The industry chatter about bank branch closures feels different now. S&P Global reports that U.S. banks and thrifts closed more than 3,300 branches in 2020 and opened just over 1,000. The branch count has been declining since 2013, its true, but COVID’s branch restrictions drove an uptick in digital adoption of banking services that further reduced branch visits.
But you’re not reading this to get a redux of the branch swan song. The industry has been adjusting to this decline well before the pandemic began. And yet, bank branch customer habits die hard. The digital revolution, even in a pandemic year, has not been universal. Oxygen, the digital banking upstart, conducted a study that found nearly 70% of Americans visited a bank branch in the past 12 months.
No wonder bank branch closures can still result in significant account and balance attrition rates.
Retention Can’t Be an Afterthought
So the banking industry faces an interesting dilemma: Branches are disappearing, but banks and credit unions haven’t entirely succeeded in getting clients to embrace all the digital channels that enable them to skip the branch. Being unable to retain clients at branches that close indicates they’re failing this “digital adoption” test.
Retention has significant ramifications for smaller financial institutions in particular. Reduced liquidity coverage and loan-to-deposit ratios can compromise an institution’s ability to grow and, ultimately, stay independent.
If my experience working with some of the largest U.S. banks is representative of the broader landscape, most financial institutions are struggling to retain clients when they close a branch. Although the industry allocates millions of dollars to attract customers every year — estimates put the cost of acquiring a single new customer at several hundred dollars — the marketing department often doesn’t see retention as their concern. They view it as an operations/customer service issue.
That’s not true when a branch is closing, however.
Notifying clients of where the next closest office is located is not a retention strategy.
Yes, some financial institutions deploy resources to save high-priority clients, but there typically isn’t a comprehensive retention playbook. Marketing and Operations often operate in silos, and that doesn’t magically change when a branch closes. But it needs to.
Designing a Successful Branch Closure Campaign
Previously, closing a branch would inevitably cause a certain percentage of customers to cross the street — proverbially or literally — and bank with a nearby competitor instead. As more institutions close locations, however, that scenario is less of a threat. Many financial institutions now have fewer branches. And so, more consumers will ask themselves: If I have to drive further to visit a branch no matter where I bank, which one offers the best digital experience so I can skip the branch altogether (or as much as possible)? The financial institution that answers that question successfully — while also cross-selling — positions itself to retain clients and win in the marketplace.
Ideally, financial institutions should begin planning their retention campaign months before the required 90-day branch closure notice is sent.
Regulators require banks to notify customers 90 days before a branch closes, and marketing departments should design retention campaigns around this schedule. Analyzing branch data and developing content and other marketing collateral can take eight weeks or longer, so it’s critical that Operations communicate bank closures to Marketing as soon as possible.
5 Questions to Ask Well Before a Branch Closes
A multi-touch, cross-channel engagement campaign is the most effective way to enroll customers in both digital services and so-called sticky products. But this requires having the right analytics. Ask your data team to look at the branch slated for closure and answer these five questions:
- Which clients visit the branch the most? Separate them by the number of times they’ve visited in the last 30, 60 and 90 days.
- Of the clients that visited the most, what services did they use at the branch?
- Among clients that visited the branch often and used services that could also be conducted digitally, what is the bank’s estimated share of wallet for that customer?
- Which of these clients are not using mobile banking and/or online bill pay?
- What is the lifetime relationship value of each customer that visited the branch in the last 30 days? (If your bank calculates this for clients.)
Answering these questions will help prioritize the target list. For institutions with limited budgets, more effort should be made to reach clients that visit often and provide the greatest relationship value. Clients that visit branches less often and use fewer banking services would go further down the priority list.
When budget is available, using a data solution that can provide detailed customer value segmentation will help. As an example, it is now possible to accurately estimate customer-level wallet potential, thereby creating an opportunity to assign both a current and future revenue opportunity to each customer.
Emphasize Digital and Loyalty-Building Products
Once the target list is identified and prioritized, it’s important to reach customers multiple times across multiple channels including direct mail, email, online banking prompts, ATM screens, and even calls from a banker.
Campaigns should be designed to encourage adoption of digital services like mobile banking, mobile check deposit and text alerts, as well as to cross-sell services that drive loyalty such as direct deposit, personal loans or a rewards credit card.
Bank marketing departments have a unique opportunity to inject themselves in the branch closure process, if they’re not involved already, and create more awareness of all digital services available. They can deliver critical, analytics-driven programs that drive digital adoption and cross-selling while improving retention.