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Impact of Alternative Delivery Channels on the Branch

April 19, 2013

By Matthew J. Hertel, Senior Vice President of Client Relations at FMSI

As alternative delivery channels continue to evolve, the impact that these options have on your account holders and branch traffic increases, as well.  Most financial institutions have been offering debit cards for decades and online banking for years.  To keep up with technology available in the market-place, in more recent times, organizations have taken the next logical step into mobile banking.  Let’s face it, more account holders are discovering mobile banking every day, and realizing it is the best option. 

Mobile banking certainly changes how account holders interact with their financial institution, because the mobile device they are carrying is now their branch.  While mobile devices may be a relatively new method for mobile banking services, e-commerce on the internet certainly is not.  As the chart below indicates consumers are indicating an increasing preference in both mobile and internet banking.  These numbers will likely continue to grow year-over-year.

Source: American Bankers Association (2010, 2012)

While many of today’s account holders still value visiting their local branch, recent trends show a sizable decrease in transactions traditionally conducted in branches.  According to the most recent FMSI Teller Line Study, industry transaction volume trends show that since 2005, branch transaction volumes have decreased 32.7%.   How much of this decrease in transaction volumes is directly related to mobile banking?

The FMSI Study also revealed a 13.4% increase in teller Salary & Benefit Hourly Pay Rate, from $13.79 to $15.64, and a significant increase of 38.9% in Labor Cost per Transaction (from $0.72 to $1.00).  How much of an increase in teller cost per transaction have you experienced since 2005?   The future generations of the 21st century will undoubtedly utilize mobile banking as the preferred method of conducting their banking, because of ease and convenience, seeing significantly less value in visiting a branch in person.  What is your financial institution doing to prepare for the impact of mobility on your account holders?

Smart phones and tablets are taking traditional transactions out of the financial institution branch networks just like email and texting have taken traditional mail out of the United States Postal Service offices.  The Postmaster General, Patrick Donahoe, recently announced a plan to cut Saturday mail delivery as a means to save the financially burdened agency $2 billion a year.  This is the first significant reduction in USPS delivery service since it discontinued Sunday delivery in 1912.  Are any of your branches open on a day of the week that are a drain on your bottom line?  Do you possibly have branch hours of operation that need to be reviewed because of a decrease in transaction volume? 
FMSI offers a complimentary Hours of Operation Analysis (HOA) to all existing TMS clients to help identify the potential labor cost impacts of being open during certain hours.  The HOA process compares branch teller transaction traffic patterns, by time of day and day of week, to current hours of operation.  After making this comparison, FMSI determines recommendations, if any, on adjustments to client hours of operation.  Bringing the retail hours of operation of each branch in-line with historic consumer traffic patterns can have a significant impact on a financial institution’s bottom line.  Alternative delivery channels are impacting how all account holders conduct their business, when was the last time you compared your branch hours of operations to your branch traffic patterns?
If you are a current TMS client, contact the FMSI Client Relations Department to request a complimentarybranch hours of operation review at 770-619-3443 ext 202 or  

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