As digital banking usage continues to increase, customer traffic in bank branches has been drastically reduced. In fact, 94% of consumers under 35-years-old bank online, according to First Data’s report, The Unbanked Generation. The problem has grown so overwhelming that it has become the biggest concern branch banking is facing.
So far, the approach that many banks have taken is reactive, without being grounded in analysis. The resulting panic has driven many bankers to try to copy successful retail models, hoping to replicate their success.
To illustrate this point, earlier this year at a banking conference, a discussion was overheard between three bankers who were talking about the future of the American bank branch. They had just listened to a speech by James Gilmore, co-author of The Experience Economy, in which he made the point that American commerce is moving from products and services to experiences. The three of them seemed to be inspired by the speech and were talking about how to turn a branch visit into a memorable experience.
Most bankers can’t help but to be limited by the industry’s recent ideas in branch transformation. These three bankers were no different. The first banker talked about how the branch can become a destination location. “Imagine,” he started, “we could offer free WiFi and coffee to our customers. They could bring their pets and lounge in comfy chairs at the branch.”
The second banker said, “We could also ‘digitize’ the branch to have more of an Apple Store feel. We could train our staff to be ‘Banking Geniuses.’ Customers could bring their iPads, or we could have tablets to show consumers how to use our website and our app. We could have a kiosk for people to go to online banking.”
Excitedly, the third banker suggested an incomprehensible combination of Starbucks, Apple Store and a bank branch, where “Banking Geniuses” deliver free coffee, while carrying tablets featuring YouTube videos of the bank’s latest commercial.
If You Build It, They Still Won’t Come
For the past several years, conversations about the “perfect” branch have taken place as the industry comes to grips with a heavy reduction in branch traffic, fueled by changing demographics and a more digital consumer. Many banks have begun to close branches in response to these changes, while others hesitate because surveys show many Americans still want to have a bank branch nearby, just in case they have a problem.
”Rather than trying to build branches that more consumers will visit, the focus should be on digitizing activities that consumers still do in the branch.”
No matter where the discussions occur, bankers are focusing on the wrong problem and the wrong solutions. They are worrying about diminishing traffic, and in response, are looking for ways to get traffic back into the branches. Instead, banks and credit unions should focus on what actually happens at the branch, and figure out how to remove friction from processes using digital technologies.
Many banking customers are not going to branches because most routine banking transactions are automated or digitized, eliminating the need to visit a physical facility. Some bankers look at other retail establishments and see people milling in coffee houses or computer stores and are assuming that they just need to replicate the environments of busy retailers.
When bank branches had long queues, people were not there because they thought banks were cool places to hang out. They were there because there was no alternative at the time. Remember the complaints about long queue lines?
The idea of the coffee house branch lives on because one bank, Umpqua Bank, in Oregon has been successful with this strategy. However, this design was successful because of the location and the demographics particular to one of their markets, Portland. Portland, much like Seattle, is the one of the epicenters of an American coffee house culture that hasn’t translated well to other parts of the country. Banks forget that Peoria, IL, Macon, GA or Hempstead, NY are not Portland, OR, and may not share this unique culture.
Similarly, more than a handful of banks have tried the “Genius Bar” concept, copying Apple stores. These branches feature digital displays, the latest ATMs, kiosks with computers for customers to access online banking, and eager to help Millennials armed with mobile devices. Most banks that have tried this design have also seen it fail.
A banker from one of the top banks in the country recently described how their costly test “digitized branch” in a major American city had borne no fruit. At the back of the branch there was a single teller line designated for businesses. When entering the branch, most customers were confused and headed to the teller line. The “Bank Geniuses” offered help with their tablets, yet most customers brushed them off and continued to the teller line.
Customers weren’t interested in checking out the new technology, since they were there to do what banks have trained their customers to do throughout history … stand in line. After a while, the Universal bankers stopped trying to engage with customers. In this scenario, the bank failed to realize that the people that still go to the branches are not the ones who are dazzled by technology.
The biggest problem that bank branches are facing is a reported 10%+ year over year reduction in teller traffic for activities like check cashing, depositing checks, and withdrawing cash. To answer this dilemma bankers should be focusing on the customer and the activities that they do at the branch. Once those activities are cataloged, banks should then determine how digital technologies can be applied to improve the branch experience.
According to Jim Bruene, the four cornerstones of the American bank branch are:
- Opening Accounts: Primarily for someone new to the bank
- Servicing Accounts: Usually when there is a problem
- Administer Advice: Primarily for more involved services like loans and business services
- Provide Visible Reinforcement of the Brand: (i.e. very expensive billboards)
If these four activities are in fact the “cornerstones” that make up today’s bank branch deliverables, there are digital technologies that can be applied to each activity.
Most banks have multiple systems for opening consumer deposit accounts; one system for the branch and a different system for their website. Some even have a separate system for their mobile platform. Unfortunately, the branch system is usually a legacy system that is much more cumbersome. Banks should consider deploying one system for all channels.
Online platforms are often built to be more efficient and take advantage of self-service routines that allow customers to identify the ideal product for themselves. The branch staff can use these tools to augment account opening and cross-sell efforts. These tools also reduce the heavy training burden on the branch staff and could result in more sales.
Studies by various research firms show that a majority of banking customers go to a bank’s website to do research before they go to a branch. Since they are already on a bank’s website, and they are planning to visit a branch, banks need to provide the option of scheduling that planned visit online. They could even begin the account application process during their online research visit. The branch staff would be able to complete the process if both channels were using the same platform.
Having a system that can cross between online and physical channels would also allow the bank to offer applications for business accounts online. Other applications that might not yet be available due to compliance or other restrictions could also be offered.
Systems that cross channels can also be deployed in other areas of the bank beyond the website and the branch. For example, systems can be used in the contact center, pop-up branches, and bank-at-work visits, or even available to bankers when visiting a customer’s location.
Servicing accounts is the main reason that most bank customers give for wanting a branch nearby, yet many banks do not provide their branch staff with the same tools available to the contact center. Often the branch staff have to call the contact center or the branch support line to address a customer’s question.
Knowledge bases, online FAQs, and Live Chat can easily be made available to the branch staff to be able to help a customer. If these tools existed on the bank’s website, it could be an opportunity for the branch staff to teach customers how to help themselves online if they had a subsequent problem.
Problem tracking systems used in contact centers can also be deployed at the branch to facilitate the tracking of issues that may require research. Use of these systems allows a more elegant exchange between the branch and a back-office function rather than the branch staff calling for support.
Many banks rely on the same branch staff to handle banking questions regarding consumer accounts, business accounts, deposit and loan products, as well as investments and insurance. The expectation that the branch staff can properly support all products and services for a diverse group of customers is lofty.
Traditionally, banks and credit unions rely on training that covers too much ground in too short of a time period and takes the staff away from serving customers. Training is supplemented by glossy pamphlets explaining products that sometimes are out of date or just present generic information.
There are digital tools that can facilitate a more robust discussion with a customer that can also help the staff provide solutions that make sense for the customer’s particular situation. These tools leverage questions, built on a simple decision tree, that the banker can use to identify the customer’s needs, providing a set of recommendations that are tailored to the customer.
If there is a hand-off to an expert, such as an Investment Advisor or Mortgage Officer, the branch could set up an appointment using an online appointment tool. If experts are available, but not at the specific branch location, banks could set up video chat or video conferencing to allow the hand-off to be much more seamless and efficient.
Reinforcing the Bank Brand
If a branch serves purely as a billboard, no amount of redesign or “digitization” will change that. Bank studies say that 70%+ of customers research a bank brand online prior to visiting a branch. With that in mind, bankers should consider if a “billboard” branch is really the best use of resources.
”In the end, we may find that the ‘branch of the future’ is actually a phone.”
If a specific location is deemed important, but has little demand for services, banks can look into turning the site into a complete self-service location. Many large banks in highly visible locations in New York City, Chicago, and other large metropolitan areas have replaced entire “billboard” branches with clusters of ATMs.
Bankers should also consider how to provide visible reinforcement of the brand within the digital space instead of relying on traditional branding. For the cost of a billboard branch, banks could purchase significant online and mobile visibility, and have significant funds available for search engine optimization (SEO). Often digital costs are much lower and can have a much larger reach.
Building the ‘Branch of the Future’ Begins With the Consumer
There are other digital tools that could be applied to each of these cornerstone functions. Successful digitization and branch transformation should begin with the consumer, not merely installing new technology and applying strategies from other industries, like Starbucks or Apple.
Bankers need to ask themselves, “Do we know how consumers prefer to use our branches?” Once that question is answered, it’s time to think about how digital technology can improve those processes.
In the end, we may find that the “branch of the future” is actually a phone.
Alex Jimenez is a digital banking and payments strategist, who focuses on innovation and fintech. A frequent speaker and writer, Jimenez has a successful track record in strategy development and implementation, operations management and consulting.