A G U I D E B O O K

F O R R E T H I N K I N G ,

R E F R E S H I N G a n d

R E N E W I N G B A N K I N G ’ S

P H Y S I C A L C H A N N E L

O F E X P E R I E N C E

A ROADMAP TO OPTIMIZING & TRANSFORMING YOUR BRANCH NETWORK

A D R E N A L I N E A G E N C Y . C O M

A D R E N A L I N E W H I T E P A P E R S E R I E S

ROUTE PL ANNING

THE MOST

PRESSING ISSUE

FOR THE BANKING

INDUSTRY TODAY IS

HOW TO OPTIMIZE

THE PHYSICAL

CHANNEL OF

EXPERIENCE IN A

MEANINGFUL WAY.

A wise man once said that a journey of a thousand miles begins with a single step. While the banking industry may be coping with roadblocks, delays and course-corrections caused by disruption, it’s the progress made along the way that is surely defining the customer banking journey today. With 90,000+ branches across the U.S., the branch channel is either an asset to a bank’s brand – an important touch point with a customer who may not visit all that often – or, a major liability because it hasn’t been maintained. The most pressing issue for the banking industry today is how to optimize the physical channel of experience in a meaningful way.

4 A R O A D M A P T O O P T I M I Z I N G & T R A N S F O R M I N G Y O U R B R A N C H N E T W O R K

Market dynamics complicate matters. Regulatory relief has led to more mergers and acquisitions in the banking industry. While this is a positive marker for a healthy industry, the impact on a bank brand can be problematic. How do you manage the branded, consult-based experience of an evolving network in a world where it’s all about mergers and acquisitions? Even if your bank has made major progress updating its branches, now you’ve suddenly doubled your network size. Those new branches have to be brought up to brand standards in both operational and visual manifestations. So, where do you start?

For an industry in flux, banking’s fundamental first step for transitioning its physical branch network is to define, develop and deploy its North Star.

The concept of a “future branch” for banks implies a state of being, something to arrive at or achieve. When imagined holistically, a future branch is less a final destination, and more of a roadmap that helps chart your course. A North Star is a constantly-evolving guiding principle that will help your bank create the ideal embodiment of the branch experience at any point in time. This framework for innovation cannot be leapfrogged or pushed aside because it will ultimately inform every step of your network transformation journey.

F O R A N I N D U S T R Y I N F L U X , b a n k i n g ’ s f u n d a m e n t a l f i r s t s t e p f o r

t r a n s i t i o n i n g i t s p h y s i c a l b r a n c h n e t w o r k i s t o d e f i n e , d e v e l o p a n d d e p l o y i t s

N O R T H S TA R

4

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C H A R T I N G T H E C O U R S E

When assessing your branch network, you’re balancing experience with efficiency, asking, “How do I get the best experience possible with the least amount of spend?” On the efficiency side, you have the size of the format helping to define what can take place there – how much staffing, automation or enhancement you will have in this branch. On the experience side, you have brand essentials – interior and exterior elements – staffing and culture and in-branch innovation and enhancement. The biggest consideration in assessing a branch is size because the amount of available and utilized space affects all other efficiency and experience elements – it also has an outsize effect on cost.

*SOURCE: Reinventing U.S. Retail Banking, Kurt Salmon/Phoenix Marketing Intl 2015

As more transactions migrate away from the branch, what to do with the physical branch has some in the industry scratching their heads. Like many others, maybe your bank has physical space you don’t need for the amount of foot traffic you’re seeing, but closing down branches seems reactionary and may not reflect your bank’s future state. While the number of in-branch transactions may be on the decline, the high value, consultative experiences still take place inside the branch.* Banks also use physical presence in a geographic area as a brand beacon, embedding themselves as part of the community. What we recommend here is tenaciously assessing network formats and purpose.

What are the key considerations as you begin to evaluate your physical network? As the industry changes, we see branch size trending toward smaller spaces. At the same time, we see processes shifting because of automation such as processing routine transactions. One exciting development that is trending up is new purpose and functionality of space as the industry iterates, such as community rooms, cafés and the like. It is important to remember that it is not just a singular location, but

an array of branches with different formats and purposes that you’re evaluating. This is where a North Star strategy comes back again. It helps banks define the ideal experience among varying formats and functions for branches.

NORTH STAR

A SPECTRUM OF FORMATS CONSIDERING:

(trending down)

(trending up)

(trending up)

AUTOMATION

SIZE

NEW PURPOSE/FUNCTIONALITY

EFFICIENCY EXPERIENCE

• Square Footage• FTE• Automation• Enhancement Tiers

• Interior/Exterior• Culture• Tecnology-Enabled• Scale/Impact

TO OPTIMIZE YOUR BR ANCH NE T WORK , YOUR NORTH S TAR SHOULD INCLUDE MULTIPLE FORM ATS VARYING IN PURP OSE

FORM ATS BAL ANCE COS T WITH EXPERIENCE, A SKING “HOW C AN WE ACHIE VE M A XIMUM LE VER AGE

WITH MINIMUM SPEND?”

Using the North Star approach, banks now have a process for evaluating internal and external forces of change and strategically deploying enhancements to the branch network. With expectations trending up and size trending down, banks have quite a lot to live up to. Unlike the early days of banking, branches are no longer a cookie-cutter facsimile of one another. Today, bank branches have diverse format and footprint requirements determined by a host of factors. From refreshing an existing space to transitioning and transforming them, enhancement opportunities exist in all shapes and sizes. Bank brands need the marriage of form and function for each branch.

While central branding elements will create a cohesive visual aesthetic, each bank branch should ideally represent both a size and scope to best serve the local market’s banking needs. That means some branches will be downsizing, while others will be expanding operations. In determining which formats to roll out in which areas, what banks are really doing is balancing expenditure and experience, ideally determining the minimum spend to achieve the maximum results for each location. Some of these branches will be retools and others ground-up builds, but regardless of format, banks will f ind that as size decreases, zones of experience overlap and require more radical shifts in design and staffing.

CONSULT STAFF

ATTRACT

ATTRACT

ENGAGE

3,000 Square Feet 1,500 Square Feet

CONSULT

TRANSACT

TRANSACT

STAFF

ENGAGE

6 A R O A D M A P T O O P T I M I Z I N G & T R A N S F O R M I N G Y O U R B R A N C H N E T W O R K

PREVAILING WINDS

Each bank location has Attract, Engage, Transact, Consult and Staff Needs zones critical to the function of the branch. The Attract zone serves as a beacon for returning and potential customers. The Engage zone is where customers are greeted and begin their in-branch journey. The Transact zone is where consumer banking activities, like deposits and withdrawals, take place. Consult is where customers get financial advice and counsel from experienced team members. Finally, Staff Needs is a non-customer facing space for back-of-the-house activities.

Two particular branch types, the Micro and Cashless formats have tightly managed zones of experience and focus on maximum efficiency while serving the community.

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THE MICRO FORM AT M A XIMIZES RE TAIL WINDOWS AND CLOSELY INTEGR ATES THE TR ANS AC T, ENG AGE AND CONSULTS ZONES

THE C A SHLESS FORM AT M AINTAINS COMMUNIT Y PRESENCE AND BR AND EXPERIENCE WITH OPTIM AL EFFICIENC Y

M I C R O F O R M A T

C A S H L E S S F O R M A T

CURRENT CONDITIONS

CASHLESS507 SF

MICRO 1,100 SF

ATTRACT

ENGAGE

TRANSACT

CONSULT

STAFF NEEDS

ATTRACT

ENGAGE

TRANSACT

CONSULT

STAFF NEEDS

DRIVE-UP

Whether a bank enhances an existing network of branches or expands to new markets via merger or acquisition, leveraging its North Star — the always-iterating, ideal branch experience — is central to optimization. When updating existing networks or transforming new branches, there are two core categories of enhancements: visual and operational. Visual upgrades range from in-branch branding and communications to design elements like upgraded interior f inishes and furniture. Operational enhancements, on the other hand, are more far-reaching and require deeper investment since they incorporate both visual elements and functional capacities, to transform how a branch operates.

Visual modifications tend to be more transitional changes in how a bank looks. Operational shifts are more 360-degree transformations in how a branch operates. Working with banks to maximize the physical branch channel, we find that approximately three-quarters of financial institutions fall into the transitional category. We understand that banks want to maintain a local community presence through local branches but don’t want or need a massive overhaul in some cases. These banks really need to make progress and unify the branch network. This is beyond refreshing visual elements to bring it in-line with the brand, but doesn’t go as far as revamping all of a bank’s practices and processes.

Often when banks are considering change to branch networks, much emphasis gets placed on full trans-formation, rather than on steps building up to a complete overhaul. That’s because transformation is more blue-sky thinking — focusing on what could be in the future rather than what should be in the next few months. Through acquisition or atrophy, the sheer volume of branches in need of an update could overwhelm any brand. Realistically, it’s just not viable from an economic or efficiency perspective to completely transform all of those spaces. What you need here is progress — a transitional, tiered approach.

8 A R O A D M A P T O O P T I M I Z I N G & T R A N S F O R M I N G Y O U R B R A N C H N E T W O R K

W H E N U P D AT I N G E X I S T I N G N E T W O R K S O R T R A N S F O R M I N G N E W B R A N C H E S , T H E R E A R E T W O C O R E C AT EG O R I E S O F E N H A N C E M E N T S:

v i s u a l a n d o p e ra t i o n a l .

A R O A D M A P T O O P T I M I Z I N G & T R A N S F O R M I N G Y O U R B R A N C H N E T W O R K

VISUAL OPERATIONAL

9© A D R E N A L I N E 2 0 2 0 , A D R E N A L I N E A G E N C Y . C O M

VS

VISUAL OPERATIONAL

T R A N S F O R M I N G E N V I R O N M E N T S I N V O L V E S T W O L E V E L S O F E N H A N C E M E N T O P P O R T U N I T I E S :

VISUAL enhancements include a range from basic branding and communications to interior f inishes

OPERATIONAL enhancements build on visual to create staff eff iciencies and optimize business models

TRANSFORMEXISTING & ACQUIRED

$360,000$245,000

$150,000$35,000

Visual

Branding & Retail Communications

Interior Finishes& Furnishes

$1,000,000+

$600,000

$300,000

$35,000 Visual

Operational

Transitional Changes

TransformationalChanges

Visual change in branch networks trends toward more surface-level elements. Signage and other forms of visual branding, along with furniture and finishes, can provide an upgrade and alignment to brand standards within a more manageable budget range. Operational enhancements build upon visual elements to usher in transitional change that aligns and begins to address the form and function of the branch. Finally, at the transformational level, the focus is on truly optimizing business models through network efficiencies – including staff roles and responsibilities, branch activities and transactions, and backend procedures.

As banks consider the practical realities of optimization, lower budgetary spend trends toward the visual elements – exterior signage and interior design. While lower financial investment is required at the refresh tier that doesn’t mean those revived spaces don’t pack a punch. Updating visual elements alone – like lighting, flooring and color palette – can have a dramatic effect on how a space feels. In transitionary enhancement, the budget incorporates visual upgrades as foundational, while functionality is assessed and augmented. With transformation, higher budgets allow for a space to be completely reshaped, incorporating new zones of experience and operational efficiencies.

MOVING AHEAD

The range of the enhancements plots into IMPLEMENTATION COST TIERS

OPERATIONAL consists of equipment and construction costs

VISUAL divides into interior and exterior

REFRESH TRANSITION TRANSFORM

Visual

Operational

IMPLEMENTATION TIERS

$1,000,000+

$600,000

$300,000

$35,000

REFRESH

$1,000,000+

$600,000

$300,000

$35,000

TRANSITION TRANSFORM

Visual

Operational

EN

HA

NC

EM

EN

T LE

VEL

S

IMPLEMENTATION TIERS

Equipment

Construction

Exterior Signage

Interior & Design

IMPLEMENTATION TIERS

13© A D R E N A L I N E 2 0 1 9 , A D R E N A L I N E A G E N C Y . C O MEXPEDITION SNAPSHOTSP E D E S TA L B A N K : REFRESHED spaces include updated color palettes and modern finishes.

C I T I Z E N S N AT I O N A L B A N K : TRANSITIONAL spaces use the same footprint, but begin to shift not only how the space looks, but how it functions. This transition introduces new zones of experience and takes away those areas that don’t function well while also incorporating modern finishes.

O R I G I N B A N K : TRANSFORMATIVE spaces are a wholesale reimagining from top to bottom. These spaces look, feel and operate differently than ever before.

Before

Before

Before

After

After

After

REFRESH TRANSITION TRANSFORM

Visual$35,000$150,000

$1,000,000+

REFRESH

$600,000

$35,000

TRANSITION TRANSFORM

Visual

Operational

$300,000

REFRESH TRANSITION TRANSFORM

Visual

Operational

$1,000,000+

$35,000

$300,000

$600,000

REFRESH TRANSITION TRANSFORM

Visual

Operational

$1,000,000

$35,000

$300,000

$600,000

$1,000,000+

REFRESH

$35,000

TRANSITION TRANSFORM

Visual

Operational

$300,000

$600,000

$475,000

REFRESH TRANSITION TRANSFORM

Visual

$75,000$150,000

$35,000

W A Y F I N D I N G T O O L S

In today’s fast-moving environment, mergers and acquisitions in the financial sector continue to rise year-over-year. A loosened regulatory environment has provided more opportunity for banks to fill the operational gaps by merging or acquiring another bank. These mergers can only amplify an existing problem in banking: marketing is often not aligned with branch strategy. This means that different sides of the house working on creating the right experience to the right audience are not even tied together. Even without the specter of a merger, most financial organizations have one team dealing with physical spaces and another entirely different marketing team dealing with brand.

For branch strategy to be successful, banks must actively work to break down those organizational silos. In other words, your bank’s approach to branch experience must be coordinated with your approach to reaching people. Marketing is the team typically handling how a bank targets certain people in a certain way in a certain market. But are the strategic decisions on the branch level being made in tandem with marketing? For example, if your bank is marketing to high net-worth individuals, are you placing branches where high net-worth individuals are located?

Further, is your bank creating experiences that high net-worth individuals want? That’s why bringing marketing into branch strategy is so vital.

14 A R O A D M A P T O O P T I M I Z I N G & T R A N S F O R M I N G Y O U R B R A N C H N E T W O R K

BRANCHSTRATEGY MARKETING

40% 40% 15% 5%

$35 - $300k

SAMPLE %ALLOCATIONOF NETWORK

REFRESH TRANSITION TRANSFORM CLOSE

$300K - $600k $600K - $1m

Now that we’ve looked at the array of improvements banks are making in branch networks and what enhancements will mean in terms of total spend, we need to address how to make decisions about these spaces. Decisions about tiers of transformation have a lot riding on them. With renovation costs at a premium, decisions must be made purposefully and strategically. So, how are banks doing that?

T I E R S O F T R A N S F O R M AT I O N

MERGERS CAN ONLY AMPLIF Y AN E XISTING PROBLEM IN BANKING: m ark et ing i s of t e n n ot

a l ig n e d with bra nch s t rate g y

C O M P A S S , G P S & M A P S

Once marketing is married to branch strategy, banks can strategically align each branch’s experience with its market potential. For informed decision-making, you will need both robust data and meaningful analysis. On data, banks should start with a branch health index that’s essentially a State of the Union of the entire network. This includes everything from traffic flow and architectural elements to retail communications and operational technology in each branch. Data on branch health is gathered by traveling from location to location and scoring each branch on a series of key indicators. The buckets in which these indicators are organized often include Exterior, Interior, Architectural Conditions and Retail Communications.

So now your bank has achieved thing one: evaluating what you have. You can now move on to thing two: evaluating the experience of it. Assessing how customers experience a bank branch is typically determined by surveying. In general, that’s not something a lot of financial institutions have the internal bandwidth to do. So, it’s time to bring in experts to help develop and deploy a meaningful survey, gather all of the data and put an expert eye on grading it.

Once the branch health index and survey data are complete, you can marry all that information together, oftentimes in a database like AMP. A tool like this empowers decision-making by tracking and assessing current conditions of your entire network.

The flip side to internal data on branch health and consumer experience is an analysis of market potential, mostly done through an array of market studies. The market study approach evaluates promise and potential by developing insights from the marriage of different datasets. Valuation modeling allows banks to forecast revenue potential and prospect growth.

Geographic information systems (GIS) provide rich local demographic data. Mobile user data tracks consumer traffic patterns allowing banks to design traffic density models and maps. Beacons use mobile data to evaluate and estimate how target audience members might behave in and around branch locations.

For successful branch strategy, market potential must align with market planning. Combining market research with internal member data and relevant competitive information allows for a comprehensive, informed perspective on strategic network optimization.

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Exterior

Interior

Architectural Conditions

Retails Comms

BRANCH EXPERIENCE SCORECARDLocation/VisibilityEase of Ingress/EgressExterior Signage Parking & Sidewalks Building ConditionLandscaping Drive‐Up

Teller AreaPlatform AreaWaiting/Lobby AreaSafe Deposit AreaConference Rooms

Overall ConditionMillwork Condition and FunctionalityWalls, Floors and CeilingFurniturePrivacyTra�c Flow and Sight LinesLighting E�ectiveness

Branding ApplicationCorporate Color PaletteMarketing CommunicationCultural ObservationsLines‐of‐Business Service Articulation Multimedia / Technology ApplicationCompliance

Scoring Factors

Location/Visibility

Ease of Ingress/Egress

Exterior Signage

Parking & Sidewalks

Building Conditions

Landscaping

Drive-Up

AVERAGE SCORE

Location 1

2

2

2

4

1

N/A

2

2.2

Location 2

3

4

3

3

1

3

3

2.9

Location 3

4

1

3

3

3

N/A

4

3.0

Location 4

5

3

4

4

4

5

4

4.1

16

T H E R O A D A H E A DFor many banks in the midst of disruption, the pace of

change has become almost too much to keep up with.

Unfortunately, being overwhelmed by options and

demands doesn’t excuse you from having to maintain

all of your channels along the customer journey.

Although we have provided a roadmap for navigating

the sites and signs along the network optimization and

transformation journey, we understand that sometimes

the prevailing winds of consumer expectation can

weigh down your decision-making. Pace yourself and

make progress. Most importantly, remember that

while the physical channel can be the most arduous

to evaluate and update, it’s the one overflowing with

potential for fostering the consultative experience

that banking has become known for.

T H E F U N C T I O N O F A N I D E A L I S N O T T O B E R E A L I Z E D B U T, L I K E T H AT O F T H E N O R T H S TA R , T O S E R V E A S A G U I D I N G P O I N T.

— E D WA R D A B B E Y

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ana ly t i c s consu l tanc y…we’re the ho l i s t i c end-to-end so lut ion p rov ider you d idn’t know ex i s ted, spec ia l i z ing

in the f inanc ia l s e r v i ce s indus t r y.

From idea through imp lementat ion, f rom phy s i ca l to d ig i ta l , f rom one channe l to the nex t , we create i t—

then f use i t a l l toge ther. Our reach i s l oca l , g lob a l and mu l t id imens iona l . Our p roduct i s exper i ences that

rede f ine the wa y comp an ie s and consumer s inte rac t , and connec t e ve r y where the t wo come in contac t .

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