Micro-branches – A hot topic, but are they right for your organization?

As the total number of retail branches in the U.S. has declined in recent years and the role of the branch itself continues to evolve, financial institutions are taking a hard look at their branching strategies to determine the optimal delivery model. One of the more popular topics of discussion around branching these days is the concept of small footprint retail branches, often called “micro-branches” or “mini-branches”. We have also seen large banks such as Capital One and Wells Fargo pilot micro-branch prototypes, which has garnered a significant amount of attention within the industry. According to a survey by Bankography, the average branch footprint has dropped nearly a quarter since 2006. So, what is a “micro-branch” and is it right for your organization?

First, let’s put some definition around the term micro-branch. Regardless of the name one chooses, we are generally referring to a space that involves a much smaller footprint, equipped with smart technology and that is heavily branded. There are many variations of this concept, which sometimes might involve the use of a shipping container or modular unit that is customized for retail banking needs. In other cases, it might be a 1,200 square foot freestanding branch that is outfitted with ITM’s, VTM’s or a small number of universal bankers.

Next, let’s address the question of why financial institutions are evaluating this model. There are three primary factors that typically drive the interest in a micro-branching strategy:

 

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