From “Driving Customer Growth Through Strategic Retail Planning,” a Curinos webinar on November 14, 2024, presented in conjunction with the brand experience company Adrenaline. The webinar featured Andrew Hovet, Curinos managing director, and Ben Hopper, Adrenaline managing director.
Branches pose a dilemma for most banks. Even while operating at almost bare-minimal staffing, their sustained profitability is an ongoing challenge. It’s hardly a surprise that their numbers have shrunk consistently over the years. At the same time, branches are the most dependable source for new customers and deposits that will stay on the books – the “front door” that FIs need to ensure ongoing retail profitability. For all their complications, branches matter, and will continue to.
The webinar presented effective strategies for leveraging branch networks to drive customer growth through optimized retail planning and network expansion.
1. Double-whammy: Network optimization has reduced the number of branches while delivering fewer new-to-bank relationships.
With the exception of those of community banks and credit unions, branches have declined in the past several years and continue to. At the same time, existing branches have seen a steep decline in new-to-bank customers and deposit sales. Between 2019 and 2023, regionals saw a decline of 28% overall, which included a 38% shrinkage of new checking deposits. For super regionals the decrease was 17% and 20%, respectively.
Retail Branch Count Change
(CAGR 2019-2023)
Consumer New-to-Bank Deposit Sales
(per Branch per Month)
Source: Curinos BranchScape, Curinos Distribution Analyzer
2. The growth of digital acquisition has offset some of the branch declines, but the quality of customer is lacking significantly.
Picking up a digital customer for one lost through branch optimization is not a fair trade. Even though digital represents almost a third of new checking relationships, branch-originated balances are initially more than seven times greater than those originated digitally and 2.5 times greater after six months. After 12 months, more than half of all digital checking relationships have attrited while more than three-quarters of those originated in branches have stayed on the books. For traditional banks, digitally generated deposits and relationships should be considered a bonus rather than a sustainable replacement for lost branch sales.
Percent New-to-Bank Checking via Digital
Relationship Balances by Channel of Origination
Relationship Retention by Channel or Origination
Source: Curinos Digital Benchmarking 1-mo/6-mos/12-mos based on 1Q2024, 3Q2023 and 1Q2023
3. Customers wallets are becoming more fragmented even as the cost of per-customer acquisition is skyrocketing.
Across the board, banking customers are adding to their list of providers. From 2018 to 2023, mass market customers have gone from about 1.5 relationships to almost 2.5, a rise of 71%. The jump for affluent and small business customers has been 45% and 30%, respectively. Much of the rise has been because digital has reduced the friction of sign-up. But in part because of digital’s encroachment, competition for these relationships has intensified significantly, with the cost per acquisition (CPA) of a customer soaring to $700 from less than $300 in only four years.
BANKING RELATIONSHIPS – TRENDED
Source(s): 2018/2021/2023 Curinos US Shopper Survey | 2018/2021/2023 Curinos US Business Banking Survey | Curinos Marketing Analyzer | Kantar | Comperemedia | Curinos Analysis
Note(s): Excludes sponsorship spend | Average CPA for full Marketing Analyzer participants | Mass Market = Household Income less than $100k; Mass Affluent = Household Income greater than $100k
4. A four-phased approach maximizes the ROI potential of network investment through informed planning and purpose-led design.
Maximizing branch effectiveness and efficiency is less about design per se than customer experience. More than half of all customers surveyed say they prefer a brick-and-mortar experience to digital, and almost half of all banking customers rate some form of financial advice as their top reason for visiting a branch. So a branch needs to move from transactions to engagement. The transformation can best be achieved through an applied four-phased approach.
5. The impact that branch consolidation can have on forgone sales in the future is insidious and often understated.
Branch closings can have an immediate positive impact on the bottom line, but unless whatever short-term gains are reinvested in customer growth, those gains can be specious. That’s because the compound effects of a closed or consolidated branch have a long tail. After five years, any residual benefit is generally outweighed by incremental attrition and foregone sales.
Annual Net Impact of Branch Closure
Branch Closure (5Y NPV)
Source: Curinos Analysis
