Thursday, 30 October 2014

Why shared branches could be the answer to avoiding closing the last branch in town

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The announcement by Lloyds Banking Group that it would stop honouring the promise to not close the last branch in a town at the end of 2015 caused some furore amongst politicians and those representing rural communities. Lloyds having the largest number of branches of the major banks in the UK and partially owned by the tax payer has in many cases been left as the last branch in town as competitors have closed their branches knowing that Lloyds were obligated not to close theirs.

The response by Vince Cable, the UK Business Secretary, to the Lloyds announcement was to give all the major banks yet another rap across the knuckles in a sternly worded letter stating that this was unacceptable. However unacceptable it is what is the answer? While the banks may point to the many transaction services that the Post Office offers on behalf of the banks, a better answer is for the banks to get together and have shared branches for those villages and towns where they cannot justify the costs of having a single dedicated branded branch.

This joint branch would allow customers to perform transactions with their bank either with the help of a teller or by using self-service machines. If there is a teller then they would need to be trained in using each of the banks’ technology for the transactions covered by the branch. The simplest implementation would be for the branch to have one teller device for each brand sharing the branch and similarly for self-service machines, however this would have the disadvantage of requiring a larger branch than each of the individual branches will have required. The smarter option would be to have single devices which allowed the customer to say which brand they wanted to deal with when they first signed in and then the appropriate screens for that bank to appear. This would keep the size of the branch down.

The shared branch could include one or more meeting rooms where customers could meet with advisors from the appropriate bank by making an appointment in advance, allowing the opportunity for the advisor to service multiple branches and therefore maximising their productivity. The advisor would not even necessarily have to be physically in the branch but could converse with the customer via videoconferencing. This way a branch could remain open in low populated areas at a relatively low cost to each individual bank.

This service could even be provided by a third party or the local community under a different overarching brand.

This is not a new idea and is one that was first floated (by me amongst others) at least ten years ago. However that was at a time when the banks were making larger profits, there was less regulatory pressure and the technology to easily and cost effectively deliver these types of solution was neither mature nor available. While there was some initial interest from the major banks it was the idea of collaboration amongst the banks that was unthinkable even though it provided a benefit to the customer.

Maybe as the big 5 banks look to reduce their number of branches and rebuild their reputations this could be the right time to look to shared branches as a means of not being seen as the bank who closed the last branch in town.

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