Budgets, Boardrooms and Branch Optimization_ Backed-by-Science Strategies for Conquering All Three...

BUDGETS, BOARDROOMS, & BRANCH OPTIMIZATIONBacked-By-Science Strategies for Conquering All 3 in 2017

JOHN W. SMITHCEO, DBSI

BOB MEARASENIOR ANALYST, CELENT

JOHN W. SMITHCEO | [email protected]

BOB MEARASenior Analyst | [email protected]

BOARDROOMS, BUDGETS, & BRANCH OPTIMIZATION

HOUSEKEEPING ITEMS

A COPY OF THE SLIDES AND TODAY’S RECORDING WILL BE EMAILED SHORTLY AFTER THE WEBINAR

PLEASE COMPLETE THE SURVEY AT THE END

USE THE CHAT WINDOW TO SEND US ANY QUESTIONS


WIN THE BOARDROOM

Benchmark data of where your peers

stand today

WIN BRANCH OPTIMIZATION

Research-Based technologies and designs

aligned to strategy

WIN THE BUDGETWhat to plan for and why

1 32

THE THREE KEY TAKEAWAYS


CURRENT STATE

DESIREDSTATE

COMPREHENSIVE SERVICES

DESIGN/BUILD

TECH/EQUIPMENT

SOFTWARE DEV

PROCESS PEOPLE & PRODUCTION

ON-TIMEON-BUDGETON-STRATEGY ON-SATISFACTION

DBSI: REDEFINE BANKINGHOW

SUCCESS

66© CELENT

About Celent We are…

…the industry’s premier provider of…• Business and IT strategy research• Ongoing research & advisory services• Vertically-oriented consulting• Global, domain specific events and

leadership forums

…an experienced presence in financial services

• Staffed by financial services industry experts with over 500 years of combined experience

• 50+ full time analysts devoted to financial services

• Clients include 50 of global top 100 financial institutions

• Centres of excellence across Capital Markets, Finance & Risk, Wealth Management, Banking and Insurance

…focused on cross practice themes

…a division of Oliver Wyman • Global financial services consultancy• 1,400 consultants, offices in 40 countries• Domain experts throughout financial services,

mirroring Celent’s coverage almost perfectly

…a global firm• Offices in North America, Europe and Asia• Reports in English, French, Japanese and

Mandarin• Coverage that spans many geographies

Digital Legacy & Ecosystem

Transformation

Innovation & Emerging

Technology

WHERE YOUR PEERS STAND TODAYINDUSTRY BENCHMARKS


Understanding Branch Banking in an Omnichannel World

1

9© Oliver Wyman 9

Why now for an omnichannel strategy?US Financial Institutions face an imperative to evolve their consumer and small business banking business models

1New economic realitiesFee regulation, persistently low interest rates, and a sluggish economic recovery have mired banks in a "no growth zone"

2Evolving consumer behavior, preferences, and expectationsThe way that consumers want to shop, buy, and use financial services is changing

3Increased competitionCompetition among traditional banks is intensifying, and new-form competitors are emerging leveraging digital strategies and data

4New strategic focusIncreased focus on the most attractive customer segments, deepening wallet share and retention to drive organic growth without de novo activity

Market dynamics Omnichannel imperatives

Deliver a high-quality, hassle-free client experience that supports more / longer / deeper relationships, while lowering the cost-to-serve

Drive more personalized marketing, sales, advice, and service experiences leveraging a single view of customer data

Manifest the FI’s brand proposition effectively across all customer touchponts

Empower more differentiated segment service propositions to attract high-priority customer segments

1010© CELENT

The branch is plagued by at least three challengesAnd the trend lines aren’t favorable…

1. Cost control• Rising operating costs• Rising labor costs• Declining transaction volume

2. Declining foot traffic• Growth in self-service channel usage• Declining check writing (and depositing)

3. Eroding relevance• Expanding self-service functionality• Prodigious growth in mobile device usage• Mainstream video usage (e.g., Skype, Face

Time)

1. Source: FMSI 2013 Teller Line Study

Branch teller cost dynamics1

• The branch channel isn’t dead – just different• FIs are rethinking what role the branch plays, and how to redesign accordingly

2005 2006 2007 2008 2009 2010 2011 2012 20130

2

4

6

8

10

12

0

20

40

60

80

100

120

Avg Monthly Teller Transactions (000)Per Transaction Labor Cost (cents)

Telle

r Xa

s pe

r M

onth

(00

0)

Cost

per

XA

(ce

nts)

1111© CELENT

Here’s why the branch channel remains so important

Fraud/risk management

Regulatory compliance

Cost reduction

Improving customer re-lationships

Improving sales results

0% 20% 40% 60% 80%

19%

24%

28%

53%

76%

Top Retail Banking Priorities

% rating #1 or #2 priority

Source: Celent survey of NA financial institutions, October 2014 (n=156)Q: “What are your institution's top retail banking priorities? Please indicate up to five in order of priority.”

Mobile2%

Contact Center8%Online11%

Branch79%

Sales mix for non-mortgage consumer lending

Mobile2%

Online7%

Contact Center8%

Branch83%

Sales mix for DDA and Savings accounts

Source: Celent survey of NA financial institutions, March 2016, n=31Q: “Indicate your channel mix for new and existing customer DDA or savings accounts.” Q: “Indicate your channel mix for new non-mortgage lending applications.”

State of Branch Transformation 2

13© CELENT 13

An area that Celent pays close attention to

• Created two managed research panels in 2015 to take a deep dive into topics of enduring importance:– Branch transformation– Digital & omnichannel banking

• Our fifth branch transformation survey is currently in the field

• This section draws from the first survey (June 2015, n=43)

1414© CELENT

We’ll try to answer three questions

1What does branch transformation mean to US financial institutions?

2 Where are banks in this journey, and how long will it take?

3 What is the likely end game?

15© CELENT 15

Most now agree that branch channel transformation is imperativeBut there’s no consensus of what “transformation” means

• After years of talk with little action, US FIs are now serious about improving branch channel efficiency and effectiveness.

• But, attitudes vary considerably about what to do.– Some see radical changes needed– Some not so much

Source: Celent NA FI survey, June 2015, n=43Q. How does your institution view the need for branch transformation Q. In your view, “branch transformation” means

Refinements and/or modernization of tried and true design concepts (e.g., incremental improvements / maintenance / updating in individual branches)

Modest changes to the branch operating model

Radical changes to the branch operating model

0% 20% 40% 60% 80%

14%

27%

57%

Unnecessary

No position

No consensus

Optional

Imperative

0% 20% 40% 60% 80% 100%

0%

0%

8%

11%

81%

Resp, (%)

Importance of branch channel transformation

Meaning of “branch transformation”

16© CELENT 16

Just 1 in 10 US FIs have a clear vision of the future branchLots of learning will take place in the next few years

• Institutions know what they need to accomplish, but they don’t know how to do so.

• Getting there won’t be fast or easy. Pilot branches need to be designed, built and tested.

• Over time, variations of standard archetypes will likely emerge, making things modestly faster for lagging FIs. -20%

0%

20%

40%

60%

3%

41%46%

11%

Res

p. (%

)

Source: Celent NA FI survey, June 2015, n=43Q. How clear is your institution’s vision for what your branch network will look like 5 years from now?

Clarity (or not) of vision

17© CELENT 17

Most institutions have just begun their journeyBut 70% are actively pursuing

• Now is a good time to be engaging US FIs about branch automation.

• Roughly two-thirds of banks and credit unions will not have made key technology decisions. Fewer will have implemented.

• Most implementations are pilots – so there may be time to influence direction.

Source: Celent NA FI survey, June 2015, n=43Q. Which option best describes where your institution is in developing a branch transformation strategy?

0%

10%

20%

30%

40%

50%

30%

35%

19%16%

Low ------------------------- Maturity Level -------------------------- High

Res

p. (%

)

Branch channel transformation development maturity

18© CELENT 18

Competing priorities and high cost/complexity hamper progress

• Even though branch transformation is “imperative”, not all FIs are able to fund rapid progress.

• Multiple priorities are competing for funding.

• As a result, it will take several years to make required progress.

Source: Celent NA FI survey, June 2015, n=43Q. What are your biggest challenges to transforming your branch network? (choose up to three)

Lack of executive sponsorship

Lack of a compelling business case/ ROI

Unclear vision

Culture

Legacy systems

Cost/ complexity

Competing priorities within the bank / lack of budget

0% 20% 40% 60% 80%

3%

24%

24%

38%

46%

51%

62%

Resp. (%)

Branch network transformation challenges

“Baby steps” will be a pragmatic necessary for most FIs, given the cost and complexity of branch transformation

19© CELENT 19

Several technologies will be commonplaceWith rich variety in how they are implemented

• Cash recycling is among the most likely technology investment in the near-term

• Along with tablet usage for front line staff

• The hard part will be integrating these new technologies with legacy systems and processes

Source: Celent NA FI survey, June 2015, n=43Q. Based on what you know now, how likely will your future (1-5 years) branch designs include the following technologies in one or more branch designs?

iBeacon or other geo-location technology

Some form of biometric customer authentication (e.g., fingerprint, voice, facial, etc.)

Video teller machines

Interactive walls or surfaces

Video conferencing for customer contact with remote SMEs

Assisted self-service devices not involving video tellers

Paperless loan origination

Paperless deposit account origination

Wi-Fi for customers

Digital signage

Cash recycling (either within other devices or as separate devices)

Tablet based applications for front line staff

0% 20% 40% 60% 80% 100%

27%

32%

46%

51%

62%

69%

78%

78%

78%

81%

89%

92%

Top 2-box likelihood (%)

Likelihood of technology usage in future branch designs

20© CELENT 20

Pronounced physical design changes are in the works

• Exactly how new branch designs will evolve is uncertain.

• However, traditional designs will be in the minority.

Source: Celent NA FI survey, June 2015, n=43Q. Based on what you know now, how likely will your future branch designs involve the following physical design elements in one or more branch designs?

Traditional teller stations

Safety deposit boxes

Mixed use space (e.g., coffee shop)

Cash vaults

Meeting rooms for businesses or outside groups to use

Concierge desk

Drive-thru tellers

Micro-branches (very small footprint, minimal staff)

Lounge/waiting areas

Digital areas where customers can interact with digital channels

Drive-thru ATMs

0% 20% 40% 60% 80% 100%

22%

27%

28%

30%

46%

49%

59%

73%

73%

76%

78%

Top 2-Box Likelihood (%)

Likelihood of physical design elements in future branch designs

21© CELENT 21

But, getting there will take some timeMost institutions are piloting new designs as a first step

• A single pilot can take more than a year to design and implement

• Once operational, most institutions take another 6 months or more to read results

Less than 6 months

Between 6 months and one

year

1-2 years 2-3 years0%

20%

40%

60%

80%

13%

39% 37%

11%

Pilot duration: time to results

Res

p. (%

)

1-2 years 2-3 years 3-5 years0%

20%

40%

60%

80%68%

12%16%

62%

15%

23%

Pilot implementation timeframe

< $10 billion > $10 billion

Res

p. (%

)

Source: Celent NA FI survey, October 2015, n=39Q. Based on what you know now, Over what time frame will you be implementing pilots?Q: How long did/will it take to design and construct a pilot and read results?

22© CELENT 22

Compelling near-term objectives will force change ahead of those new designs

• Banks are focused on a triumvirate of near-term priorities:– Maximizing sales and service

effectiveness of front line staff– Favorably influencing adoption of digital

channel capabilities– Reducing channel costs

• None of these can wait for new branch designs to be built, tested and operationalized

Source: Celent NA FI survey, August 2015, n=39Q. For each of the objectives listed below, indicate the importance of each based on your institutions’ near-term branch channel priorities?

Improve staff adherence to policy and procedure

Improve branch staff visibility of customer interactions in other channels

Implement business process improvements

Reduce channel costs

Favorably influence customer adoption of digital channel capabilities

Maximize the sales & service effectiveness of front-line staff

1 2 3 4 5

3.2

3.6

3.9

4.0

4.2

4.6

3.5

3.9

3.8

4.4

4.2

4.5

> $10 billon< $10 bil-lion

Low ------ Avg. Importance ----- high

What is important in the near-term

BRIEF RECAP

81% FIND IT IMPERATIVE TO TRANSFORM THE BRANCH

BUT, ONLY 10% HAVE A CLEAR VISION OF HOW

IN FACT, MANY KNOW WHAT THEY WANT


IT’S HARD! (you are focused to your day job and it’s complex)

TAKE THE COMPLEX & MAKE IT SIMPLE:BEST PROCESS AND

PRACTICES TO MOVE FORWARD


WINTHE BOARDROOM


?ANSWER THE QUESTIONSWHAT ARE WE GOING TO DO?

WHY ARE THESE SPECIFIC ACTIONS SELECTED?

WHERE & WHEN DO WE PLAN TO START?

WIN THE BOARD


WHAT PROBLEMS ARE WE SOLVING?

BUILD A GAME PLAN

Ask the right questions, of the right people in your organization

Identify what works, what doesn’t, your uniqueness, the barriers getting in your way, and the desired state

Establish what success looks like to you

Create a summary playbook to ensure you are all on the same page


DISCOVERY QUESTIONNAIRE What is Branch Transformation? What makes you different or unique? What is the client experience? What gets in the way? Who gets it right?

Objectives Project Scope Key Elements

of the Program Client Experience Budget Success Metrics

DISCOVER

28

DEVELOP YOUR STRATEGIC INTENT


EXECUTIVE SUMMARYAll your challenges, desires and research-in-between are summarized in an Executive Summary to ensure executive alignment is obtained, and we are all on the same page.

Objectives Project Scope Key Elements

of the Program Client Experience Budget Success Metrics

DISCOVER

29

DEFINEA PATH TO SUPPORT EXECUTIVE & BOARD ALIGNMENT


WINTHE BUDGET


“WHAT ALL GOES INTO A BRANCH

TRANSFORMATION?”

IT’S A LOT MORE THAN YOU THINK! YOU HAVE TO INCLUDE:

DESIGN, ARCHITECTURE, INTERIOR DESIGN, ENGINEERING

DEMOLITION(IF NEEDED)

BANKING EQUIPMENT, TECHNOLOGY, FURNITURE, SIGNAGE

BRANDINGDIGITAL SIGNAGE, MERCHANDISING

CONSTRUCTION VARIES GREATLY ON CURRENT SITE CONDITION

OWNERPROVIDED ITEMS, I.T., OFFICE SUPPLIES

CONTINGENCY FOR UNFORSEEN CONDITIONS

+ + + + + +

SO, HOW CAN I GET MY ALL-IN COST?

DBSI’s proprietary SMART BUDGET TOOL considers every part of your Branch Transformation to calculate an accurate estimate of your all-in cost. That way, there’s no surprises.

SMARTKIT™ FOR NEXTFINEXT TECH

EXPERT NEARBY

SELF-SERVICE

EDUCATION STATION

SIGNATURE ITEM

TCRs & ATMs

FURNITURE PKG

RE-DESIGN

DIGITAL

LIGHTING

CARPET & PAINT

ADA

RemoteExpertise

All Flagship Elements

LOW 1 LOW 2 LOW 3 MED 1 MED 2 MED 3 HIGH 1 HIGH 2 HIGH 3

Brand Refresh

Sell with Digital

Retail Design Pkg

Open Plan Design

Efficiency Drivers

Transformation

Educate

DESI

GN/B

RANC

H EL

EMEN

TS

BRANCH TYPE

INVESTMENT & BUDGET OUTLINE

$60,000

$100,000

$200,000

$500,000

$700,000

$900,000

$1.1M

$1.3M

$1.5M

HOW WILL I APPLY THIS?Distinct SMARTKIT™ of parts by branch segment for easy implementation across your network giving you the best return for your investment.


CREATE AN ACCURATE BUDGET

CREATE AN EXECUTIVE SUMMARY

WHY TAKE ACTION, WHAT THE ACTIONS ARE, AND BY WHEN

WINTHE BOARDROOM & THE BUDGET


WINBRANCH OPTIMIZATION


CHALLENGES Design a branch

that defies banking traditions

Invite the community in

Appeal to the Agrifinance community without losing the Rabobank identity

IMPACT“In my 20 years in banking I’ve never heard clients express this much excitement when coming into a bank.”

SCOTT CISNEROSVice President Community Banking Manager

DBSI X-FACTORHaving to only work with one company (DBSI) for everything from design, to tech, to build, to the integration of it all helped Rabobank discover the perfect blend of design and technology – and ultimately deliver a WOW experience.

RABOBANKBRANCH TRANSFORMATION | 3,600 sf


RABOBANKBRANCH TRANSFORMATION | 3,600 sf


CHALLENGES Develop an inviting, hyperlocal

design to align to the brand & Colorado lifestyle

Create the roadmap to determine how many branches, where, and why

Remove all barriers to service Ensure no one asks again “do

you offer Mortgages?”

IMPACTALL success metrics by the Executive Team and Board have been achieved!

DBSI X-FACTORThis was a complicated project. A building housing not only a branch but significant back office operations, 3 levels, very old building and it with 2 previous major additions in it’s a past.

WOW was end game, but the planning to keep all of that running while DBSI fully transformed the location was a challenge that was overcome to rave results.

COORS CUBRANCH & CALL CENTER TRANSFORMATION | 11,000 sf


40

COORS CUBEFORE


COORS CUAFTER


CHALLENGES Create a new global, go-to

market branch strategy

Drive efficiency in a high transaction environment

Enable staff to drive adoption to alternate channels

IMPACT“You’re an extraordinarily professional team that really takes the time to listen.We thoroughly value your recommendations!”

STEVE ROMANOEVP

DBSI X-FACTORWith a proven 6D process to guide, DBSI was able to breakthrough lack of executive alignment define their current state to desired in just 3-months with a full go-to market strategy.

NAVY FEDERAL CUBRANCH CHANNEL EVOLUTION | LESS THAN 3 MONTHS


NAVY FEDERAL CUBRANCH CHANNEL EVOLUTION | LESS THAN 3 MONTHS


TOP SHORT & MEDIUM-TERM STRATEGIES UNCOVERED BY CELENT RESEARCH

Maximizing sales and service effectiveness of front line staff

Favorably influencing adoption of digital channel capabilities

Reducing channel costs


Attract leads. Drive engagement. Match your products and services with your clients’ interests.

STRATEGY: DRIVE ADVISORY BRANCH TRAFFIC


Individuals can self-assess key indicators of their financial fitness in just 90 seconds, and see how their results stack up against their peers both locally and nationally.


STRATEGY: DRIVE ADVISORY BRANCH TRAFFIC

Break the chains of your hardware and open your cash automation machines up to all associates—from anywhere in the branch.

STRATEGY: FREE STAFF TO UNIVERSAL

REMOTE TRANSACTIONASSIST




Transactions started anywhere, fulfilled anywhere

All associates (FSR, Teller, or the Branch Manager) can now complete ALL transaction needs



Help clients understand what you offer, successes you’ve delivered to others and how to obtain those solutions easily.

STRATEGY: HELP CLIENTS DISCOVER & ADOPT TO PRODUCTS

INTERACTIVEDIGITALSIGNAGE


Clients can ENGAGE to learn about “why you,” a simplified view of your products, successes you’ve provided to others, your community contributions and even the people doing all of this.

INTERACT to learn mobile check deposit, bill pay, who they may want to bank with—and actually get started.

35+ apps to engage clients to help them DISCOVER how you can assist.

STRATEGY: HELP CLIENTS DISCOVER & ADOPT TO PRODUCTS


Introducing the first core-integrated, all-in-one service branch channel

TM

P O W E R E D B Y C F M

STRATEGY: IMPLEMENT SELF-SERVICE TO REDUCE CHANNEL COSTS


$

ONE SOLUTION.ALL OF THIS:

THREE DIFFERENT APPLICATIONS IN ONE DEVICENEXT fulfills the need for self-service, assisted-service, and full-service by opening up your cash recyclers to clients and tellers.

FULL TRANSACTION SET CAPABILITIESA full integration with your core platform makes NEXT more than just an ATM. It brings teller functionality— without the ATM cost.

LOWER COST AND INVESTMENT Repurpose your existing cash recyclers and dispensers to the new assisted-service model.

SMARTER RETAIL ENVIRONMENTSimple transactions are completed by the client to drive your costs down, while allowing staff to handle consultative-type tasks that drive up sales.




TELLER LINE+NEXT POWER TOWER/TELLER TOWER+NEXT STANDALONE




SUMMARY

SHORT TERM ACTIONS Drive branch traffic: FINANCIAL HEALTHCHECK Help client discover products: DIGITAL SIGNAGE Free staff and create Universal Bankers: RTA Migrate to self-service: NEXT

LONG TERM ACTIONS Discovery for redesigns and go-to-market

strategies Board on-board & budgets

81% FIND IT IMPERATIVE TO TRANSFORM THE BRANCH

ONLY 10% HAVE A CLEAR VISION OF HOW TO DO SO

NEED TO ACHIEVE SHORT TERM OBJECTIVES IN PARALLEL TO MEDIUM-TERM TRANFORMATION EFFORTS


GROWTHSTRATEGY ALIGNMENT

& EXPERIENCE ENHANCEMENT COST REDUCTION

CHANNEL OPTIMIZATION

45% YOY increase in business

accounts

Evolved vast majority (85%+) of clients only using tax services to add-on wealth management services

160 new accounts monthly

Micro-branch

715 SF

Saved tens of millions of dollars on Private Client initiative with the rapid test approach done in our Collaboratory

SHARED TENANCY

50% less cost

DOUBLEtraffic

2 FTEs less per location

Closed 2 underperforming branches to optimize

others

Developed go-to-market branch strategy in

3 MONTHS

TARGETED SEGMENTATION

Attracted largest depositor through event held in the “Community

Room”

Created new regional HQ that incorporates all

business aspects

49% YOY increase in loan

origination53%

YOY increase in client growth

THE RESULTS


SHRINK THE ENTIRE PROCESS BY SPENDING ONE DAY

AT THE IDEATION CENTER


Where more than 400 financial institutions started their branch transformation

efforts

Learn the Top 10 retail banking barriers that

affect sales and service

Interact with over 20 retail components and technologies

Discover the latest trends in retail and learn how they can

work for you

IDEATION CENTERYOU’RE INVITED!



Q&ABOARDROOMS, BUDGETS, & BRANCH OPTIMIZATION

JOHN W. SMITHCEO | [email protected]

BOB MEARASenior Analyst | [email protected]

THANK YOU FOR ATTENDING!

Questions? Feel free to reach out:


Date post:	12-Jan-2017
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