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The data in FMSI’s 2015 Teller Line Study provides actionable clarity to widely shared perceptions about the steady decline in bank branch traffic as personnel costs continue to rise. Measuring the impact of those associated trends on the bottom line offers a solid foundation for developing new frontline customer service models. The good news is that technology solutions can be deployed to facilitate more efficient scheduling, help implement new staffing approaches, and evaluate cross-selling effectiveness.
Over the 24 years that we have conducted this study, the volume of transactions at community bank and credit union branches has declined 45.3 percent, while the costs of employee salaries and benefits have increased 90.1 percent. The ratio of labor cost per transaction has risen 133.3 percent since 1992, owing in large part to an 18.5 percent decrease in the average number of transactions processed per teller hour. On a per-transaction basis, the labor cost for a basic teller interaction has more than doubled from an average 48 cents to $1.12 today.
The drop in branch traffic has been especially steep over the last five years as customers migrated in increasing numbers to online and mobile channels. Average transaction volume per bank branch has dropped about 1,000 per month to the current 7,200 since 2011. As the data on remote sign-ins at many banks and credit unions would likely bear out, account holders are actually interacting more frequently with their financial institutions. They’re just not traveling to a branch to do so.
The rate of Americans using Internet banking rose from 18 percent in 2000 to 61 percent in 2013, according to a survey cited in the Teller Line Study analysis. In comparison, the adoption curve for mobile services has been even steeper, nearly doubling from 18 percent in mid- 2010 to 35 percent in just two years. Mass adoption of mobile access could potentially have an even more dramatic effect on reducing branch traffic, given that one service in particular, remote deposit capture, offers a convenient alternative to the most common reason to step up to the teller line—the need to deposit a check.
Contributing to the decline of transactions per branch has been the proliferation of banking facilities over the past 45 years. When Internet banking was introduced around the turn of the century, technophiles were quick to predict the demise of the branch. However, banks continued to invest in brick and mortar. As the Teller Line Study reports, the ratio of U.S. population to a branch declined from 9,340 in 1970 to 2,970 in 2014— caused by a nearly 300 percent expansion in the number of branches during a time when population growth was only about half that rate.
Although the number of branches has declined nearly 5 percent from the peak high of 99,550 across the country in 2009, the likelihood of “over-branching” remains high as customers rely increasingly on virtual banking. The challenge is to balance customer expectations for convenient branch access—even though they are stopping by less often—with the need to optimize operational efficiency to support competitive pricing of products and services.
New Breed of Branches
The 2015 Teller Line Study looks beyond these trends to analyze alternative approaches to frontline customer service in the form of sales-centric branches. Teller counters are replaced with more open floor plans so employees can step up and converse with customers in what we call “higher quality” interactions. Simple deposits and withdrawals are handled at self-service stations, lowering the costs of those transactions and freeing up staff to provide financial guidance and introduce customers to useful products and services.
This new blend of technology, architectural design, and training employees to handle more diverse and complex interactions aims to shift the status of branches from cost center to profit center and to offer a more sustainable approach to serving customers’ evolving expectations. This approach provides access to standard transactions, albeit technologically enabled, while freeing up employees trained as universal associates to provide advice on financial products and services that millennials say they want when they come to a branch.
Technology not only plays a role in customer-facing service delivery under this new model, but also in planning, implementing, and evaluating its effectiveness. The information in the Teller Line Study offers a benchmark for community financial institutions to compare the transactional volume and operational efficiency of branches based on core transaction and platform system data. In addition, automated systems are available or can be delivered to improve the investment in branch infrastructure and staffing in a variety of ways:
• More efficient scheduling based on traffic volume forecasts. With systems in place to identify patterns in hourly, weekly, and seasonal branch traffic, managers can schedule full-time and part-time staff for both peak and idle periods to maintain customer service while holding the line on personnel costs.
• Time-blocking for secondary duties. Forecasting branch traffic can also facilitate building additional revenue-enhancing duties into work schedules, such as outbound sales calls and sales/ service training for universal associates.
• Tracking performance on sales and service goals. Sales reporting systems can help pinpoint the number of additional product and service enrollments beyond the services requested when customers walk in the door. This data is useful in assessing employee and branch performance and the effectiveness of new training and staffing models.
• Enhancing the customer service experience. Especially for busy customers and those who are attached to their mobile devices, an application is available that offers the option to schedule appointments at branches. The technology is empowering and underscores that their bank values their time as much as they do. At the same time, it enhances scheduling so that managers can ensure the right employees are on hand to provide the services customers want when they want it.
The return on implementing these solutions can be measured in terms of higher productivity and lower costs per transaction. A comparison in the Teller Line Study of average bank and credit union branch performance to financial institutions using these technology tools show consistently better-than-average performance over the past five years. For example, for 2015, teller processing labor cost per transaction for credit unions averaged $1.08, for banks $1.23, and for financial institutions employing new models and solutions 83 cents. Along the same lines, the rate of average transactions per teller hour worked for 2015 was 16 for credit unions, 13.1 for banks, and 21.2 for top-performing institutions.
In short, technology is at the center of what is happening in branches today. Remote services are largely responsible for the decline in transactions, and business analytics can help us chart that decline in startling detail. But new solutions can also help improve branch services, elevate the customer experience, and enhance profitability and productivity.