A recent BAI report indicates that the future in branching favors banks with a dense footprint and large market share. There are also studies suggesting that branch profitability is more strategic when achieving density in markets with a growing population and increasing household income. Yet this is all within the current environment of lower branch transactions and shifts in consumer behaviors toward mobile/online banking.

Add to that the shadow of the Pacific Rim and Europe which have been checkless for the past decade. The top ten banks in the United States are fully aware of the profitability benefits in a checkless environment since they all have international networks. Branch profitability is much more complex than just looking at larger branch networks since the profit driver is typically the deposit size within each branch and the asset growth from the overall network.

Here’s the issue: Policy, process, systems integration, cross training, and marketing all have a significant impact on branch channel performance, just as branch density and market share do.  Community banks are refocusing on making the branch experience ideal for their customers. Yet the larger challenge in today’s tech-driven consumer environment is to deliver that “ideal experience” equally across all channels including the internet, contact centers, cash management services, ATMs, and crossover among business bankers and consumer specialists.  Banks are challenged in making that service delivery consistent due to the lack of systems and process integration. And there are additional factors impacting service such as the lack of automated underwriting. Forty minutes in a branch to get a loan is hard to justify when the indirect loan environment takes only minutes, and many banks offer web-based processes that take far less time.

The imperative for every bank is to analyze their unique market and operational factors and develop a strategic plan for their branch network. Studies suggest that as a nation we have far too many branches considering the mobile technology trends. Where will your bank be in three to five years, and how will you take advantage of the macro and micro conditions to drive improvement? There are many improvement opportunities today, as Nolan’s Bank Performance Study indicates. Your vision of the future will drive where to start and which actions to take.