Branch banks have historically been the front line of the customer relationship. But at a time when more than 50 percent of Americans bank online to some degree, branch banks are challenged to stay relevant.
Customers’ branch visits have decreased 20 percent over the past decade as more financial transactions migrate from the branch to mobile and online channels, according to the research firm Celent1. Branch banks are also expensive to operate. As customers rapidly adopt online modes of banking, branches will struggle to stay profitable using their current model.
But these facilities offer the comfort and knowledge of friendly, face-to-face customer interactions that online channels cannot replicate adequately. For example, most customers still prefer in-person consultation for major financial decisions such as loans, mortgages, and investments. According to a survey by consulting firm Novantas2, the branch remains the preferred sales and service channel for opening accounts (75 percent), getting advice (58 percent), and buying financial products (62 percent). The same survey found that even those who prefer to bank electronically, frequently choose their bank based on having branches nearby in case they encounter situations that warrant face-to-face interactions with bank staff.
Consequently, the era of branch banks is far from over. Instead, banks are inventing new ways for the branch to cater to certain customer interactions. Branch banks of the future will focus less on transaction-oriented business and more toward sales, service, and consultancy.
Cost pressures and reduced transaction-based revenue will cause branches to become leaner. They will need to employ more automation and self-service technologies to off-load from a staff of fewer employees who will need to handle a wider range of customer needs. They will adopt more retailstyle approaches to make branches more attractive and useful destinations. Innovative lobby designs and technologies will stimulate customer engagement with employees.
Rather than compete with online channels, branch banks will become part of an integrated customer experience that spans all banking channels. Innovative wireless technologies will enable branches to recognize and better personalize their relationship with customers when they enter the bank. And to reduce IT costs, network reliability and performance will become more important as business-critical applications and IT resources are outsourced, consolidated, and virtualized.
This white paper presents a vision of the branch bank of the future and highlights some of the key network applications, technologies, and issues that will differentiate the “best from the rest” based on Hughes’ work with innovative banking customers
Digital Signage, Kiosks, and Videoconferencing
Branch banks of the future will embrace digital signs, selfservice kiosks, and other visually interactive technologies to improve the banking experience and communicate more effectively with customers. Research conducted by the Platt Retail Institute3 found that digital signage in banks influenced customer purchase behavior, improving demand for new services such as online bill paying, direct deposit, and new mortgages or refinancing.
Branch banks of the future will deploy touch-screen “media walls” and other interactive elements in high visibility locations to engage customers and deliver key messages. Some will allow customers to discover, print, and take home just the product and service information they want. Others may allow customers to view dynamically updated mortgage, loan, or currency rates. Others may serve as electronic bulletin boards, providing live market updates, news, community information, and weather.
Touch-screen media walls can also improve efficiencies and cut customer waiting times. Customers tap the screen to indicate which service they seek, alerting the staff to their presence, prioritizing their place in line, or routing themselves to the appropriate banking advisor
When the branch is closed, customers will be delighted to find a touch-screen kiosk in the 24-hour ATM lobby with videoconferencing that lets them talk face-to-face with a banking professional during off hours. Similarly, banks can stretch their employee expertise further. Customers will be able to remotely access specialists, managers, and counselors who are not on premises in a private videoconferencing session through the kiosk.
Banking customers typically don’t linger; they want to get their business done and leave. So for banks to offer Wi-Fi connectivity may sound counterintuitive. Not so, says banking consultant Sarah Meyerrose4. She believes free Wi-Fi improves the customer experience by letting mobile device users make better use of their waiting time in branches.
Branch banks of the future will extend this Wi-Fi usefulness to make the customer experience even richer. As in Apple stores, roaming staff will use the technology to reduce the time customers wait in line, handling routine banking transactions with mobile devices. iPad-toting bank advisors will use the tablets’ rich media experience to co-browse products and services, capture customer signatures, and wirelessly transmit the signed forms for processing. And customers will use their Wi-Fi devices on premises to schedule appointments with financial advisors or learn about special programs.
Radio-Frequency Identification (RFID) systems will automatically identify customers via RFID-equipped bank cards so that branch employees can provide enhanced levels of personalized service. Customers carrying these cards can be greeted by name as they walk through the door, and their account information will be readily available when they approach an associate.
Soon, Near Field Communications (NFC) built into mobile devices will enable banks to reach customers in new ways, both inside and outside the branch. In addition to providing a mobile, “contactless” payment option, customers with NFC-enabled devices will be able to touch digital signs, media walls, or kiosks in high-traffic locations outside the bank to get bank product information or to be routed to the closest branch to do business.
Security and Surveillance
Introducing wireless, advanced ATMs, and new technologies into branch banks introduces a new layer of security risk into a security-intense environment. The Gramm-Leach- Bliley Act5 already requires banks to develop plans that describe how they are prepared to protect customer information. But new technologies lead to new security threats that constantly change the risk landscape. Consequently, branch banks of the future will have to employ a range of new security mechanisms that improve the security, confidentiality, and regulatory compliance associated with protecting customer information without compromising the customer’s banking experience.
Payment Card Industry (PCI) Data Security Standard (DSS)-compliant networks will become critical in the branch bank of the future. Gartner analyst Avivah Litan posed the question in her blog “How come there is no PCI for bank account data?6” In it she argued that while consumer credit cards are safeguarded by PCI DSS, protecting bank account information is much more of a concern to customers. The threats to Automated Clearing House (ACH) and wire fraud warrant PCI protection.
Customer information that traverses the branch’s Wi-Fi network must be protected in accordance with PCI DSS guidelines as branch banks increasingly accept credit card payments for things such as loan application fees or lock box services. Wireless PCI intrusion and detection capabilities, state-of-the-art data encryption, and firewalls must also be used to protect customer information inside the branch.
ATMs add yet another layer of security complexity. Banks lose approximately $1 billion annually to ATM skimming, according to John Pearce of ADT Security Services7. In addition to video surveillance at ATM locations, banks will employ sophisticated anti-skim technology that detects the presence of foreign devices or unusual behaviors at the ATM card reader. Branch banks of the future will also introduce biometric authentication such as finger ID technology to replace and enhance ATM PIN code security.
Traditional analog closed-circuit TV (CCTV) inside the branch will be replaced by high-definition IP camera networks in future bank branches. CCTV is expensive and requires monitoring and maintenance at the branch level, which typically must rely on people who are not security experts. IP video offloads the video surveillance burden from the branch. IP video cuts cost, centralizes management, delivers higher quality video, and can be monitored from a central location by security experts. IP video also enables greater video placement flexibility. Wireless IP cameras can be installed inexpensively in places that are impractical or cost prohibitive, such as parking lots and remote buildings.
Brett King, the best-selling author of BANK 2.0, wrote in his blog Banking4Tomorrow8, “It is conceivable that all the transactional elements within a branch will be moved to automated banking with electronic banking centers, automated branches, ATMs, or the Internet within the next 5-10 years. What then is left? The face-to-face, value-add of a real, live human interaction.” Consequently, branch banks of the future must competitively differentiate foremost on their employees’ knowledge, professionalism, and certification. Banks will need to upgrade skills of branch staff and keep them constantly aware of new bank-related insights through continuous, real-time training.
The branch of the future will utilize rich media training via private IPTV networks or on-demand online training content. Distance learning programs through IPTV, online training portals, or video training kiosks can help to increase employees’ productivity, improve cross-selling, and deliver a better and more personalized experience to the customer. These training media can serve up highly customized, highly targeted training content, while enabling managers to track performance in real time. Employees also can be kept continuously abreast of current promotions and have operational questions answered by remote managers.
Virtualization and Cloud Computing
Fewer staff and the need to drive down operational costs will drive banks to centralize deployment of applications, simplify IT infrastructure, and improve the reliability of IT systems. Virtualization and cloud computing will be key to this effort. Virtualized “branch servers” located locally will enable branch banks to deliver bandwidth-hungry, branch-of-the-future applications such as digital signage, interactive kiosks, and video training without choking the WAN network bandwidth. It will enable banks to lower capital costs, reduce power consumption in the branch (by consolidating hardware), and improve application performance.
Virtualization will also transform the bank desktop. Security and regulatory compliance are the top two IT concerns for banks. Desktop virtualization is one of the best ways to address both challenges. “One of the best ways to aid with compliance is with quick, uniform deployment of all applications,” said David Wagner, senior editor at Enterprise Efficiency. “Changes to regulations can mean changing multiple applications on the desktop of thousands of enterprise terminals, not to mention time-consuming testing, potential conflicts with heterogeneous equipments, and far-flung systems managed by people with different needs and agendas.”9
Security concerns over the need to protect data have been an inhibitor to banks’ embrace of cloud computing. But those security challenges are being resolved, and branch banks of the future will increasingly adopt hybrid cloud architectures where their sensitive data remain on private clouds but are connected to public clouds to deliver much of their computing resources.
Cloud computing enables the hardware and application and operating systems maintenance to be outsourced to a trusted service provider, freeing up internal capacity of the private cloud and allowing the bank to focus on delivering better service. Since cloud services are paid incrementally, banks save money. They can also move more of their data storage requirements to the cloud. And cloud computing delivers better mobility for branch workers, allowing them to access information wherever they are, rather than being tethered to their desks.
As branch banks of the future prepare for natural and manmade disasters, they need to ensure they plan for business continuity. In times of trouble, the availability of retail banking is critical to the public well-being.
Here, too, virtualization and cloud computing will play a role by better preparing branch banks for emergencies and disaster recovery. Virtualized IT infrastructures reduce recovery time when the branch goes down. It also allows working from home or other locations to become part of the emergency preparedness plan when disaster strikes.
But an even better outcome than fast recovery is keeping the bank network from failing altogether. Branch banks of the future will establish emergency preparedness plans that include secondary satellite, DSL, or 3G wireless backup networks for their enterprise or ATM WAN. Satellite provides economical, high-speed connectivity to branch banks and kicks into operation in the event of a terrestrial network failure. Satellite networks reach all parts of the country and are unencumbered by natural disasters or man-made problems like an accidentally severed cable upstream at a construction site.
By bonding terrestrial broadband and satellite access together, branch banks, even in the most remote locations, can gain cost-effective network redundancy with automatic fail-over from terrestrial to satellite and vice versa. Taking it a step further, branch banks of the future will increasingly adopt “co-primary” network access in which both terrestrial and satellite share the traffic between the two transport systems based on business rules to improve network reliability and dramatically increase application performance due to the delivery of higher network speeds. This co-primary architecture helps banks justify the cost of an otherwise rarely-used backup network since all the bandwidth is used regularly. The total cost of these two transport systems will be significantly less than T1 alone and provide improved reliability.
At Hughes, we’re working to build this new technology infrastructure that will support the branch bank and the banking experience of the future. And because these technologies are so important, we are building them with increased reliability, higher performance, and greater security than ever before. For over a generation we have helped banks around the world use information technology as a competitive advantage. As banks become more sophisticated in the use of technology to increase the kinds of services offered to their customers and improve their branches’ efficiency, Hughes is well-positioned to assist banks building their own “branch of the future.”