Bancography | Branch Planning, Marketing Research, Brand Strategy

Gen Y And Bank Branches: A Message For Branchaholics

CU Times reported on a study conducted by Fiserv which found that:

“Gen Y members do not limit themselves to online and mobile banking — they’re more likely than any other age segment to visit a branch, drive up to an ATM or phone a call center.”

My take: This is not a cause for Branchaholic celebration.

Not to denigrate the Fiserv study, but this is hardly the first survey to find that — lo and behold! — Gen Yers go into bank and credit union branches.

Branchaholics — i.e., delusionary people in financial services who fail to admit to the reality that branches are dying out, and worse, want to invest tons of money to make bank branches look like something that would be featured in a Star Wars movie, or worse, look like Starbucks — take these data points, and say “See!? Branches aren’t dead.”

But what the Branchaholics aren’t acknowledging is what these studies (often) fail to ask: Why did Gen Yers use bank/credit union branches?

I don’t have research data to back up my assertion, but here it is anyway: 99% of the time, Gen Yers use branches because they can’t get their problem resolved in any other channel. Simply put, Gen Yers use branches not because they want to, but because they have to.

And it’s painful for them. I mean, really, have you seen this sub-species of human? They don’t know how to talk with their mouths. But they sure can type faster than Nicki Minaj can rap (or whatever you call that).

Bottom line: Don’t use Gen Y branch usage data as a sign that branches aren’t dead, or are coming back to life. It’s actually a sign that the other channels — the digital channels — aren’t doing a good enough job. 


Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Check out Ron's book, Smarter Bank.. According to Brett King, “Ron is famous for his snarky sense of humor, and his well-researched, well-considered takes on banking and customer behavior. If you are in banking, you should read it — you will come away smarter and better informed." New! The Kindle version is here!

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Comments

  1. Brian Gunn says:

    Spot on Ron. The only reason I ever go into a branch is to conduct a transaction that I can’t anywhere else. And I get frustrated that I have to go in every time.

  2. Jodi Torres says:

    Regardless of generation it is all about convenience. Branches are less convenient than mobile or web – my time, my place.

  3. Ron,

    I don’t have quant data to support this, but I recently produced a video around qualitative data that shows exactly this outcome. Happy to share it with your readers over the coming weeks.

    BK

  4. Nicely put Ron, I see the future of branches like a Monty Pythonesque Complaints department, only useful for being angry with someone face to face.

  5. Yes! Amd just like the Monty Python skit, you’ll have to PAY to have an argument.

  6. Timothy Ryan says:

    “I don’t have research data to back up my assertion, but here it is anyway….” I guess I should have stopped reading right there.

    Why do people discussing this subject persist in imagining that one channel is “better” than another? This is a bit like debating which wheel on your car is “most important”.

    Of course consumers do not “need” branches. They also don’t “need” banks. The whole point is to encourage them that they “want” to do business with you. And for this purpose a variety of delivery channels is a more attractive offering than one or another.

  7. Timothy: Thanks for your comment, and thanks for enduring with what the incredibly painful experience of reading what I wrote past the “…don’t have data…” sentence.

  8. Timothy Ryan says:

    No problem. The pain was momentary, but on a site apparently devoted to snark, I hadn’t expected you to be offended.

  9. Touche. Nicely done.

  10. Timothy Ryan says:

    On a slightly more serious note, I would be interested in your views on the notion that “branch versus electronic channels” is a false choice.

    It is my view (supported in part by studies such as the Fiserv analysis you quote) that customers see no benefit from limiting themselves to a single option; on the contrary, customers tend to value multiple options—-even ones they do not, in the end, utilize.

    Therefore, it is hard to see how a bank can win broad consumer market share with a strategy based on what delivery options you are NOT providing. I’m not sure what has changed enough that we should expect Wingspan to be a success if it were to be attempted today.

  11. Bingo. Spot on. A single, or limited channel delivery approach is a business model choice, not a response to consumers’ so-called preferences. The decision to limit access to a particular channel, or not offer a channel at all (e..g., go branchless) is a decision to limit costs, and a bet that a sufficient number of customers can still be attracted and retained without the benefit of that channel. But that decision has NOTHING to do with any of this research about consumers’ so-called preferences.

  12. Timothy Ryan says:

    I agree completely.

    Agitators for the branchless proposition often cloak their argument in consumer preference language. That is, the claim is push forward that bankers are ignorantly spending millions of dollars on branches because they do not see what customers really want. If these bankers were more enlightened about consumers, especially the younger ones, this reasoning goes, then they would see that branches are useless and dangerously wasteful. To the extent that research data shows continued branch use, the anti-branch crowd feels compelled to dismiss it.

    Beyond this, there is the matter of the distinction between utilization and value. Another topic altogether. Thanks for your comments.

  13. The argument to eliminate branches based on their outrageous cost is completely valid to me. The argument that branches need to be eliminated because they are painfully inconvenient and inefficient, especially for a “sub-species of human” that values efficiency above absolutely everything else is just plain wrong. Speaking as a member of Gen Y, I can tell you that, while I appreciate efficiency, what I value above all else is choice. My generation is used to surfing through 500 TV channels for our entertainment and thousands of websites for our news. We appreciate having multiple options (as Timothy pointed out).

    I’m sure there are members of Gen Y who dislike branches (or anything that forces them to temporarily unplug). Personally, I enjoy the occasional visit to my local bank branch (even if it looks nothing like the Mos Eisley Cantina).

    I wrote a blog post about this that expounds more on my viewpoint: http://www.zootweb.com/blog/index.php/love-branch-banking/139/

  14. Timothy Ryan says:

    Alex,

    I agree with you that customer choice is paramount. The argument for continuing to offer branches is based on the fact that customers perceive value in multiple channels. Actual customer decision making clearly continues to award market share to institutions that offer multiple channels, including branches. Changes in customer transaction behavior are not evidence to the contrary.

    As Ron points out above, “A single, or limited channel delivery approach is a business model choice, not a response to consumers’ so-called preferences.”

    My own view is that this represents a losing proposition for most banks—because there is no compelling advantage to the customer in this model. Customers may or may not intend to use a branch frequently, but they see no reason to assume that they will never need to, or want to. To date, supposed pricing advantages of non-branch banks have proven anemic in attracting customers and balances.

    Branch cost is a real issue. But reducing costs per branch is a better generic response than reducing branches. Branches do not have to cost what banks are in the habit of spending on them, and these choices are within the bank’s control. But a business model which ignores actual customer decision making, in favor of a low-cost, limited channel business strategy is very unlikely to be the wave of the future, no matter how much it is hyped.

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