What To Do About Bank Branches

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If there’s one thing the banking industry loves to talk about, it’s the future of bank branches.

Branches are dead! No, look at this survey, consumers still prefer branches! Wrong, meathead, consumers prefer digital channels! Jane, you ignorant slut, branches need to evolve to become sales centers!

My take: The discussion regarding the role and future of branches misses a key element.

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While I would be perfectly happy to see branches go away, that’s not likely, nor realistic. There are some interactions that simply still have to be done in a branch.

I have one New York-based friend who apparently doesn’t have to initiate these types of transactions, and so he never needs a branch. Alas, his kids will never know what the inside of a bank branch looks like (which he tweets about on occasion).

I, on the other hand, needed to cash in a bunch of savings bonds recently. Maybe remote deposit capture was a possibility there, but I don’t think so. I guess I could have put the savings bonds in an envelope and mailed them into the bank, but while I’m not the brightest bulb on the planet, I wasn’t stupid enough to do that.

I’m nitpicking, of course. It’s certainly possible to use a smartphone to scan those bonds and avoid the branch. But there are other things that involve the use of a branch that are harder to replace. I imagine my friend has no need for a safe deposit box, either.  

Reality: As long as there are still physical (versus digital) elements to the world of banking, there will be a need for branches.

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The “preferences” argument is totally laughable. Asking consumers what channels they “prefer” and then using those “preferences” to proclaim the death or future of the branch is just bad research.

Point #1: Consumers will use what ever mechanism is most convenient to them at the moment they want to do something.

Point #2: Sometimes consumers “prefer” to do something in one channel versus another, not because the interaction is so great in that preferred channel, but because it sucks so bad in the non-preferred channel. Translation: Maybe applying for loans online would be preferred by more consumers if the process were better.

Reality: Consumers’ stated preferences (at a point in time) are lousy indicators of a channel’s future viability.

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The branch evolution discussion — which usually comes down to proclamations about how the branch will evolve to one that involves mostly sales interactions — typically omits any details on how this transformation or evolution is going to come about.

What always strikes me about the proclamations about the future role of branches is this: If branches aren’t where consumers go for sales-related discussions today, why would things be any different in the future?

Consumers channel behavior regarding sales interactions follow generation-dominated trends: Seniors use the branches, Boomers use the phone, and Gen Xers and Yers use…..well, I’m not quite sure what they use. I’m inclined to believe that Gen Yers haven’t had many sales-related interactions to discern any trends in channel use. 

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So, if the pundits think that the branch of the future is going to be a place where consumers go to sit and discuss their financial lives with well-trained branch reps, then a lot of things have to change. Not just with the design of branches and the staffing of employees within the branch, but in the minds of consumers. 

In other words, it’s going to take a lot of marketing effort to educate and persuade customers (those of the future, that is) to use bank branches for these perceived purposes. 

Bottom line: It’s ironic. When the online channel was emerging, smart banks realized that they had to “market” the channel to drive customer utilization. Who would’ve thought the pendulum would have swung so far that they now have to market the branches to drive usage?

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