9. INDUSTRY, INNOVATION, AND INFRASTRUCTURE

PNC Financial Services Group Inc. raising the bar with branch automation, analysts expect more AI – Pittsburgh Business Times – The Business Journals

Written by Amanda

PNC Financial Services Group Inc has thrown down the gauntlet to the banking sector, an industry increasingly baffled by rapidly evolving customer preferences away from branches and the need for brick-and-mortar.

PNC (NYSE:PNC) on Tuesday confirmed that it is converting more than 60% of its 2,600 branches nationwide to a new automated model by the end of 2026. Basic transactions previously conducted by a teller will be completed via ATMs and video banking, employees will focus on providing financial and technical guidance to customers. The branches will have a home space feel with an emphasis on comfort.

Rethinking space and what staffers do is nothing new in the industry and certainly not for PNC itself, which has been stressing the shift from processing basic transactions at teller windows to cross-selling products and services in increasingly relaxed environments, for more than a decade. Even before Covid-19 forced restrictions at branch lobbies for safety’s sake, clients were steadily moving to digital transactions, although the pandemic certainly escalated the trend. Branch consolidation continues across the industry. Yet banks still need them. Customers may not come to do basic deposits and check cashing as they did 20 years ago, but they do use branches for advice and service, which is what PNC has determined.

What sets PNC apart with its branch strategy is the large number of sites it is reconfiguring and, analysts emphasized, what it may have up its sleeve in terms of tech.

“Clearly, PNC is at the forefront of implementing new technologies in their commercial and consumer business,” said Gerard Cassidy, managing director and head of U.S. Bank Equity Strategy and Large Cap Bank Analyst at RBC Capital Markets. “This is another piece of evidence to show how they’re making advances in technology and banking. We expect more artificial intelligence to be utilized by PNC that will certainly come to play here as they automate those branches.”

PNC is not alone. The nation’s biggest banks are all moving in the same direction, Cassidy said.

“When it comes to achieving higher profitability, it comes down to execution and keeping your costs as low as possible and automation helps with keeping costs in check,” he said. “It’s going to come down to how automated the branches will be by the end of 2026.”

Richard Bove, chief financial strategist at Odeon Capital Group LLC, noted that the industry hasn’t come up with “what the magic technique is for branches,” try as it might.

“Nobody wants to go to a bank branch, they want to bank with their phone or computer,” he said. “You can’t be a simple banking branch, you’ve got to be a financial center selling products to individuals and businesses and having expertise in a number of areas. The idea is to get to the customer at a time when the customer is making a decision to buy or sell something. So the branch has to be used for a different function. It can be mechanical, which PNC is going toward.”

Bove believes the branch is shifting from consumer to business customers, mirroring the economy.

“I don’t think PNC is going to make a great deal of money off the consumer any longer, the consumer isn’t going to drive the U.S. economy — business is,” Bove said. “That’s very good for PNC. If PNC is reducing its interface with the consumer, I think they’ve got their head on straight. Consumer demands on the banking system have changed enormously. If the fintech companies did anything, they’ve told the banks you’ve got to open up a new distribution channel, lend money across the internet. The old way doesn’t work any more.”

The size of the field of branches PNC is converting is distinct.

“I don’t recall any great numbers for what percentage of branches are fully teller automated for peers,” said Eric Compton, a senior equity analyst at Morningstar who tracks PNC. “My initial reaction is that the idea of trying to automate most of the rote teller operations at a branch and reserving those person-to-person interactions for more focused sales and advice conversations is not itself revolutionary. We see this at a lot of the larger banks to one degree or another and, if anything, it sounds pretty similar to PNC’s previous universal banker talking points with maybe a bit more emphasis on getting rid of as much of the teller side of the job as possible.”

PNC did not say how much the process will cost or financial impact expectations.

“As an analyst, I would be watching first for any increases in revenues and market share shifts as this could be a sign that the more focused sales process is working,” Compton said.

Source: bizjournals.com

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Amanda

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