Bank branch networks continue to decline steadily. Consumer research shows that UK banks are cutting branches at a rate of 60 per month , and a similar pattern is apparent in many other countries. Few doubt that the future of banking is largely digital, so how will bank branches survive? This blog explores a new role for the bank branch in a digital age.
Digital-first banking has been a looming priority for years. And, for skeptics, the pandemic removed any doubt – banking has indeed become a digital business. One can say that digital banks are effectively technology companies operating within the constraints of a banking license. All over the world, disruptive forces are challenging traditional bank business models and redefining how banks interact with customers. Advanced technologies change what’s possible and may ultimately alter the concept of what it means to be a bank. This has serious implications for the future of bank branches.
Bank branch closure programs are primarily driven by factors such as M&A consolidations, a need to cut costs and a general fall in branch traffic as transactional banking moves online. Digital is now the prime banking channel, and its usage is increasing. Recent research shows that 50% of banking customers interact with their bank via a mobile device or website at least once a week compared to 32% before the pandemic.
Bank branches repurposed
The growth of digital banking solutions for deposits and payments alongside the decline of cash usage means there’s little need to visit a branch to transact. However, even in this this digital age, people continue to visit branches for some banking services, and they find value in the human interaction and connection that local branches offer. So, while people may not need to visit a branch, many still choose to. For example, they may prefer to visit a branch to:
- Open new accounts
- Receive advice and guidance, particularly on complex issues such as retirement planning
- Complete complex or large transactions like a house purchase
- Conduct small business banking, which may require interaction
- Discover and discuss financial products including mortgages and insurance
Thus, the branch remains a critical customer touchpoint; it is a physical manifestation of the bank’s brand and all that it stands for. The branch helps to build customer trust, especially for those banks that often play a major role at the heart of a community.
Although branch closures have dominated the headlines, many banks – including startups – are opening branches while others are repurposing branches as advice centers. Banks that dispense with their branch networks do so at their peril. This may be a one-way street, and there are salutary lessons from other industries that have committed solely to digital. Who could have foreseen the resurgence of vinyl records that are currently flying off the shelves?
Destination bank branch
The branch of the future can – and should – be integral to a truly customer-centric banking strategy. In many cases it will be the destination for customer journeys that begin online or mobile. In practice, the branch is the crucial link between the customer’s physical and digital financial worlds, and the most successful banks will be those who offer an integrated, personalized experience. Importantly, the branch of the future must transform to meet emerging customer needs and rising expectations.
In the age of the customer experience, technology and human interaction should be complements, not substitutes. In the bank of the future, the branch will be alive and well and performing a role that’s real, not retro. So, what does the branch of the future look like?
The branch of the future
Branch banking is ultimately a people business, but the role of the banker is changing, requiring a renewed focus on staff skills and talent development, including:
- Universal bankers. As transactional needs decline, more banks should adopt a universal-banker model. This is hybrid role, combining the functions of the traditional teller and the personal banker. Universal bankers must be conversant with all aspects of branch banking and able to handle a broad spectrum of customer requests. This is generalist role that requires specialist skills. Many banks will need to invest in talent development to combine the best of the new world of automation and the traditional world of relationship banking.
- Advice and guidance. Many bank customers visit a branch to seek personal advice about a specific aspect of their life like buying a house or planning for retirement, for example. Here, banks can harness the power of technology and data to build an up-to-date and personalized picture of a customer’s financial circumstances and offer a range of products and services for consideration, bespoke to the given customer. In the digital age, one size fits nobody, and banks should tailor financial products to meet a customer’s personal needs and financial goals. From a bank perspective this elevates the bank’s role from banker to trusted adviser and builds customer commitment and loyalty.
- Specialists. Universal bankers will not completely replace specialists. With branch visits increasingly focused on complex transactions, banks need specialists available by appointment or via remote channels. Banks may opt to build a pool of specialist talent that can serve multiple branches. With this approach, banks must use customer data to gain insight about customer demographics, preferences and spending patterns. Branches (or groups of branches) can then be equipped with agents who have the right specialist knowledge to build a constructive dialogue with customers.
As banking evolves, physical branches must be reimagined to facilitate conversations away from the traditional banking counter. And while a branch network should offer a consistent experience, not all branches are equal. For example, flagship branches in key locations deliver high-impact brand value and recognition while community branches offer opportunities to deepen relationships. To add real value, the bank’s branch offers a perfect intersection of all banking channels.
My next blog will further explore the crucial role of technology in creating the branch of the future.