Financial institutions nationwide are implementing changes in their physical branch network in response to evolving consumer expectations, but the industry is sometimes challenged with mixed messages. For instance, actual branch visits are down among Americans as a whole yet younger consumers are now indicating that they see real value in the branch and go to their banks and credit unions on a regular basis, an Accenture survey found. Cash spending isn't quite as prevalent as it used to be, yet ATMs remain as popular as ever and 46% of Generation Zers intend to open a deposit account before 2019 concludes, a PricewaterhouseCoopers study showed. Banks and credit unions must be adept at shifting their strategy to accommodate all of these changes. Subsequently while the industry is shuttering brick and mortar at an elevated clip (approximately 9,000 branch closures in the past 10 years, according to The Wall Street Journal), 1,200 banks have actually expanded their number of branches since 2012..
It's in this highly dynamic universe that decommissioning plays a critical role.
"There's a lot more to decommissioning than what meets the eye."
At its essence, decommissioning is the process of closing a bank or credit union location, usually triggered by reduced business flow or consumer traffic. That said, there's a lot more to decommissioning than meets the eye, both in the rationale behind it and the procedures for making it happen.
There are a number of reasons why banks and credit unions may consider decommissioning a branch, but all are focused on one thing in the end: to make an FI run more efficiently as a whole. There is more pressure than ever on the bottom line. The following scenarios commonly prompt a decommissioning discussion:
Increased online banking activity
Like a host of other industries, the internet has dramatically altered the consumer and retail banking space. According to a 2017 poll from the American Bankers Association, up to 40% of Americans manage their bank accounts via online means; more than any other method. Furthermore, roughly a quarter of those consumers interact with their accounts primarily through their phones or tablets.
FI's are responding in kind by devoting more resources to these channels, noted Ness Feddis, Senior Vice President and Deputy Chief Counsel for Consumer Protection and Payments at ABA.
"Since the first smartphone changed the world [over] 10 years ago, banks have leveraged mobile technology to take customer account access and convenience to the next level, Feddis explained. "Banks are also integrating new technology in the design and functionality of their branches, which are still popular with many customers."
In parts of the country where branch visits are down sharply, banks may decide decommissioning is the best way to serve their customers, as it enables them to reconfigure their capital and performance priorities to focus on the digital channel.
Lease term expiration
When banks and credit unions rent a space and their contract expires, they – much like regular everyday people who rent homes and apartments – have a decision to make: re-sign or sign off. When the latter is chosen, there are many working parts to ensure that the process of decommissioning is completed quickly and comprehensively, notes Linda Haig, Account Support Manager at BranchServ, who specializes in efficiencies and decommissioning.
"The processes and steps involved are often different for each institution," Haig explained. "For example, FIs with leased sites may decide to sell their equipment rather than store it. What winds up for sale, what stays and what's removed often depends on the landlord's preference, but BranchServ can work closely with the bank or credit union to recommend what security and automation equipment is worth keeping for future use versus selling or disposing."
Mergers and acquisitions
M&A's literally take place every day, across all industries – with a whopping $2.5 trillion in worth occurring in the first six months of 2018, The New York Times reported. Consolidation has been quite apparent among FIs, and banking institutions now total 5,000; down from 14,500 in 1984, according to The Journal.
Once banks pair up, they close down some locations while opening up many others, similar to what happened at Riverview Financial Corporation, the brainchild of National Bank of Marysville and Halifax National Bank. Since their partnership back in 2008, Riverview Financial Corp. has more than quadrupled its physical footprint, growing to 33 branches from a combined seven.
"The culture of banking has changed," Haig said. "To save on costs while at the same time better serving customers, banks will often join forces. While they may close locations as a result, they often open new ones up as well. Decommissioning is a key component in these decisions."
While quick, seamless transactions may be the kind of banking customers have come to expect, decommissioning doesn't happen right away or overnight. BranchServ provides complete project management services that align with our customers' timelines and budget. From A to Z, BranchServ can handle it all, including site surveys, safe deposit box drillings and branch equipment relocation, storage or disposal. For the equipment that is ultimately retained, the company provides real added value in that it tracks new branch activity and makes recommendations as to when and where salvaged equipment can be repurposed.
These may be times of change and unpredictability in the banking space, but BranchServ has the capabilities and efficiencies you can rely on and won't let you down when you need it the most. Contact us today to find out more about our specialized solutions.