Branch network and modular service optimization for community banking

In the information society, what is clearly changing is the role and image of bank branches in order to satisfy in a more efficient way customers' needs. This paper develops an integrated approach to assist the bank's management in reconfiguring a branch network according to the dictates of the market. We are seeking the optimum number of branches and the optimum mix of services that each branch should offer in order to maximize the revenue-generating measures of the branches within a community. The problem is modeled using a linear program that accounts for community performance as a function of performance variables that are explained by a set of external and internal factors, which reflect community characteristics and modular branch banking parameters, respectively. The relationships between factor and performance variables are identified using regression analysis. An iterative algorithm allows convergence to a solution that provides the best configuration of branches after all possible branch mergers and modular branch adjustments are accomplished.