The 21st Century Bank Branch

By Chris Janson, Sr. Market Manager, Ciena

Neighborhood banks go back to at least Roman times, where loans were made and deposits accepted in exchange for payment of interest from the local temples. More recently, people today use local banks to deposit paychecks, build savings and borrow money. Like so much of 21st century life, technology brought rapid change to things literally unchanged for centuries.

Today, routine transactions can be conducted remotely, through web portals and mobile devices. But if consumers do not visit these resources routinely, how can that bank retain loyalty and remain profitable?

Branch 2.0 and Information Networks

Banking organizations need to decide how to manage the high costs associated with each branch. In the US, the number of branches decreased by 1,500 in 2013, according to SNL Financial, and new branch locations are shrinking in size from an average of 5,000 square feet to less than 3,000 square feet. Banks are closing select locations and renovating others as part of an optimization effort called, “Branch of the Future” or “Branch 2.0”. Customers are greeted with an environment reminiscent of a hotel lobby or café. Some are including a barista encouraging customers to linger in comfortable chairs, utilizing free WiFi and consulting on high value services.

These services include asset management, investment training, market analysis, retail lending and other financial transactions, all aimed at high net worth customers. These services can be delivered to customers through enhanced connectivity at the branch location. From a network standpoint, Branch 2.0 will require several fundamental capabilities. There will be heavy use of video for telepresence consultation or training seminars. Customers will also expect a high degree of security, delivered through an assured network infrastructure and offered as a valuable reason to conduct business at the branch. Branches will also need to ensure robust business continuity and disaster recovery through a well-designed data center and network architecture.

Building Branch 2.0 with SDN and NFV

All of these services will require advanced networking capabilities. It’s not enough to just plan for more bandwidth.  What will be needed is the smarts to deliver bandwidth based on instantaneous needs and business activities happening throughout the day. Delivery will be made through an Ethernet business service, likely at 1Gbps in the near term and scaling up over time. Ensuring that branch connectivity is always available and optimized will best be accomplished through a Software Defined Network (SDN) solution. SDN implementations will allow the bank to ensure contention-free restoration paths to the branch in the event of path failures, optimize available bandwidth among locations and also schedule or broker resources for routine functions such as server backup or video streaming.

In the near future, banks will also be able to virtualize network appliances using an open hardware platform connected to an Ethernet business service at the branch. Commonly called Network Functions Virtualization (NFV) and currently being specified through ETSI (European Telecommunications Standards Institute), NFV will allow banks to rapidly upgrade their network infrastructure in support of emerging Branch 2.0 applications. For example, encryption of layer 2 and layer 3 traffic will be accomplished through an appliance located at the branch and connected to the bank’s network through a VPN (virtual private network). That device may also perform WAN (wide area network) optimization and enterprise routing functions, all based on software loaded to the appliance and controlled through the network.

Software control and virtualization will simplify the infrastructure needs at the branch, lowering operating costs while new revenue sources are launched. Integrating these technologies into the bank’s modernization and branch strategy will be a crucial part of keeping the local branch viable.

Chris Janson, Sr. Marketing Manager, Ciena, 978-465-7080; email: cjanson@ciena.com

Ciena Corporation, the network specialist, helps financial institutions use networks to increase profitability and boost competitive differentiation. Our optical and packet networking platforms, intelligent software, and consultative services, help financial institutions consolidate infrastructure, secure sensitive data, and address regulatory requirements among data centers, trading exchanges, and branch or corporate offices. Ciena’s Agility SDN controller delivers on-demand connectivity and virtualized network functions, enabling institutions to adopt new applications, ensure business integrity and rapidly scale capacity.

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