Insights from BAI Retail Delivery 2011 from ARCA's CEO Mort O'Sullivan

The high costs associated with the branch channel and the concern about banking fees are causing many financial institutions to question the basics: What is the branch for? How can it be optimized for profitability and for customer attraction and retention? Should automation be used to drive customers to self-service or should it be used to control cash, freeing staff to engage with customers? At this year’s BAI Retail Delivery conference, these were hot topics of discussion.

Mort O’Sullivan, founder and CEO of ARCA, attended the 2011 BAI Retail Delivery show and had some interesting thoughts after his experience there. Here is a recent conversation with Mort:

Q: What was your most interesting take away from BAI?
A: One thing that I have been thinking about since the show, is that over the last 30 years the growth in number of branches has correlated directly with the increase of fee revenue. If fee income is squeezed, what will that mean for the branch?

Q: What was most intriguing new service or technology you saw at BAI this year?
A:The general acceptance of cash recycling - not only at the teller line but now in ATMs. It makes me think about what banks are going to do with their branches, what kinds of staffing models they will use and the kind of employee that banks will hire in the future.

Q: What do you think that these things mean for the traditional branch?
A: It looks like banks need to rethink the branch and redesign towards a branch model that is more efficient. Smaller branches with simpler processes can help replace lost fee revenue with an improved customer experience and a tighter engagement.

Q: What dose the ideal branch look like?
A: I think the ideal branch is small, the size of a storefront and less than half of the size of a traditional branch, with no teller lines or back-rooms and with a smaller staffing model. This will reduce the operating costs of branches while breaking down barriers to allow for a closer relationship with each customer.

Q: What are some interesting things that banks are doing today in their branches?
A: Smaller more dispersed branches in convenient locations, branches with universal tellers and open designs. Similar to what we have seen in South Africa with the “one and done” concept where the first branch employee a customer meets can handle all of their needs.

Q: What was different this year from previous years?
A: I have been going to BAI since the mid 90’s and it’s good to see some old friends back at the show this year and meet with some of our customers. This year there was a return of many hardware technology providers to the show. I am glad to see the show is growing again.