Bank Branches Finally Declining? Impact On Surveillance?

One of the things that has helped video surveillance in retail is the ever increasing number of stores. More branches, more locations, more cameras.

Despite e-commerce and e-banking being 10 to 20 years old now, until it seems that banks (and retailers) would never stop opening new locations, even if there were 2 or 4 or 8 on the same block.

Now, multiple reports are claiming a rise in bank branch closings.

Those of you on the banking / retail side? What do you think?

Is the Internet finally starting to make a dent in physical locations?


That is a multi-tiered answer. The internet, yes, but not by itself. Certainly on-line banking services have made life more convenient than it once was. I include automatic payments, direct deposit, et al. It is but a part of the decline in brick-and-mortar growth. Another factor is the proliferation of ATM machines and all of the services they offer. IMHO, the biggest contribution to the decline is all of the mergers and acquisitions over the past 6-8 years. There are simply fewer banks (corporations) than there once was. Bank A merges with or acquires Bank B, along with all of the financial assets and brick and mortar buildings. They evaluated and closed branches in cities where they (because of the acquisition) had multiple sites and market overlap. Too big to fail has offered a number of well-documented problems, one of which (for security vendors) is too big to grow.

New FI regulations along with some harsh lessons learned have also caused financial institutions to be a good bit more cautious than in years past.

Did the internet itself make the dent, no, but it is a factor. All three of these hitting at nearly the same time make for a decline in sales to be sure.

Isn't there opportunity to be had as well, since although branches are closing, ATM's and mega-ATMs, and even tellerless branches are on the increase? With new construction comes new security requirements, as well as specialized video requirements:

The smaller “smart branches” are about one-third the size of a regular branch and won’t have any tellers, at least in the traditional sense. Customers who want to do business with a teller will be able to speak to one via video. The teller, who won’t actually be in the branch, will be at one of a handful of “customer contact centres” across the country. The test branches are also missing the traditional wall of offices. But customers who want privacy for services such as financial planning will have access to conference rooms where they can connect with specialists — again via video.

No walls=more security, no?

That's a good point. I don't know how much more ATMs would offset fewer branches.

Modern ATMs are entire integrated banking systems all to themselves. Cameras/surveillance is essentially embedded into the ATM. Very difficult to penetrate unless you're able to OEM to an ATM vendor.

Steve, are you seeing the DVR/NVR embedded into the ATM? I am sure it is an option but is it the most common one?

John, I don’t know what the ratio is of embedded DVR/NVR vs recording to a back-end system. I’m just saying I’m pretty sure the banks look to the ATM manufacturers for integration, rather than going shopping for video a la cart.

But there is a difference between embedding a camera inside an ATM vs a DVR/NVR. Embedding cameras makes sense broadly, embedding recorders less so, since many times are multiple ATMs or the ATMs are inside or next to a branch. In those contexts, you'd typically want to have the recorder external to the ATMs.

Hmm, yes I see what you're saying about the physical unit. It makes sense to have embedded cameras, but not necessarily embedded VMS.

I’m just thinking about the acquisition process. The bank puts out an RFP for an ATM system that includes video and video management--or at least with integration requirements to their existing video management. They don’t put out an RFP for the ATM, then another for a VMS to manage video from those ATMs. If they do go shopping for video it’s probably within the broader context of VMS for the entire banking system, which may also include that from ATMs. But I don’t know. Are IPVM member seeing RFPs from banks for video management for ATMs?

It is certainly not across the board, but Financials generally secure their ATM's and software from one vendor and their security package from a different vendor. That model has not changed much in 30 years. There are exceptions of course. The security vendor has a deep understanding of the long range goals of Network, Financial LP, Fraud, physical security etc that is typically difficult to put into a commodity to be put out for a bid. When you consider the speed that the CCTV market alone changes, they need good experienced vendors that can service their needs for several years.

Also don't forget that as they downsize in branches, their own personnel numbers don't stay static. There is an inevitable and corresponing decrease in security personnel. There is a dependance that is formed with the vendor. The (good) vendor becomes an extension or a true Vendor/Partner of the Security Department.

Here's a report citing Bank of America cutting 1,200 branches in the past 5 years.

Some interesting points mentioned about why they are cutting branches:

"The number of mobile banking customers has more than doubled in the past four years to more than 17 million people. Now, 13% of Bank of America’s checks are deposited via mobile."

"The bank is seeing about 10,000 customers a week book appointments online to come into the branch, up from 2,000 a week last year. This allows the bank to better anticipate the need for staffing, and adjust staffing levels accordingly."

This is on the retail side, but seems to be a similar trend. Macy's, one of the largest department stores "has closed 52 stores and opened 12 new ones" in the past 5 years plus they plan to close as many as 40 stores in 2016.

I am still curious how this is impacting the banking / retailer video surveillance business. A decade ago, when business was booming, this was clearly helped by non-stop store expansion. Now?

...when business was booming, this was clearly helped by non-stop store expansion...

On a macro-trend level, isn't there a good deal of offsetting business in the fact that these spaces, being by the nature prime real estate, are not simply abandoned, but inevitably sold or leased to someone else who has their own security requirements?

Cameras up, cameras down, cameras moved around, is good business no?

Is there?

I am not sure but physical store count and traffic appear to be declerating if not flat declining.

e.g.:

"U.S. retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online."

"Growth in store counts at the 100 largest retailers by revenue has slowed to less than 3% from more than 12% three years ago, according to Moody's."

In particular, large chain retailers spend more on average than small independents as they have more sophisticated needs / operations. So even if large chains are being replaced by more local or smaller stores, that probably would not be good for the surveillance business.

The bigger issue is that this does not seem to be a normal pattern of new chain retailer surpasses old chain retailer but online retailing reducing the value of physical stores.

Yeah, I agree with you in general, foot traffic down less feet to watch etc.

There’s no mistaking new brick-and-mortar starts are down and foot traffic to existing stores are down. Consequently retail is being very conservative about any new spend.

The only good trend is acquisition that leads to corporate integration of video systems or installation of entirely new consolidated systems.

Our play of course is to help retailers make the most of what they have by providing inexpensive systems that help them operate the business more efficiently and thus help sales.

But I think your original proposal is valid—fewer stores and fewer customers mean a lower overall need for traditional video surveillance.

"Our play of course is to help retailers make the most of what they have by providing inexpensive systems that help them operate the business more efficiently and thus help sales."

Is that mainly heat maps and people counting? How well do you see that being adopted overall by retailers (not just yours but in general)?

Retailers love people counters and make good use of them. Heatmaps are trickier (in terms of usefulness) due to camera angles--the ideal heatmap is one that overlays a floorplan of the store, rather than showing traffic patterns only within the camera’s field of view. In that regard we’ve still got work to do.

When I talk about operating the business more efficiently I’m mostly talking about targeting not just the LP guy but also the store managers, regional and district managers, and corporate operations/marketing type managers. These people can benefit from video if they can easily and quickly access it remotely to check on operational things like staffing, customer service, and zero in on periods of routine interest like opening and closing, or certain procedures they want to make sure are being followed. It has the ability to augment programs like secret shopper or store audits as well.

When I look at usage patterns I see LP guys accessing their systems in response to an incident, but I see operational staff scanning their stores nearly every day.

As far as general adoption of this model I don’t know what it looks like among retail overall but I think a lot has to do with it being at the right price. The high-end systems may not be worth the cost if we’re talking about efficiency (although, the LP savings are still there). And the very low-end systems are difficult to install, manage and access if you’ve got hundreds of stores—so in practicality they don’t tend to provide the efficiency gains. Obviously if cameras (and recorders) are a commodity, pressure will increase to provide whatever value Retail gets out of video at a much lower equipment cost, so the margins need to come from somewhere other than the hardware.

Interesting report from the U.K. on the the failure of self-service banking in the wake of ~2,000 branch closures in the last decade there.

‘This is being driven primarily by cost,’ he says. ‘They all want you to do as many transactions as possible yourself, whether you are doing it online or are doing it on a machine in the branch. ‘It means they need fewer staff, and so I think they will continue remorselessly down this route. They view it as some form of progress — irrespective of what customers are telling them.’ The rise of internet banking does mean people visit their local branch less often than they used to. The British Bankers’ Association claims footfall is dropping by 10 per cent a year.

And to Steve's and John's point, these replacements no doubt have security, though a lot of is just cameras in the kiosks and other built-ins. Which doesn't leave much for the local integrator.

Bank layoffs are coming:

former Barclays CEO Antony Jenkins' recent prediction that pressure from the tech industry "will compel banks to significantly automate their business" and "that the number of branches and people may decline by as much as 50% over the next years."

Simple Bank is an online bank based in Portland, OR, they are growing rapidly. Young people tell me that Simple fits their life styles much better than the traditional banking model.

I think it's more the mentality of the new generation. I do a fair amount of work in banks and retail. Retail side seems weird to me, always opening, don't see a ton of closing, but recently one of the big banks here in Canada has started closing a lot of it's branches.

When I'm working in a bank I mostly see, for lack of a better term, older people. I myself am 25, and would say in the hour or two I typically spend in a bank the customers I see are mostly 50+. In these rural areas where they are closing branches I imagine it just has to do with all the younger folks a) moving out of the small towns and b) not needing to go into the branch, or just bank when they are in the city, where they work.