BRANCH EXPANSION: Digital vs. Physical Offerings

Whether led by the financial institution’s management team or board of directors, branch expansion efforts are challenging. Where do you get started? Begin by evaluating your current business model according to the potential market needs. Careful consideration should be focused on digital vs. physical offerings in the branch.

Are Digital Branches Better Than Physical Branches?

To find a clear and relevant answer to the question, look from the vantage point of your customers/members. While most financial transactions today can be initiated and completed digitally via internet banking, ATM/ITM, or mobile app, there is great value and relevance in physical retail branches. 

Digital branches and digital banking tools offer convenience, ease of transaction, and align with our obsession with our smart devices. Physical branches, however, offer face-to-face consultations. These, which on the outset seem unnecessary, provide an intangible benefit of comfort and consistency to clients. 

The best channel strategy and Why?

The difficulty of determining the best channel strategy is based on the market and customer segmentation. Younger communities where wide-spread usage of technology is established may opt to bank digitally or in a hybrid physical branch format. Hybrid physical banches offer both physical employees and digital tools such as video conferencing and ITM technology. Older communities and some commercial communities enjoy a relationship-driven experienced in a physical branch. Other considerations might be diversification of the population, stagnant economic growth (stagnant GDP), population stagnancy due to decreasing birthrate/aging population, and seamless integration or integration challenges with digital offerings and physical branch capabilities. 

Questions to Consider

Consider these questions when determining what strategy works best for digital vs. physical offerings include:

1. How to recover the costs concerning digital reorganization or physical expansion?
2. What social trends and geographical characteristics are in play in the markets served?
3. Are the appropriate profitability management parameters in place to properly manage the success, client impact, and growth for the branch style utilized?
4. What are the current staffing challenges in play and how will that be addressed moving forward?
5. How will my existing and future clients adapt?
6. How large of a budget is needed for customer acquisition and retention and employee compensation/benefits in the branch versus the current program?
7. How can the customer/member experience match in a digital and physical format?

The answer, then, to the question is still a ‘no.’ Digital branches and physical branches each have their uses in today’s marketplace. However, the key to successful branch expansion is the strategy behind the location or style of branch, a deep dive into the data, and the careful commitment to the service level experienced in either option. Meeting the customer or member’s needs is still the greatest and most essential metric for future success. 

If you are looking for a strategic partner to help your financial institution with its expansion or transformation needs, click here.