Do Banks Want Customers in Their Branches? The RDC Branch Renewal Paradox

by Bob Meara, March 31, 2008


New York, NY, USA March 31, 2008

Do Banks Want Customers in Their Branches? The RDC Branch Renewal Paradox

RDC is impacting branch foot traffic in 60% of banks that offer it. Among a minority, branch transaction declines of 20% or more are evidenced, accelerating already declining branch activity. The implications for banks are profound: fewer chances to interact face-to-face with customers, and the obsolescence of the traditional branch, something few banks intended when they launched RDC.

Until recently, most banks did not regard remote deposit capture (RDC) as a useful means of replacing costly branch transactional visits with a lower cost self-service mechanism. After all, RDC customers had been mostly large businesses who rarely visited branches to make deposits. But, as client adoption migrates downmarket, RDC (and to a lesser extent, image ATMs) will have a profound effect on branch transactional volume as customers make deposits without using the branch. Few, if any, financial institutions launched RDC solutions with the intent of reducing branch traffic, yet that's exactly what is happening in a minority of banks taking aggressive postures with RDC.

In a new report, Do Banks Want Customers in Their Branches? The RDC Branch Renewal Paradox, Celent examines the results of a web-based survey conducted among 157 financial institutions in December 2007. Among them, 56% of respondents offer RDC and another 9% are in pilot with the product. The survey was preceded and followed by telephone interviews to assist in interpreting results.

Even as RDC whittles away at branch activity, banks continue to build branches. Since 1998, the US branch population increased 37%. With growth in the US population of just 10% over the same period, the observed rate of branch building is more than triple the US population growth. Thus, US financial institutions have invested heavily to grow their geographic branch footprints while concurrently investing in self-service technology to keep customers out of those same branches. Paradox or strategy?

"Banks obviously want customers in their branches, but the questions for a growing number of banks appear to be 'which ones?' and 'for what reason?'" says Bob Meara, senior analyst with Celent's Banking Group and the author of the report.

"Transactional foot traffic is key to generating new sales through cross-sell among most banks. Other banks welcome declining foot traffic since customers are transacting using lower cost self-service channels. Welcome or not, branch foot traffic is in decline," he adds.

After a review of historic branch building activity, this report analyses branch transaction taxonomy, detailing the remarkable dominance of check transactions at the teller line. The report then examines the adoption of multiple self-service technologies and their influence upon branch foot traffic.

The report looks at common branch scorecard metrics and compensation strategies designed to leverage branch traffic for sales gain. It concludes with an examination of changes afoot in branch banking spawned by the inexorable decline of transactional activity most banks face. Appendices detail research methodology and comprehensive branch automation solution adoption statistics derived from the research.

This 47-page report contains 36 figures and 10 tables. A table of contents is available online.

Members of Celent's Retail Banking, Wholesale Banking, and Payments research services can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

New York, NY, USA March 31, 2008

Do Banks Want Customers in Their Branches? The RDC Branch Renewal Paradox


Executive Summary 04
Introduction 07
  Branch Transaction Taxonomy 08
  Branch Transactions and Self-Service 12
  Branch Automation Solutions 13
Growing Influence of Self-Service 16
  Remote Deposit Capture 18
  Consumer Capture 22
  Image ATM 25
Leveraging Branch Traffic 28
  Salary Compensation 29
  Cross-Sell and Upsell 31
The Future of Branch Banking 33
  Alarms Ringing 34
  Reinventing the Branch -- Eventually 38
Conclusions 40
Appendix I: Research Methodology 41
Appendix II: Solution Adoption Detail 44


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