Saturday, January 8, 2011

The Branch is Dead, Long Live the Branch

That we live in a wired (or perhaps more appropriately, a wireless) world is an oft repeated truism. As I work on this post, I am using the Internet. My mobile phone just beeped with a text message. An intrepid bunch of schoolmates are using Facebook to organize a high school reunion half a planet away. Reunion after how many years, you say? Well, let's just say it is enough for many grey hairs.

If the drumbeat of news is to be believed, consumers are leaping en masse to interacting with their financial institutions through mobile phones and other remote channels. You can now snap a picture of a check with your phone and deposit it in your bank from anywhere in the world. Remote Deposit Capture (RDC) allows businesses and consumers to scan checks from the comfort of their offices or family rooms, and zap across images for deposit. The perfect storm of convenience and technology should mean that very few people visit their neighborhood branch anymore, right? Wrong!

An item (no pun, honest!) in The 2010 Federal Reserve Payments Study caught my eye. Yes, the number of checks written has declined from about 30 billion to 24.4 billion. However, only 13% of checks deposited were received by financial institutions as images. That means a respectable 87% of checks were deposited physically. So, despite all the noise about check deposits getting virtualized, there still is a healthy number of people walking into branches to make deposits.

Now, your take on the physical branch versus self-service debate will dictate whether you see this glass half full or half empty of your beverage of choice. Proponents of RDC will point to the enormous growth potential in the remaining 87%. The same percentage will be looked at by some retail bankers as rationale to invest in branches.

At the risk of being a fence sitter (come to think of it, sitting on an actual fence can be acutely uncomfortable), let me say that both views are correct. RDC will continue its growth, albeit at its present course and speed- I don't see a "big bang" transformation in that direction. I do, however, see an opportunity for investment in technologies like teller capture and enhanced training for tellers to go beyond their current role as deposit takers. Teller capture uses technology to capture images, proof, and balance deposits at the teller station. It reduces keystrokes and data entry errors. It also provides more "heads up" time for tellers to interact with customers, where additional training can enhance the customer experience.

Transformation is a funny thing. Just when you think the new and different will swamp the world, something from the hoary past reaches out to remind us of its existence. Success will go to those who craft strategies to leverage both.