US Consumers Continue to Leave the Branch; A New, “Virtual” Banking Segment is Rising and Threatens Traditional Bank Sales Systems

NEW YORK, March 21, 2012 /PRNewswire/ — New consumer research presented by the consulting firm Novantas at CBA Live 2012 today shows that banking customers increasingly prefer non-branch channels for a range of day-to-day banking transactions, from deposits, to solving service problems. As many as 35% of US banking customers are now “virtually domiciled,” essentially not using branches any more for their day-to-day banking needs. “The rise of virtually domiciled customers at banks is both a huge challenge and an opportunity for the industry,” said Novantas partner Kevin Travis, one of the study’s authors. “For traditional network banks, they are an untapped source of cross-sales, but they are also great targets for new entrant and direct players, from internet-only banks, to wealth managers and credit unions.”

These changes in customer preference and behavior mean branch volumes continue to fall, in some categories of transactions by as much as 20% year over year. As fewer customers walk in the door, banks face a sales crisis, with fewer “at-bat” opportunities to acquire new business. “The value of the sales force investment many banks have made has always been positive. Banks could count on a ‘if you build it, they will come’ model working in most markets. Today, that’s over.  Returns on sales force investments are likely negative for the industry and may not be coming back,” said Darryl Demos, Novantas partner and expert in bank sales and service staffing and processes.

For consumers, these findings show that many banks are continuing to invest in technology that improves their daily lives, and give them back the time they could have spent standing in line at a branch. The key question going forward is, will consumers be willing to give up branches as they use the new technologies. The research shows that levels of “branch attachment” remain very high, even in segments of customers that don’t use branches any more.