Should Banks Branch Out?
April 20, 2017
Digital platforms are striking heated debate in financial organizations. Will traditional branches go the way of the dinosaur? Experts are calling for an “abrupt and sudden death” of bank branches, as we know them, and predicting smaller footprints, fewer tellers and a rise in digital-branch integration. What does that mean for your bank or credit union? Microbranches may be the happy medium the industry has been anticipating. Wells Fargo and PNC have already jumped on the trend, but are they really a viable solution? How can your bank ensure a return on your investment?
Transactional needs can be managed through web-based banking tools. The revenue generators, however, should be (and usually are) handled in-person. People still struggle to accept the security of online and mobile banking. So, it’s reasonable to believe that it will be generations before they are comfortable opening accounts and taking out loans in an exclusively online environment. Boxman Studios and Level 5 take a deeper look into the upside of container-based microbranches.
Boxman Studios recognizes the adoption of technology in the financial industry, but we also understand the importance of convenience and customer service. To balance this, we created the container-based microbranch, an innovative and community-oriented concept that can easily travel to different markets.
Designed with an efficient footprint, the 20’ x 8’ container environment houses many of the amenities of a full-service branch, including a 24-hour ATM that can cash checks, and deposit multiple checks or cash. Customers can also open new accounts, order debit cards, or get information on loans and other products and services.
Traditionally, when a brand needs to breach a market, they invest in expensive brick-and-mortar with a large staff and high operational costs. We believe there is more than one way to engage with your consumers. With that strategy in mind, a container-based micro branch can be set up in high traffic, easily accessible areas, and easily transported from market to market for brand visibility and interaction.
Getting a Return on Investment
Speed to Market
Boxman Studio’s build timeframes allow microbranches to be completed 30%-50% faster when compared to traditional stick-built construction. These projects are built to necessary building codes with the same (if not better) quality without sacrificing timelines. This is made possible with the utilization of Boxman’s modular construction process that allows for floors, walls, ceilings, electrical, and plumbing to be installed simultaneously.
We take into consideration that there may be a need to move your microbranch at some point (even if it is a permanent structure). Boxman’s units are built to be mobile and moved easily without sacrificing the unit’s structural integrity, finishes (internal and external), and equipment. Rather than having to construct a new building, units can be moved from one site to another.
When the construction or renovation of a new branch can reasonably be a $2 million investment, for a customer base averaging around a 5-10 mile radius, landing in the right location may be one of the most
important elements of the process. If one market or location doesn’t work for your branch, or generate necessary revenues, moving the whole operation is just one forklift away.
By utilizing Boxman Studios’ product, our clients can receive tax benefits. Based on IRS Publication 946, container structures are categorized as 7-year tax life property. Specifically, the code states, “Any property that does not have a class life and has not been designated by law as being in any other class.” This means that modular units are not called out in the IRS Publication 946, therefore it defaults to a 7-year property, which allows you depreciate the units over a 7 year tax life. Commercial traditional stick built construction in IRS Publication 4562 is classified as nonresidential real property, which has a depreciation period of 39 years.
Boxman Studios’ projects are asthetically versatile and flexible. They can be constructed to have the appearance of a modular unit, traditional stick built construction, or a combination of both. Our units are manufactured utilizing different methods to suit our client’s purpose and need. De-commissioned (used) shipping containers can be modified and structurally reinforced, or purpose built structures (building units ourselves and to specific specifications) can be constructed.
Our job is to translate your vision into a customized structure that maintains the highest safety standards, moves easily from our facility to sites across the state or the country, fits your budget, and delivers a unique and immersive brand experience to your clientele.
Experience and Personal Interactions
Per TimeTrade’s survey that examined the banking habits and perceptions of more than 1,000 US banking customers, people conduct many banking activities online. However, 45% of those surveyed ranked security concerns as the top reason they abandoned online banking forms. This number was followed by “I find I want expertise from a live banking associate” (32%), and “I am not sure if I am choosing the right options” (24%).
In the same survey, 74% of respondents said they still visit banks at least five times a year. 43% of consumers report they visit their branch more than 10 times a year, while 31% visit their branch five to nine times a year.
The financial landscape is going mobile, but over 80% of financial customers still prefer in-person interactions for opening accounts and applying for loans. Routine transactions will continue to migrate towards web and mobile apps. To continue providing value, banks and credit unions must heed the call for more experiential, accessible, and versatile branches. Container-based microbranches are an ideal way to meet your customers in the middle.
Note: *Boxman Studios is not providing tax advice and all clients are to confirm tax life with your tax professional and representative.