With all the opposition, uncertainty and general tumult that plague financial institutions' transformation efforts, it's a recipe for disaster that can discourage even the best-intentioned and most committed change agents in the industry.
Hey, let’s face it… there are some financial institutions out there that aren’t responding to the changing landscape very strategically. These banks and credit unions will implement new solutions without ever fully defining the problems they are trying to solve.
Even when you have a clear idea of what they want to accomplish, there are always the naysayers who detest change and the fear mongers who love to derail progress with their scary “what if” scenarios. Here are four common pitfalls you’ll want to avoid.
1. Prioritizing Operational Efficiency and Cost Savings Over Overall Profitability
As branch traffic has slowed, many banks have leveraged cost saving technology to develop new concepts that shrink branch payrolls but overlook the impact on other critical branch functions. For example, a new, high-functioning ATM might replace tellers, but what about all those teller referrals that generated a substantial portion of product sales in the branch? Thus, the cost savings achieved by reducing teller headcount can be offset by an even larger drop in lost sales opportunities. Alternatively, a new branch experience built around universal bankers could be used to reduce the number of FTEs and achieve some operational efficiencies without sacrificing the sales and service components that tellers once handled.
2. Confusing Modest Modifications With True Transformation
About 10 years ago, Bank of America developed one of the nicest branch waiting areas in all of banking. Customers were provided with books, magazines and a large flat screen television as well as very comfortable chairs. No business was done in this area; the objective was to give customers a comfortable place to wait and some entertainment choices to help pass the time.
The message some customers got was “get comfortable, maybe even start a book, because you have a long wait ahead.” Additionally, some branches watched these areas fill with customers and even non-customers, who had no intention of doing any bank business that day.
Unfortunately, these expensive amenities did little to make the branch visit more efficient or rewarding. In fact, in the minds of most customers, little had really changed. As a result, the uptick in sales or customer satisfaction that would have justified this investment never materialized.
3. Discounting the Consumer Perspective
You can find articles about banks looking to shutter 15% of their branches due to dwindling foot traffic. In one such article, the writer noted that this initiative was likely to save the bank money, but it wasn’t going to deliver any benefits to consumers who had clearly expressed a preference for human interaction in a brick-and-mortar location. These people would now be faced with two choices: they could be forced to adopt digital banking channels devoid of the intimate experience they preferred, or they could drive further to another branch. Ironically, this bank had recently ran an ad proclaiming that the “customer was at the center of everything we do.”
Think about this… A once-satisfied customer is now waiting in line at the new location, which was hard for them to find. They look around and can quickly see that it’s clearly overcrowded, as the branch tries to absorb a volume of traffic that was previously distributed across multiple locations. How do you think this customer might feel when they look over at a poster touting the bank’s customer-centric mission?
The truth is, those increasingly rare branch visits that boost loyalty will matter a whole lot more in the future, especially for smaller financial institutions with less robust digital arsenals.
4. Promoting Technology at the Expense of Personal Touch
Online and mobile banking tools delight more consumers every day by removing the biggest pain point in the branch experience. At least one bank has sought to build on this success by rolling out “digital self-service centers” and many others have added digital features to branch environments. However, consumers rarely see digital and physical as separate “channels” and tend to focus more on what they get from an experience than how it is delivered. So, it might be wise to ask those clients who make the effort to come to your brick and mortar outlets whether they are looking for a three-dimensional analog of their mobile app.
A few European banks, like CheBanca and Cariparma Crédit Agricole, have integrated the best of digital and physical with great success in environments that clearly prioritize conversation over computations. BNP Paribas’ Hello Bank has created dramatic, disruptive pop-up experiences to complement a digital first model, generating cultural and emotional affinity as well as sales. These venues don’t feature technology or just use it to automate transactions, they promote person-to-person engagement and dialogue. It’s worth noting that luxury retailers in the U.S. have adopted a similar strategy, removing cashwraps from sales floors to foster conversations with sales staff that emphasize advice over price.