Banks, stop thinking about branches as a place to transact
Will Weidman, APT: Banks, get out of a traditional transactional mindset and focus on developing valuable long-term customer relationships
How would you respond if someone were to ask you: “What is the purpose of the bank branch?” For decades, the first answer may have been: “To allow customers to conveniently transact with the bank and manage their accounts”. Branches have always been a driver of sales as well, but service, particularly deposits and withdrawals, had been their primary use. This model has now changed drastically, and banks that still operate as they used to will very quickly yield to more forward-thinking competitors.
In the mid-1990s, the average person visited a branch 2.2 times per month; ten year later, that figure was only 0.26 times per month, and it only continues to decrease. If the branch isn’t being used to conduct transactions anymore, one might argue they should be rationalised altogether. However, contrary to intuition, that’s not the right approach either.
While it might seem that millennials are the group fleeing branches the fastest, according to a recent study, over 60% of millennials still find value in them. Many people still prefer to have an in-person conversation about more complex financial products and services, meaning that banks who disregard their branch footprints could miss valuable growth opportunities entirely.
Today, the branch must seamlessly integrate with other channels and locations to not only meet the needs of customers who value services, but drive new sales. Whether that means redesigning branches to facilitate sales conversations, or offering ancillary services that have little resemblance to traditional banking, the companies that embrace a redefinition of their branch network will quickly rise to the top.
Redefining the branch
- New layouts
Capital One Café – a bank and a coffee shop in one
The first element banks can focus on to make the branch more adaptable to current consumer needs is redesigning the branch in a way that encourages conversations between customers and bankers. Many banks have been experimenting with open floor-plan designs, concierge services, and more modern exteriors to make the branch inviting and conducive to natural customer interaction.
Banks should also consider the synergies between open branch layouts and new staffing models. Some banks are moving towards staffing “universal bankers” who can perform nearly all branch tasks, from depositing a check to helping customers open or manage investment accounts. While this is a promising concept in theory, banks should closely monitor branch performance to ensure that generalist bankers are able to meet the customer’s needs with more complex products. Perhaps, for example, higher income areas or regions with more small businesses need product specialists. Carefully testing new staffing models in a variety of locations will allow banks to surgically optimize staffing mixes branch by branch to maximise program returns across the network.
Other banks are designing branches completely outside of the traditional model—some can hardly be recognised as banks. The most famous example is the Capital One Café format, which has the look and feel of a cozy coffee shop, but has knowledgeable associates on hand who can open accounts and answer questions for customers. Innovations such as these signify that banks are willing to take dramatic steps to connect with customers in new and exciting ways in the hopes of growing lifetime value.
- New technology
Self-service options are becoming fairly ubiquitous in the consumer world, even in industries like restaurants and hotels that are typically known for their hospitality. Indeed, in a recent survey, 40% of customers preferred self-service to human contact for future interactions with companies. This trend dovetails nicely with banks’ desire to take some of the cost out of their branches. Many are introducing technologies to automate the more routine tasks of the branch, using cash counters, information kiosks, and of course, ATMs.
It is critical for banks to introduce technology that customers will truly value and utilise, not just technology that seems sleek and trendy. For instance, some banks have introduced offices with video conferencing technology to allow customers to speak with remotely-located product experts. However, some customers could be disappointed when they come to a branch to speak to someone and are instead presented with a TV remote – from the customer’s perspective, this interaction could seemingly have happened from the comfort of their home. Given that these technologies require substantial upfront investments with far-reaching consequences, banks must introduce them on a small scale first and perform extensive analysis to correctly target them to the most receptive branches.
Further, it will be critical for banks to continue innovating and enhancing their digital capabilities to seamlessly connect and integrate with the branch. Fintech startups such as Simple and Betterment can offer excellent user experiences, but they lack the physical network and in-person support a bank can offer. Banks should look to seamlessly integrate digital and physical channels to maximize this advantage. For example, customers should be able to see targeted ads in a mobile app for a specific banking product, research that product, click a link to connect with the call center, and from the app schedule an appointment at the branch.
- Look beyond your four walls
A continuing theme of the “branch of the future” vision is connecting with the customer in nontraditional ways to cement the value of the bank in consumers’ lives. One tactic that innovative banks have begun to explore is offering customised promotions and offers for partner vendors. Using “beacons,” or Bluetooth enabled devices that can communicate with smartphones, banks are now able to detect when customers are near a branch or ATM and send them targeted messages.
When this technology was initially introduced, executives’ gut reactions may have been to use it to alert customers when they are near a branch or ATM. Some banks, though, are looking to use beacons more creatively to create stronger bonds between the brand and the customer. Citibank, for example, is using them to send nearby customers localised promotions and event information. This reflects the trend towards banks becoming intertwined with non-banking aspects of customers’ lives in hopes of building deeper relationships. Now, rather than the bank simply being a place where people store money, it can be a company that provides localised, unique experiences.
As banks grapple with what to do with their branch footprints, they must realise an evolving purpose: get out of a traditional transactional mindset, and focus on developing valuable long-term customer relationships.
By Will Weidman, senior vice-president, APT
