over the last quarter, especially in North America where confidence improved 4% this quarter.
• Confidence is linked to product satisfaction. The segments that are most confident in financial providers – younger and wealthier consumers, also prove to be the most satisfied with financial products.
• Consumers expressed warmer feelings about personal finances. Asia and Latin America markets led the way – posting the most positive gains, with a net percentage of 7.

Read more about global trends across Q1 by accessing our latest report here.

Traditional transactions are on the decline for banks around the world–even though for most, the overall volume of transactions is increasing. As the role of the branch changes from the centerpiece of distribution strategies to a component part, what can banks predict about its future form and purpose?

1. For the customer: Customer relationships are moving from a “convenience model” to an “activity-driven model.” Convenience required that banks pursue branch density, knowing that customers make decisions about their relationships primarily based on proximity to the branch. The new model of customer relationships will be structured around engaging with customers in their day to day lives, virtually—by timely, context-driven, product offers, refined money management tools and services, and interactive correspondence with “the branch” through virtual channels. Our recent work on product and service innovation looked at the proliferation of banking “activities” driven by technology.
2. Traffic and sales: The role of the branch itself for customers will become increasingly specified as it moves from being the central channel to one piece of the channel array. Most of our members report declining branch transactions, but increasing transactions overall. The transactions that will continue to be drawn to the branch will be new account sales, complex product sales, like mortgages, and some types of problem resolution. Meanwhile, we expect cross-selling to be driven by non-branch channels. See our recent work on customer channel preferences to understand how these trends are already emerging.
3. Contribution to overall distribution strategy: On the bank side, banks face the challenge of reshaping the purview of the branch. While the branch will have core strengths like those outlined above, it will also need to become a support mechanism for online and mobile channels—creating incentives for its staff to educate customers about online channel capabilities. While many banks are carrying branch networks that exceed demand, the more pressing issue is rightsizing and retraining staff to meet changing customer behavior. The need for traditional teller staff will see continued decline. Similarly, as cross-sales become more refined online, total sales from the branch will also decline. Accordingly, we expect increasingly lean staffing models, with many moving to generalist “universal bankers” supported by centralized product experts. See our recent work on right-sizing branch staffing through attrition and creating incentives for branch-supported online growth.

Our data shows that customers that prefer to use technology for banking purposes are more likely to be younger and active on social media. They are less likely to visit a bank branch on a regular basis. One challenge many banks are facing is how to connect with these tech users and engage them outside of the branch.

Bancolombia approaches this challenge through its use of social media to learn about the financial goals of its remote-channel customers.  In an effort to help customers feel more at ease with borrowing, Bancolombia devised a Facebook campaign encouraging consumers to share their dreams as they pertain to credit. The bank responded through a series of video messages on their YouTube channel unpacking the non-financial considerations required to make these dreams come true. Consumers were then invited to vote for their favorite dream, with the top 3 dreams receiving a final contribution. All other contributors were able to click through on embedded service links to discuss suitable credit products.

Use this case to learn how to:

• Effectively demonstrate the human-side of the brand
• Better understand consumers needs and wants
• Drive sales leads to your established sales channels

Access the Bancolombia case study here

Explore our new Social Media resource center to learn more about this case and others.

In 2007, The Council surveyed members on “what channels will best serve customers for purchasing products end-to-end?” for both 2007 (“today”, then) and in 5 years time (2012). Responses were unambiguous: a sharp decline in branch sales – from well over 80%, to just over 40% – and a sharp incline in on-line sales, from just under 10% to just short of 50%.

Here we are in 2012 and it is clear these projections were wildly optimistic. But today the stakes are higher: banks that do not enable non-branch sales will miss crucial opportunities for cost reductions and brand differentiation. The question is – why have on-line sales failed to realize their potential?

1. Banks continue to hope for a “return to normal” – Confronted with uncertainty, many institutions have fallen back on what they know – the branch, where they have most tried and tested experience selling – rather than try to build something new. Economic austerities inclined toward a less aggressive “run-the-bank” versus “change-the-bank” split, notwithstanding the potential cost savings associated with the latter. As sales growth flattened, increasing productivity in the branch appears a faster path to growth than improving the online sales experience.
2. The branch is viewed as the home of customer relationships– Many senior executives remain unconvinced they can effectively manage relationships through non branch channels. Indeed, the Council’s data does suggest that customers who use technology-only tend to feel less committed to their banks. Accordingly, serious concerns remain around on-line relationships becoming too transactional, losing the depth otherwise assured by in-person interactions. As a result, banks must focus on creating a unique experience online.
3. Banks are not teaching their customers how to do business – CFC data shows that as many as 30% of customers have no experience doing even basic tasks online, and another 20% only use to the web to access products they already own. The banks that have been most effective at increasing online sales and activity do so by investing in customer education around web functionality.
4. Internal accounting still over-estimates the contribution of the branch, while not putting enough pressure on the web – As a general rule, remote channels receive scant recognition for the sales they aid, and no domiciling of the account openings they actually record. Such systematically biased branch-centric accounting precludes an objective, fact-based conversation around right-sizing branch networks. It is difficult to build a business case for the online channel if it always appears unprofitable next to the branch. Without firm revenue goals for itself, the web will continue to lack urgency.
5. Bank websites are not offering the right kind of help – The web is the dominant channel for research, but bank sites are not giving prospective consumers enough help when it comes to researching products on-line. By failing to provide the content and functionality to support customers throughout the entire purchase journey, customers are encouraged to go elsewhere for information – such as various off-domain social media sites. In other words, the service to sales process so crucial to the branch barely exists on bank websites. As CFC survey data shows, customers who rely on digital channels rate their banks poorly in key service indicators–like guidance during the sales process, ease of communication, and access to knowledgeable staff.

For further background on building a more compelling on-line offering, members can access  The Future of Internet Sales and previous blogs on personalizing the on-line experience and managing channels from cost to profit.

CFC recently conducted a survey of nearly 4,000 global consumers to understand their channel usage patterns and channel preferences. Perhaps the most interesting group of channel users that emerges is the multichannel customer. We took a deeper dive into the profile of a multichannel customer and have given life to this type of user:

• A balanced multichannel customer uses an even balance of personal and technological channels. They are more likely to learn about and use financial products and services through tech channels but are then more inclined to purchase the product or service in the branch and go to the branch when they have a problem or require customer support.
• They are more likely to be younger, have a college degree, and use social media.
• They’re engaged and optimistic – they are the most positive about progress towards financial goals and are the most financial engaged group. They hold more products at the bank and are most likely to purchase additional products. They also use financial advisors.
• Very few customers are balanced multichannel users today – about 18%. Most people lean heavily towards personal channels or technological channels.
• It is possible to be a bad multichannel user. About 30% of multichannel users are conducting activities on the wrong channels and using channels against their strengths.

Access our recent research brief to learn more about the multichannel user, as well as other types of channel users.

Join us at our next insights meeting on March 21^st when we will share best practices case studies around engaging customers through remote channels and creating emotional connections outside of the branch. For more information please email cfcresearch@executiveboard.com.

Even as branch traffic volumes decline, banks struggle to implement new systems and models for staffing. For many, despite the fact that most customers bank through multiple channels, the branch is still considered the hub of the customer relationship. The result is a branch network that is staffed for customer behaviors that no longer exist.

Complicating the situation, even when banks want to reduce staffing, such reductions can harm customer relationships, weaken the bank’s stature in the community, and can convey the wrong message about overall financial health.

CFC recently profiled a regional United States bank that has created a model for using attrition to right-size their branch staffing. After staff attrition, rehiring decisions must pass through rigorous review of branch productivity, traffic volumes, and overall trends across channels. The new model requires three key components:

1) Centralized staffing decisions: Branch staffing decisions were centralized to ensure that they reflect the reality of customer activities across the distribution network. While branch transactions are declining, transactions for the bank as a whole are on the rise.

2) Using extensive branch transaction data to assess teller needs: The bank worked to create an objective framework for staffing decisions. For tellers, they rely on copious data about transactions in the branch and teller time-spend in order to determine minimum staffing requirements.

3) Using recent productivity levels as a guide for sales staff: Sales performance on a branch level is notoriously difficult to measure because of the uncertainty around number actual sales opportunities. To determine appropriate sales staff levels, the bank created a model the focuses on productivity over the past month and the number of staff required to match that productivity going forward.

For more detail on this tactic, and examples of the models the bank created, our members can download the complete case.

Related Posts:

The Role of the Branch in Online Growth

Branch Staff Skills in a Multi-Channel World

Social Media-Supported Branch Banking

The Poverty of Branch-Centric Accounting