Chase Bets on Mobile — and Branches

shutterstock_34559890The conventional wisdom today is that mobile banking will trump — or even perhaps is already trumping — all other banking channels. Especially branch banking.

But at JPMorgan Chase both are being given equal weight in its strategic plans. Further, data supports JPM’s approach.

Chase’s digital strategy is having a profound effect on the economics of the bank, which generated nearly $100 billion of revenue in fiscal year 2012, according to JPM documents released at yesterday’s briefing for investors. The costs to Chase for bank accounts that are not “fully digital” is 70% higher, while traditional card accounts cost the bank 30% more than digital accounts.

Those benefits are compounded by higher retention rates for accounts that utilize Chase’s mobile channels compared to those that do not. Mobile-ified banking accounts have a 33% higher retention rate; that rate is 35% for mobile card accounts.

If having customers go mobile pays off big for Chase, why is it adding branches? Over the next 12 months, Chase will expand its branch network of 5,508 by another 100 locations, or about 2%. Chase is also investing in some of its existing locations, as evidenced by a reopening of a well-located Chase branch in San Francisco this month. Yesterday, my friend, Patrice Peyret, wondered why Chase was pursuing this strategy. Patrice wrote:

More expansive real-estate that customers will have to pay for…. You can’t go 2 blocks in SF without walking past a Chase branch. I’d love to see how many million dollars of yearly rent they have in their budget just for that one city.

Well, Chase is paying all those millions of dollars in rent because the numbers work, especially when the branch strategy is coupled with technology-driven efficiencies. Consider checking accounts. According to Chase, the vast majority of its customers research their checking account, but open the account at the branch. Is this a function of poor online account opening protocols? Perhaps, but it doesn’t appear as though Chase is losing out business to banks thatchase_acct_origination are better at online account opening. And this not just about checking products. The bank sold in FY2012 about $1.5 billion of credit cards through its branches and approximately $2.2 billion of mortgages through physical stores. According to Chase, at least 74% of the bank’s customers across all its customer segments visit a Chase branch at least quarterly.

These are compelling numbers in and of themselves, but at the same time Chase is extracting significant cost reductions out of its branch network. All those self-service banking kiosks that Chase is installing — they are a centerpiece of the new San Francisco branch, for example — are resulting in a 25% reduction in teller transactions. And that seemingly posh San Francisco branch — it is part of a new building strategy that is costing the bank 33% less to construct and 25% less to operate than 2012 new builds.

Despite all the anti-branch rhetoric, that data is compelling. Branches remain in use at Chase, while the cost to operate them drops. It might not be trendy, but the mobile/branch hybrid strategy appears to be working at Chase.

Learn more about the tension between branch and mobile banking at Bank Innovation 2013. Request your invitation here.