How Mobile Banking, E-Mortgages Are Changing the Bank Branch

Mortgage & Real Estate

Survey data show by midyear 2013 Internet-based mortgage sales in the U.S. increased 75% year-over-year leading to a 16% decline in branch sales.

Accentures 2013 annual survey of 2,001 retail banking customers across the United States compares results of the same pool of respondents conducted in 2012 also show mobile banking increased 50%.

Together these changes are forcing banks to reconsider their retail branching strategies.

Branches need to be reimagined as one aspect of a radically new approach to consumers, says Mike Goodson, a managing director and head of management consulting for Accentures North America banking practice.

Online banking regardless of its specifics represents an opportunity for banks to recover profitability and reduce costs as much as it is an opportunity to establish a much more sustainable relationship with customers and better retention of market share into the future, he says.

Given the scale of these disruptions, traditional full-service banks, as a group, could lose significant market share by 2020 to banks thatreorient around digital technologies and to new entrants from the retail and technology sectors, says Wayne Busch, managing director of Accentures North America banking practice. Our research shows signs of this already occurring.

Banks are responding to the trend differently.

Some banks are expanding in new locations, or trying to generate higher volume of online sales of home equity loans. Others are creating new branch models that can manage borrowers appetite for Internet and mobile banking efficiently enough to retain existing customers and attract new borrowers.

The said goals, however, cannot be achieved unless banks strike the right online off-line balance.

There is little question that branches remain important in the minds of U.S. consumers, says Goodson.

As of today, the survey finds branches still are cited as the number one reason for loyalty. Eight out of ten consumers see themselves using branches as often or more often in the next five years.

But the rapid rise of mobile banking illustrates how quickly customer behaviors can change through digital technologies and profitability pressures that motivate banks to promote less costly and more convenient online banking options, Goodson notes.

Examples include recent promotions of mobile check-deposit tools offered by major U.S. banks to drive rapid mass market adoption, increasing the use of mobile banking 50% compared to 2012, according to the survey. Nearly one-third, or 32% of U.S. consumers engage in mobile banking at least once a month.

Other data show, compared to 2012, customer behavior has changed considerably in favor of online banking.

The number of survey participants who think online banking should be the No. 1 area in which banks should be investing increased to 43% surpassing the 38% that instead recommended branch expansion.

The acceleration in consumer acceptance of digital banking particularly in mobile banking and online product sales, adds Goodson, suggests a very different banking landscape for 2020.

Every year the nations top 25 banks spend more than $50 billion to maintain branch networks, where they sell approximately 60% of all their products including mortgage loans, according to Accenture data.

This fact in itself suggests a lighter, more diverse branch banking model is needed to maintain sales and enable digital banking, Goodson says.

Findings indicate new branch arrangements already have started to shape up.

So-called light branch networks where less than one-third of the branches are oriented to direct sales are one example. They are highly automated, with a small staff that facilitate sales and provide access to remote advisory specialists.

Kiosks are another option where up to half the network is geared to routine account services situated in malls and transport hubs, he explains. They are cashless networks that feature advanced ATMs with video that allow customers to connect and transact with remote staff.

Full-service hubs on the other hand operate like a small group of conventional branches that offer full sales and service support with extended hours, including specialized mortgage and trade advisers.

Flagship branch operations tend to be even smaller in size. Branches are strategically located to act as flagships centers of sales and services that promote the banks brand,introduce new products and self-service tools.

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