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Digital Migration: Retail Customers Calling the Shots

ARTICLE| Wed Jan 15 2020

Digital migration is now a key cost reduction lever for banks and credit unions. In the Post-COVID phase of customer migration from branch to digital, every aspect of face-to-face and voice-to-voice interaction needs to be mapped and evaluated for digitization.

Research indicates that great self-service experiences can enhance customer loyalty by providing convenience, immediacy, and reducing effort. But progress on migration is uneven, and the stakes are getting higher - creating a mandate for action in 2021.

The institutions that have proactively harnessed the substitution of branch channel are gaining ground, taking the lead in slashing branch transaction burdens as more of their customers switch their daily banking activities to mobile/ online banking and advanced ATMs. However, it is becoming clear that many others are mired in passive, partial programs, with real implications for future competitiveness. The graphic below shows the skew in transition due to digital disruption due to COVID 19, which is now even further reduced.

Fig. 1: Acceleration in digital disruption due to COVID 19

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The rest of this article outlines requirements for digital migration, available technology stack, brief description of the key features of the transition roadmap and return on investment.

Banks and credit unions need to move from a few high-visibility areas (e.g., ATM and mobile deposits) to a full set of transaction metrics or a formal organization-wide plan.

The first wave of digitization was motivated by cost-savings, e.g., reductions in teller staffing across the industry. In contrast, this wave is driven by customer expectations. A deliverables-based, targeted approach can yield improved efficiency, further automation of even more branch services such as, informational services, digital account opening, and credit automation, etc.

An objective, full-scale program must also look at branch consolidations and closures. Some might argue this approach to be potentially far more disruptive to customer relationships. In a holistic digital migration program, aimed at setting goals at reducing branch-based full time equivalents, plus an equally sharp increase in branch reductions, customers are rewarded with new convenience and enjoy expanded service features outside of branch hours, not to mention better availability. With such a powerful value proposition, the stage is set for accelerated digitization.

In this more comprehensive wave of digital migration, every aspect of face-to-face and voice-to-voice customer interaction needs to be mapped and evaluated for digitization. Considerations must also include the promotion, education, incentives, and segment tailored approaches that are needed to usher customers and staff through delicate transitions.


Digital migration would be much more manageable in a forgiving setting of high banking profitability. But the current and foreseeable environment is one of pressing conditions and hard choices.

Whilst, banks continue to reduce branch-related expenses, and staffing in particular, as transactions go digital, for Canadian credit unions, at a roughly 5% - 8% 2019 RoE and efficiency ratio as high as 85% vs 67% for Canadian banks, there is little time to waste.

BankingBook’s research reveals that over the past five years, for Canadian banks average teller staffing per branch in full-time equivalents has been on a downtrend, roughly 4% - 5% decline per year. In contrast, branch counts have remained relatively unchanged.

Often the realities of minimum branch staffing find themselves on a collision course with aggressive productivity assumptions. In fact, our research indicates that teller productivity improvement has hit a period of diminishing returns, with staff reductions out-pacing declines in branch transactions. A typical bank branch requires at least 5,000 teller transactions per month to justify the cost of the operation, and we estimate that one-third of branches fall below this level.

Those organizations that harvest digital dividend are able to lower cost, increase sales and customer satisfaction. Making the right decision about physical network is essential than ever. For credit unions an additional hurdle that needs to be considered is the ageing demographic of CU members. As the graphic below shows, 55 and above are also turning towards digital banking:

Fig. 2: Digital transition

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First, the substitution effect is real with image deposits leading the way. With new technology such as ATM digital imaging, mobile phone cameras, and OCR software, banks can now digitally receive checks for deposit, directly displacing teller activity and branch visits.

Second, the financial urgency is real. Branch reductions can be a primary source of cost savings, needed not only to improve profitability, but also to fund critical transitions to digital channels and offerings. Accelerating channel substitution paves the way, but must be managed correctly.

Third, the competitive urgency is real. While most banks now offer remote deposit capture via mobile and ATMs, staff efficiency and branch consolidation will need to accelerate, and consumer digital migration will be essential to progress.

Migration efforts are one key element of a broader repositioning for an increasingly digital future. These investments are more than just tactical moves to capture near term efficiencies, enhance customer experiences and maintain customer loyalties. Migration programs also build long term digital capabilities and cultural changes that are core to reinventing the everyday banking experience.

Banks taking a “build it and they will come” posture, with weak change management support have seen weaker customer channel shift and lowered returns on automation technology investment. Meanwhile, the proactive players, realizing more digital migration benefited from investment in additional initiatives.


To reach this optimal zone in digital migration and channel substitution, banks and credit unions will need a holistic migration program that addresses critical questions and capabilities in the four major areas:

The institutions must develop sophisticated measurements of migration rates across channels over time for all transactions, service, and sales. Many activities were traditionally measured separately within different channel silos, depriving management of a full customer-centric view across all channel touchpoints.

In order to set effective migration targets, it is critical to see how customer behavior is changing and moving from one channel to another by transaction type. For example, a year-over-year view may indicate that deposits are still migrating to mobile, but ATM deposits are stalled. Some of the largest and most advanced institutions in the field of digital migration now have dedicated analytic teams to measure transaction activity across channels. We believe many others must and will follow.

The institutions needs a deep understanding of different customer segments, their transaction patterns, and their likely migration rates. A particular focus is needed on behavioral drivers: where is channel migration stalled; what is preventing further switching; and what will motivate significant change.

For any transaction type, a small percentage of customers will generate the majority of transactions. Even among these customers, some will be using digital channels sparingly; others have never used them at all. Some will need face-to-face technology education; others may respond to promotion and/or incentives. Small business customers will need a separate and distinct plan, given their importance and different needs. So, the actions a bank must take will differ by segment.

To prioritize properly, organizations needs a comparative analysis of potential rates of return on various automation programs.

No matter what the journey is, the end-result needs to focus on client centricity and improved member/customer experience.

Understanding customer experience is essential to implementing operational efficiency improvement. BBA’s work focuses on analyzing customer behavior – helping clients develop a deeper understanding of customer attributes - decisions that they choose to make and their impact on risk, profitability and balance sheets. Using best practice solutions and approaches, we apply behavioral insights in our service design and delivery models, use key attributes of customer behavior as a blueprint to map service offering which results in improving the overall customer experience.

BBA’s technology solution BranchScapeTM, helps executives examine the performance of standalone channels, align the day-to-day activities within each channel with the overall objectives of the franchise. BranchScape provides an integrated approach in reconfiguring a branch network, according to the dictates of the market.