IT Branch Investment on the Rise

CHICAGO – The old standby in retail banking is not going away and banks and credit unions continue making significant investments in their branch networks, according to TowerGroup. The financial services think firm estimates that banks, credit unions and thrifts will spend $3.5 billion on branch technology this year, a figure that next year is expected to grow to just over $4 billion. Technology investments are a significant part of this re-investment in the “high-touch” delivery channels, TowerGroup’s president and CEO, Mark Sievewright, told the 2003 Branch Banking Symposium in Chicago last week. This emphasis on renewal is clear in areas like technology investment and is being driven by consumer demand, the need to update existing, often 20-year-old, branch technology and the need to include branch transactions in an overall customer relationship strategy, Sievewright says. “Our research shows that 92% of U.S. consumers still visit a bank branch at least once a month, with the majority preferring it to other forms of interaction with their financial services provider. The branch is going to remain a key component of financial services delivery and distribution for some time,” Sievewright says. He says that TowerGroup research also shows that while the branch represents only one-third of “total customer interactions within the retail banking sector, it commands the majority of technology investment and operational expense for financial institutions (as compared with other delivery channels such as call centers, ATMs and the Internet).” The growth of integrated Web services should bring down the costs of technology integration and “level the playing field,” the TowerGroup chief adds. “It has the potential to reduce costs for all, offering smaller institutions access to the same kind of technology capability as larger institutions,” Sievewright says.