Branch transformation strategies to improve branch efficiency, lower costs and improve the customer experience. Contact me at chris.gill@diebold.com for more information.

1. Florida Bankers Association 2012 Annual Meeting
June 10 -13, 2012
Branch Transformation: Strategies to Position
Your Branch Network for the Future
Chris Gill, Senior Director
Diebold Consulting
chris.gill@diebold.com
704-651-6167 1

2. Today’s Discussion
 Customer Channel Usage Behavior
 Channel Capabilities of the Future
 Future Role of the Branch
2

3. Customer Channel Usage Behavior
3

4. Self-Service Transactions Continue to Grow
U.S. Self-Service Banking Transactions
2009 - 2013
90
80 CAGR = 10.6%
14.0
70 9.4
5.6
3.0
60
1.2
33.3 35.0
50 30.0
26.8
23.3
40
30
17.0 17.8 18.5 19.3 19.8
20
10 14.6 14.7 14.8 15.0 15.1
0
2009 2010 2011 2012 2013
ATM (CAGR = 0.8%) Call Center (CAGR = 3.9%)
Online (CAGR = 20.1%) Mobile (CAGR = 84.8%)
Source: TowerGroup
4

5. Branch Transactions Expected to Decline
U.S. Branch Transactions
2010 - 2014
Transactions (Billions)
Source: TowerGroup
5

6. Online Banking Preferred for Routine Transactions
Question: How do you prefer to conduct the following banking activities?
Transfer Funds Balance Inquiry
Pay Bills
Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart
Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally
6

7. Branch Still Preferred for Deposits
Question: How do you prefer to conduct the following banking activities?
Cash Withdrawal Deposit Checks / Cash
Note: Percentages may not round to 100% as lower incidence categories are omitted from the chart
Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally
7

8. Consumers Want Personal Contact to Resolve Problems
Question: How do you prefer to conduct the following banking activities?
Resolve a Problem
Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart
Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally
8

9. Consumers Prefer the Branch For New Account Opening
Question: How do you prefer to conduct the following banking activities?
Get Product Information
Open a Deposit Account Apply for a Loan
Note: Phone includes both IVR and call center rep; percentages may not round to 100% as lower incidence categories omitted from the chart
Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally
9

10. Physical Locations Still Important in New FI Selection
Question: How important is the number and location of branches and
ATMs in choosing a new bank?
Percentage of respondents indicating “Very Important” or “Important”
Source: Forrester/Diebold research, 3rd Quarter 2011; sample size = 10,038 respondents nationally
10

11. Varying Levels of Interest in Mobile Functionality
Question: How likely would you be to use the following mobile banking
functions?
Percent ‘Likely'
Mobile Functionality or 'Very Likely'
Basic
Receive text alerts on balances 22.6%
Check account balances and recent
transaction activity 33.3%
Intermediate
Transfer money between accounts 28.9%
Text message customer service about a
problem 20.6%
Make a Bill Payment 28.6%
Advanced
Scan a check for deposit with camera 17.2%
Use phone to pay for a purchase 17.1%
Transfer money with another person 17.3%
Source: Forrester/Diebold research, 4th Quarter 2011; sample size = 5,369 respondents nationally
11

12. Channel Capabilities of the Future
12

13. Mobile Will Become As Ubiquitous As Your Driver’s License
Mobile
Wallet
Geo- Mobile
Tagging Shopping
Authentica- NFC
tion Payments
sad
QR Codes Apps
Remote
Paperless
Deposit
Receipts
Capture
13

14. Personal Finance Management (PFM) Software
 PFM will:
– Evolve into a central one-stop shop rather than a stand-
alone tab in online banking
– Include simplified interfaces (iPad influence)
– Allow bankers and customers to interactively collaborate
on a customer’s finances
 ‘Stickiness’ of PFM is very high; makes it more
difficult to switch banks
Source: Javelin Strategy & Research
14

15. Advances in Authentication
 Biometric readers
 Mobile authentication
 Voice authentication
 Facial recognition
 Two factor authentication
15

16. Better Customer Interfaces
 New and better interfaces
– In conjunction with better channel integration,
technological advances will enhance and simplify user
interfaces (computing without a mouse?)
– iPad-like screens at the ATM
– Microsoft Surface
16

17. Multichannel Integration
 Customers are demanding a seamless and
consistent experience across channels
 Channels will be better connected to each other
– For example: if a customer starts an application
online, they could complete it in a branch
 Convergence of mobile, online and PFM
Consumer Accounts
Branch Banking
Mobile Banking
Online Banking
Investments
Retirement
Credit Card
Mortgage
Checking
Savings
Loans
Customer
17

18. How Should Banks Prepare?
 “No man is an island”
– Banks should develop an integrated channel strategy
that maximizes the strengths of each channel
 Agility
– TowerGroup notes that in an uncertain environment,
banks need to have technology that is flexible and easy
to deploy
 Understanding what the customers want
– Banks have a wealth of customer data that needs to be
better leveraged to drive strategies
18

19. Future Role of the Branch
19

20. Branch Role Will Evolve Dramatically
Handling of more
complex
transactions
Customer service Right-sized and
and problem efficient
resolution operation
New Brand presence
Sales & advice Branch in local
community
Role
20

21. Imperative for Branch Transformation
Flat Growth Scenario: Deposits and Loans Stop
Preserving 2012 Profitability
Growing, Spreads Remain Constant
Total Operating Cost Total Revenue1
FTE
(bar, $000) (line, $M)
‘12-’16 CAGR ∆ from Reduction
Rev 0.0% Year 2012 EBIT Required2
Costs 2.8%
EBIT (1.3%) 2013 -$20K 0.4
Revenue
2014 -$41K 0.9
2015 -$63K 1.3
2016 -$86K 1.7
Under this scenario, branches
will be able to maintain current
levels of profitability through
headcount reductions alone
Branch
$1.7 $1.7 $1.7 $1.7 $1.6
Profit ($M)
21

22. Banks Will Need a New Branch Strategy
Branch Planning Dimensions
Customer
Facility Design
Experience
Distribution
Network
Technology Channel
Strategy Integration Optimization
Leveraging
Staffing Customer
Information
22

23. Branch Space Needs to Be Used Differently
Dimension Implications
 Smaller footprint
Facility Design  Greater emphasis on sales rather
than transactional capabilities
 Greater level of customer
Customer Experience engagement
 Integrated across channels
23

24. Branches Require Major Transformation
Videoconferencing ILLUSTRATIVE
Teller
Automation
Mobile /
Tablet Demo
Concierge
Interactive Marketing
24

25. Optimize Delivery Channels to Align With Customer Needs
Dimension Implications
 Branch and ATM network plan
that optimizes market coverage at
an effective cost
Channel
 Prioritization of investments
Optimization
across channels
 Consistency of the customer
experience across channels
 Migration of routine transactions
Technology
 Automation of branch processes
Integration
 Save customers time
25

26. Execution is Critical
Dimension Issues to Address
 Defining the target customer
experience
Operations
 Changing policies and procedures
 Integrating with existing systems
Employee  Communications
Preparation  Training
 Education / Communications
Customer Adoption
 Incentives
Measurement /  Customer behavior
Tracking  Return on investment
26

27. New Branch Concepts – Leveraging Technology to Lower
Operating Costs

28. A New Branch Staffing Paradigm is Required
Dimension Implications
 ‘Universal banker’ concept
 Hiring for sales and customer service
Staffing
aptitude
 Fewer FTE per branch
 Deeper understanding of customer
Leveraging Customer channel usage and preferences
Information  ‘Predictive analytics’ tools
 Cross-channel information sharing
28

29. Key Takeaways
29

30. Bank Strategies Need to Address Three Key Issues
Issues Questions to Address
• What channel capabilities are most
important to our customers today and in
Channel the future?
• How do we prioritize investments across
Strategy channels?
• How do we maximize the return on new
technology?
• How can we operate our branches more
Branch efficiently and at a lower operating cost?
• How do we increase sales productivity in
Transformation our branches?
• What capabilities are required to deliver
Customer our target customer experience?
• How do we ensure consistency of the
Experience experience across channels?
30

31. Diebold Consulting
Channel Optimization Expense Management
• Channel management strategy • Workflow optimization
• Branch optimization • Transaction migration
• ATM optimization • Deposit automation
• Market assessment • Teller automation
• Customer channel usage analysis • Employee/customer engagement
Customer Experience Revenue Growth
• Customer experience strategy • Customer-centric innovation
• Payments migration • Product/fee packaging and pricing
• Process improvement • Analytic-driven promotions
Account opening • Payment/channel-driving innovations
Problem resolution • Product line analysis
Chris Gill
Senior Director, Diebold Consulting
chris.gill@diebold.com
704-651-6167
www.diebold.com/consulting
31