Branch Banking for Emerging Markets

Articles proliferate when banks decide to close branches. Commentators paint a picture of transformation - that the great monoliths of old are embracing the future by tearing up their old brick and mortar footprint and replacing them with branches on wheels (http://www.bbc.com/news/business-26993637), or getting rid of teller counters and replacing them with sophisticated gadgetry– either in branch or in customers’ pockets.

This is in contrast to the increase of bank branches in some emerging markets, such as the Philippines. Banks are in the midst of opening new branches, not only in the cities but they are also increasing their footprint in the provinces as well, in an attempt to reach the unbanked (as in the case of Bank of the Philippine Islands http://www.tribune.net.ph/business/bpi-bpi-family-to-open-40-branches-next-year) or to grow their retail network as in the case of Security Bank (http://www.philstar.com/business/2014/10/04/1376129/security-bank-venture-more-areas-outside-luzon).   

There have been some attempts to move away from the traditional brick and mortar – as exemplified by RCBC Microbank (http://www.rcbc.com/news_article0040.php); however, most of the expansion has been more of the same.  Is it necessary to open a physical branch? Would it be more cost effective to have more self-service channels than to have teller counters? How can we incorporate today’s technology and veer away from the traditional branch design? 

Philippine banks can take a leaf out of the transformation happening in the developed economies. Most changes programmes address the same concerns that face any bank anywhere in the world – e.g. costs in owning, staffing and maintaining unprofitable branches; retaining people doing simple tasks that can be automated.

Since Philippine banks are expanding their branch networks, they are in a position to step back, rethink and take advantage of the benefits of the lessons being learned in other parts of the world.

A widely adopted option is self-service channels, which are secure, fast and easy to use. Keep in mind that moving people to use self-service channels requires a high level of confidence in these channels. If customers persist on going to a teller for a service that should have been handled by a machine or kiosk, you have to ask yourself why – there might be a need that these new channels do not meet.  Bank of the Philippine Islands (BPI) has successfully integrated a self-service queuing system as the starting point of all transactions requiring a teller. With BPI Express Assist (or BEA), customers input their transactions in the kiosk, get a queue number, sit and wait for their number to be called before going to the teller counter. It is very easy to use, requires little to no assistance, and it helps cut the time for tellers to complete transactions because the data entered by the customer is fed to their teller system.

Branches on wheels can be another option, bringing bank services to far flung areas where it is not profitable to operate a physical branch. As with self-service channels, they have to earn the complete confidence of customers and make it easy for customers to use and access banking services. Enabling branch systems to render on tablet devices is one way of making this option versatile for banks.

Banks will continue to face this issue for the medium term, so why not take a look at what is happening in other parts of the world and learn what to do now? Banks don’t have to reinvent the wheel.