Free WiFi? Yes. Cappuccino Hangouts? No Way.
Every now and then, someone in the financial industry suggests transforming branches into hangouts. Most recently, the author of a Bank Innovation article wondered why banks and credit unions don’t follow in Starbucks’ footsteps, becoming a “third place” by turning their branches into “destination experiences.”
It’s tempting to look at what Starbucks has done and think, “Why can’t we try that?” And when financial institutions see what Umpqua Bank and ING DIRECT are doing with their facilities, they can easily be mislead. “We should do that too.” They fall in love with the concept without understanding the underlying strategies driving each bank’s decision to create a café-style experience. ING DIRECT was an internet-based bank looking to reassure consumers by establishing some sort of physical presence. And Umpqua’s success has much more to do with its promotional, branch-centered events – like movie nights — than the bank’s innovative store design or the CDs it sells.
Reality Checks: Branches aren’t hangouts, and they never will be. Consumers generally have no interest in hanging out in banks. Almost every financial institution that has explored this strategy has found that it doesn’t work.
“Institutions trying to replicate Starbucks ‘third place’ have been generally unsuccessful with few exceptions,” says Paul Seibert, Principle at EHS Design, an firm specializing in branch architecture.
“The real question is why do you want people to hang out in your branch?” asks Seibert. “What is the purpose? How does it help create business?”
THE ‘LETS-GO-HANG-OUT-AT-THE-BANK’ BANK
These guys abandoned this concept shortly after introducing it. One of the main reasons? Consumers were confused. Was it a bank or a coffee shop? Consumers weren’t comfortable with the cross-over concept.
MAUI WOWI SMOOTHIES & 3-MONTH CDS
Reliant Bank subleased some space to a smoothie shop but discontinued the relationship after only nine months due to staffing issues with the franchisee. Apparently, they had a problem keeping the location staffed. Reliant plans to replace the smoothie concession, and is currently in negotiations with another food service partner.
This branch isn’t a prototype that will be rolled out across the Deutsche Bank network. It isn’t the future direction Deutsche is taking its branches. It doesn’t signal an emerging trend. Deutsche had a single branch located inside an upscale, high-end shopping area and needed to match its retail experience with consumer expectations and the architectural cues appropriate to such a situation. Banks should always adapt the design of their branches to fit the local context.
Jim Haack, a principal at Momentum, a design/build firm specializing in the financial industry, reminds us that there is always value in making your branches more comfortable and inviting, but draws the line a developing full-blown cafés. He says you can use these ideas — comfy sofas and gourmet coffee — to create what’s called “touchdown spaces,” an architectural term that is essentially a closing area for sales.
“Sales reps can use lounges areas as neutral turf to close deals,” Haack says. “Customers feel more at ease in a space that feels more like their living room than some guys’ sales office.”
Start Offering Free WiFi…Today!
Sarah Meyerrose, a banking consultant, thinks free WiFi is a way to dull the pain consumers associate with banking. “We all know banks are not a destination, but a periodic necessary evil to be avoided whenever possible,” she wrote on Bank Innovation’s website. “So why not offer free, fast WiFi?”
You can — indeed you should — offer free WiFi in your branches. Free WiFi for customers improves the experience by giving those with mobile devices the chance to utilize down time. If they are waiting for a service rep or a loan to be approved, they can use their mobile devices to pass their time waiting productively.
Reality Check: Someday soon, free WiFI won’t be a differentiator, it will be an expectation. Customers will get grumpy if you don’t have it.
“WiFi is an understandable customer expectation,” Brett King, author of the breakthrough book Bank 2.0, told The Financial Brand. “It gives customers more control over their experience.”
“HSBC Premier introduced Free WiFi in Hong Kong,” King explains. “Customer satisfaction almost doubled as a result of this in respect to their perceptions of the branch.”
If a few people occasionally drop in to use your free WiFi, that’s great. But just because you offer free WiFi does not mean you are trying to make your bank a hangout or turn it into a café. You can even call them “lounges.” Just don’t fool yourself into thinking that people will flock to your locations to loaf around and sip cappuccinos. It ain’t gonna happen.
There is nothing wrong with trying to make your waiting areas more warm, personal, inviting and comfortable. You probably already offer coffee, so why not offer good coffee? You already give people reading materials (albeit offline, old media magazines and newspapers), so why not give them internet access and let them read what they want to read?
Reality Check: Building cafés is way too far a departure from banking’s core business model.
“I just don’t think turning a branch into a coffee shop will save your branch if you don’t have a value proposition,” King cautions.
And don’t forget about all the issues with inventory, permitting and other sorts of nastiness associated with food service businesses.
“The more complex in terms of beverages and food, the less likely it is to succeed,” warns Seibert.
King offers this final word of advice: “Banks can use coffee and WiFi to make your stay more pleasant, but don’t think that it will make up for poor customer service.”
This article © 2012 by The Financial Brand and may not be reproduced.
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- Branch Showcase: Virgin | ING Express | Financial Spa
- Branch Showcase: M&T Green | BNZ’s Concept Store | TD’s Slipque
The idea of the “3rd place” is not necessarily to ask “how can we create an inviting lounge experience?”, but to probe the deeper questions of “what is the role of the branch in the life of the consumer?” and what business are we really in?” In the same way that Domino’s Pizza is in the business of reducing take-out order uncertainty, banks are in the flux of realising that they need to move passed offering financial freedom and consider what role they play, or can play, in making the daily lives of customer more fulfilling. In this way the “3rd place” is more a metaphor in the same way blue ocean strategy is.
I agree that we should stop force-fitting the coffee lounge concept, but lets’ keep the conversation open to improving the relevance of banks for consumers.
I agree that branches will never be “hangouts” and I don’t think serving better coffee or cookies will change that. Most suburban branches are setup like islands surrounded by parking lots. I don’t think those types of branches have a chance of being anything more than a place I have to visit. However, branches located in areas that experience a lot of foot traffic such as central metropolitan areas or malls, could do some things that would entice me to stay a while.
One of those ideas mentioned in the post on Bank Innovation is offering exclusive content over a free Wifi network. Starbucks seems to think that their exclusive wifi content will be the real draw for customers (outside of the coffee of course).
Given the right location, mixing exclusive content with more comfortable spaces (touchdown spaces?) could lead to people visiting the branch even if they have no pressing need to do so.
Joey, the suggestion to provide proprietary content is thought-provoking, but the next question would be, “Where does this exclusive content come from?” Financial institutions aren’t known for their ability to create compelling content.
Coffee shops like Starbucks are in an “experience” industry. When it comes to food service businesses, things like atmosphere, ambiance, presentation and even the patrons themselves blend in to a form of retail theater. Any restaurateur who considers their establishment more than a fuel stop is in the “experience” business. Starbucks is a café, and much like pubs, cafés are natural places for people to congregate. Banks are not.
Just because banks and credit unions can do things to get people to linger longer in branches doesn’t mean they should. Why should they? How does the strategy lead to more business? Does the cost of developing and maintaining “hangout branches” overshadow whatever positive lift they might create for the brand?
What is the strategy/business case for turning branches into “experience destinations?”
Yes, those are two good questions. I’ve thought about the exclusive content question, but I haven’t really come up with anything specific. My thought is that it would be like a financial library. A collection of material normally only available in magazines, the bookstore or, the library.
I think banks and credit unions would want people to spend more time at branches so there is more opportunity to consult with them and about purchasing more/different products. Most of the banks that I have dealt with are constantly trying to turn routine service interactions into sales opportunities. Obviously I am not going spend extra time at a branch if I know they will be hard selling me while I am there.
But, if part of their exclusive content delivery mechanism included a way to get answers about how the exclusive content applies to my finances, I just might take advantage of that. In fact, I might be willing to talk to the Banker who is sitting a few feet away. Then my visit could be turned into a sales opportunity.
Joey, do you mean something like this, but online and only available from within a branch’s WiFi service?
If a financial institution is willing to invest in building a proprietary library of content and materials (which isn’t a bad idea in itself), would offering it exclusively within branches yield the biggest, best return for the time, energy and money spent developing it? I’m skeptical.
With respect to the business case, if the goal is to get people “purchasing more/different products,” then there are literally hundreds of other strategies to accomplish this, and most have a concrete and immediate ROI vs. an indirect soft-sell. There are many things financial institutions could and should be doing that they aren’t. This list here is an excellent starting point.
Why would people “hang out” at banks? To case it out for detailed “plans” down the road…
I’m all for cafes and coffee shops adding free/unlimited wifi for its patrons. But I get nervous when I hear anything about banking and technology! Especially easily exploited technologies (what tech isn’t easily exploitable with the right tools and motivation?).
Free wifi for banks?
Can you say, “I’d like to close my account please…”?
Sam Title
Chief Executive Cofficer
@TheCoffice
Sam, this is a simple IT problem. The bank needs a separate WiFi service for customers. IT cannot piggyback WiFi internet access for customers off its own internal connections. The best way to ensure security is to wall-off customer WiFi access as its own independent, standalone service. That means getting a new line. Still, the total investment per location should be under $1,000 for everything, all the way down to signage.
@Editor
I hadn’t read the beneficial branch post..why do I feel like I’ve stepped in something now? But, yes, something like that but online and only available from within a branch’s WIFI service.
One reason you would offer it inside the branch rather than on the Internet is because you could not offer it online. There are thousands of books and many magazines and journals you can’t read online due to various copyright restrictions. That’s why starbucks is offering complete access to the Wallstreet Journal inside their stores. Why not offer that type of content for free inside the branch?
The point you make about immediate and measurable ROI is a good one. Any attempt to estimate an ROI for something like this would probably just be a wild guess.
I think the premise starts with a Cafe first. In the 1600′s Loyds of London started as a Cafe. So we have about 400 years of history to reckon with. Cafe first, then add additional services, i.e. banking and financial products. These services can be done through technology, i.e. banking kiosk, or for that matter any type of service or product that would be relevent for that particular Cafe’s community. Technology would be added in such a way as to not take away from the ambiance of the Cafe, a corner, a nook. Additionally you could provide Kimbles or IPads, that could be checked out for a small fee, or free…one of the Cafe’s amenities. All of this depends on your business model. Why not provide the coffee/tea for free, and charge a small monthly subscribtion fee, that includes wifi ? Some will abuse this yes, most won’t, prividing the Cafe with an anuity model.
[...] • Free WiFi? Yes. Cappuccino hangouts? No way. [...]
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