Branch rightsizing. Today's Challenge.
As internet and other multichannel experiences are driving consumers away from bank branches, it is more important than ever to demonstrate the value of the network. The resizing of branches activity is only one among several consequences of this widespread trend, which requires an attentive analysis of sales and services in order to evaluate the need of a new paradigm.
The challenge today is to evaluate branch performance on strong objective basis.
In order to perform a network optimization and development, the first step is to gauge the current situation in terms of all potential sub-markets and in terms of existing branches. Clusters are defined during a preliminary study as the attraction basin or domain of influence of an existing branch or a potential new branch. They are located at the branch geo-reference in the first case, at a major center of interest in the latter. The analysis of the potential is carried out independently of the existing branch network, in what we call “ground state approach”.
The first step is the definition of the optimization process, with a first distinction between “internal” and “demand-driven” optimization.
- Internal Optimization: the goal might be, for instance, to improve the efficiency of the existing branch network. This entails a target variable that is related either to cost reduction or to fostering of marginality.
- Demand-driven Optimization: the target(s) are related to tuning between demand and ability of the network to cope with the spatial distribution of such demand.
Whether you are repositioning a branch or evaluating the opening of a new one, there are several factors to be taken into account in order to provide a situation-specific and meaningful analysis.
4 steps for Branch Optimization
- Determine if the branch is satisfying prospective contributors objectives
- Evaluation of the network target markets potential
- Execute a competitive products and services evaluation
- Assessment of sales staff expertise and management skills
Retail banks need to rethink now about their next step toward better distribution strategies, evolving simultaneously with a dynamic financial landscape and ever-changing customer needs.
What makes a branch rationalization analysis a good one is the resulting ability to identify specific key drivers, evaluate current performance and improve the overall network effectiveness.