Branch Location Optimization and Site Suitability Analysis for Banks

Ashwani Rawat

The banking sector in India has been evolving at a very rapid pace, especially in recent years, which has also been reflected in all the major developments that have taken place. With significant advancements being made in communication and information technology, the propagation of financial information and services has been accelerated and broadened. Owing to these changes, along with the open market policy of India, there is fierce competition being faced by the banking sector today, to overcome this, there are myriad strategies being implemented, one of which is creating a vast network of financial and transaction centres, which include branches, ATMs etc. Various techniques and technologies are being leveraged to this end, and location intelligence is one of the most important ones, as it can provide a platform for effective planning, organising and decision making for choosing suitable sites for branch location optimization.

Banks today need to be both market-driven as well as market responsive, which means that they have to be able to both predict as well as deliver services that the customers want and need. A part of this would include the management of data involving customers, customer profiles etc. which when combined with proper data and customer relationship management, can give banks the competitive edge needed.

We all know that expanding a bank needs extensive and exhaustive planning. The new branch or ATM has to be situated in an area, that would have sufficient demand as well as profit potential. The identification of such locations requires a clear understanding of the bank’s network distribution while building in such an area would also require substantial investment. With so much resting upon the cost in terms of both time and money, having data support can help with expansion plans and location intelligence does just that.

Also Read: Location Intelligence Applications-Every Financial Firm Should Deploy

With a GIS programme, banks can perform a thorough analysis of the potential success of the new branch or ATM location. The programme would do so by modelling all the relevant information about a site, running it through a sophisticated algorithm and estimating the potential success of the new location. While there are myriad criteria that are factored in the process, some of the prerequisites that the algorithm would look into include:

• Customer Demand: Location intelligence allows financial institutions to easily map out the existing customer base, mapping their current network distribution and wearing it on top of data about the possibility, demographic information and activities. The map butcher areas of customer distribution and the various characteristics of the target consumer base. For example, it could highlight areas where customers pre-dominantly speak a particular language more than the others. This information can be leveraged by banks to determine what kind of language services need to be offered within the chosen region. The report can also give income information, that can be used for establishing if a higher income area may derive greater benefits from numerous or larger teams of loan officers.

• Local Public Data: When on the lookout for establishing a business in any capacity, banks need to get the information relevant to the region. Ranging from land and construction costs to business activity and profitability to infrastructure data, tax rate, etc. all are relevant information for financial institutions. Infrastructure, particularly can be used for predicting a region’s potential pertaining to growth. Since all the factors mentioned above, contribute greatly to the quality of life that the residents enjoy, they are also quite crucial markers that could determine if subsequent generations would remain in the area or relocate from it, thus assessing the expanding consumer base and retention for banks.

• Competitor Analysis: Another really important factor to consider, is competitor data when thinking about expansion. Any sort of gaps that might be present in competitor companies, can be covered by banks by moving their branch into that region. Similarly, areas thatmight have high competitor activity and loyalty, would not be the best place to open a new branch.

Utilising all this information, location intelligence can identify and integrate the data into actionable insights for creating map-based analysis. Economic developers can utilise the maps for the identification of potential sites for expansion, which can be supported with data that has been locally collected to assess which locations meet all the necessary criteria.

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The strategic placement of branch locations and ATMs can help in maximising transaction and revenue which is fundamental for ensuring profitability. Over the years, the demographic and social-economic profile of various areas keeps on evolving, which means that new location data streams are fundamental for understanding how your bank can expand or consolidate your branch footprint. Thus, location intelligence is one of the most important support tools, that can help banks accomplish the task more efficiently and gain a competitive advantage over other players.

Views expressed in this article are the personal opinion of Ashwani Rawat Co-Founder, Transerve.

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