On Linkedin today, I saw a really interesting discussion on something in my wheelhouse: the profitability of branch banking.
Maya posed this topic of discussion on the message board, specifically talking about safe deposit boxes. Here is what she said:
“I would love to know what you think about this age old service of bank branches renting safe deposit boxes.
Many veteran bank branches have a safe deposit box room (usually in the basement of the branch). It’s a service that demands pretty big set up costs, and expenses for security and service. But how many people actually use them?
What do you think banks today can do to make this service more attractive, and reach a higher ROI?”
I would respond to these concerns in the following manner:
Although safe boxes aren’t as sticky a product as it once was, I think that it is still a good investment for branches that are in a mature residential market. The setup cost in a branch can be expensive, but as with any rental situation, pricing & occupancy is the key to profitability. As branch service & product delivery reinvents itself, with the pressures of electronic banking solutions, the safe box is one physical service that can’t be duplicated in that medium and still a defining feature of the branch experience. Since product packaging is the way to go for branches, adding the safe box to the product mix can still be positioned as a value added benefit to the business relationship. As the technology of the safe box security is improved, the economies of scale dictate that the overall cost to the branch will be lower as time goes on. For this reason, I am not worried about safe boxes as a pariah in the profitability of the branch profit/loss model. There just needs to be a smart vision for the future of the product and not a sense of complacency as with anything in business.
I agree with Waverly that the fees need to be logical, but enough to be profitable since the bank safe deposit box is still one of the safest place to store valuables in my opinion.