San Francisco, CA, USA
August 8, 2005Branch Boom: Folly or
Forethought?
Report Published by Celent
Celent estimates that over the past twelve months
banks have spent about US$6 billion to establish new branches with $450
million allotted to new branch technology.
Branch banking is making a comeback from its near
demise during the Internet heydays. During 2004, around five branches were
opened per business day. Internet banks have not taken the retail banking
world by storm, though they have taught bankers a lesson or two.
In a new report "Branch Boom: Folly or
Forethought," Celent examines the state of retail branches and finds
that the recent boom has resulted in a slight deterioration in branch
scale. The report provides the next steps a bank should take.
Is the renewed enthusiasm for branch
banking folly or forethought? Banks’ massive investment in branches has raised
concern that the market may become saturated and that banks may not get a
good return on investment. According to Alenka
Grealish, co-author of the report and manager of the
banking group at Celent, "Regardless of the alarms, bankers cannot
stop investing in their branches. However, they must invest wisely. It
would be folly to continue viewing branches primarily as transaction
centers." Transactions are going to dwindle over the next ten years.
Based on check usage and remote deposit trends, Celent estimates that
check-related transactions will drop from 364 per day per branch in 2002
to 178 in 2010. The implications for banks are profound: fewer chances to
interact face-to-face with customers and the obsolescence of the
traditional branch layout.
Bart
Narter, co-author and senior
analyst, observes "The foresight is the move to a culture and
infrastructure oriented toward sales and service. The banks that will
excel over the next five years will: harness customer service and sales
technology and operate cost-effective branch networks."
This report is the fourth in a series by Celent on
important branch banking trends. The first two in the series were Branch
Automation Solutions: The Convergence of Teller, Platform, and CRM Part I
and Part II, May 2005. The third report in the series was Does Size
Really Matter? How "CRM Lite" Deployments Are Enabling
Successful Smaller Banks, July 2005.
A table
of contents is available online.
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