Fifth_Avenue_Bank,_New_York_1900
Teller Line, Fifth Avenue Bank, NY 1900 (Wikimedia)

As digital banking continues to grow with banking customers, customer traffic in bank branches has 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 copy successful retail models, hoping to capture their success. As if to illustrate this point earlier this year, at a banking conference, I overheard a discussion between three bankers who were talking about the future of the American bank branch.  We 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 would have our own and we can show them 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.

For the past several years these exact conversations have been had in many banking quarters as the industry comes to grips with a heavy reduction in branch traffic, which is fueled by changing demographics and a more digitized world.  Many banks have begun to close branches in response to these changes, but hesitate because many many surveys show many Americans still want to have a bank branch nearby, just in case they have a problem.

My three conference colleagues, and the many other bankers that have had similar discussions, 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. Banks should focus on what actually happens at the branch and figure out how to digitize the processes around each of these activities.

Many banking customers are not going to branches because most banking transactions are now automated or digitized and are not taking place within the walls of a branch.  To solve the issue, many bankers are looking around and seeing 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. Perhaps bankers have forgotten the old complaints about long queues, stale environments and bureaucratic processes.

The idea of the coffee house branch lives on because one bank, Umpqua Bank, in Oregon has been successful with such an idea. 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 don’t share its unique culture. Once again this idea reared it’s ugly head a few weeks ago, Tom Harper writing for ATM Marketplace talks about the coffee house branch as if it was a new idea.

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 seen it fail.

Recently, a banker from one of the top 4 banks described to me how their costly test “digitized branch” in a major American city had borne no fruit. They did get some great articles in major newspapers and the American Banker.  He described a branch like the one discussed above.  At the back of the branch there was a single teller line designated for businesses.  When entering the branch most customers looked around confused and headed to the teller line. The “Bank Geniuses” offered help with their tablets at the ready. Most customers brushed them off and continued to the teller line. Customers weren’t interested in checking out the technology, they were there to do what banks have trained their customers to do for a long time, stand in line. After a while the Geniuses stopped trying to talk to customers and just began mingling in a corner checking out Instagram. 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, while customers still say they want a physical branch. To answer this dilemma bankers should be focusing on the customer and the activities that they do at the branch. Once those activities are catalogued banks should determine how digital technologies can be applied to improve the branch experience and truly digitize it.

In a recent column Jim Bruene, founder of Finovate and former editor of Online Banking Report, identified the four “cornerstones” of the American bank branch:

“1. Opening accounts, especially for someone new to the bank
2. Servicing accounts, especially when there is a ‘problem’
3. Providing advice, especially for loans and business services
4. Visible reinforcement of the brand (i.e. very expensive billboards)”

If these four points are in fact the“cornerstones” that make up today’s bank branch needs, there are available technologies that can be applied. Let’s take these in order:

Opening Accounts
Many banks have two different systems for opening consumer deposit accounts, one system for the branch and a different one for their website. Unfortunately, the branch system is usually a legacy system that is much more cumbersome. Banks should consider deploying one system in both 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 ought to offer 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
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 existed on the bank’s website it could be an opportunity for the branch staff to teach customers how to be able to help themselves online if they ever have another 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.

Providing Advice
Many banks rely on the same staff members at a branch to be able to handle all manner of banking questions from consumer accounts to business accounts, from deposit and loan products to 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, the main focus dealing with this expectation is relying on training that covers too much ground in too much of a time 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 discussion with a customer and can lead the staff to solutions that make sense for the customer’s particular situation. These tools are questions built on a simple decision tree which the banker can ask to identify the customer’s needs and result in a set of recommendations that are tailored to the customer. The staff can e-mail or print these recommendations to give the customer more information if they want it.

If there is a handoff 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 that handoff to be much more seamless and efficient.

Visible Reinforcement of the 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 necessary.

If a specific location is indeed required, 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 plenty leftover for significant search engine optimization (SEO). Often digital costs are much lower and can have a much larger reach.

Conclusion

There are other digital tools that could be applied to each of these “cornerstones.” Successful digitization and branch transformation should begin with the customer, not merely installing all the technology available and putting it into someone else’s strategy like Starbucks or Apple.  Bankers should ask themselves, do we know what customers really do and want to do at our branches?  Once they can answer that, they should think about how digital technology can improve those processes and apply them.

In the end, we may find that the “branch of the future” is actually a phone.

A version of this post was published by The Financial Brand on January 5th, 2016, under the title Building the Branch of the Future is More Than Technology.

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4 thoughts on “Is this really the future of the bank branch?

  1. Great article. Although I often smile at some of the statistics thrown about like “94% of consumers under 35 years of age bank online.” Well…of course they do. But, when they have an issue/problem, want a mortgage, look to a trusted advisor about financial planning, etc — they also often visit a branch. We all know (or we should by now) that the traditional branch is a thing of the past, slowly being replaced by those with more technology and Universal-type Associates that have the ability to do more than a transaction. You are also spot on with the observation that there needs to be more than one model – they can’t all be Appl-esk, Starbuck-like in hopes of attracting more consumers. I think it’s time for organizations to take a step back once again, stop playing follow-the leader, thinking technology is going to solve all their branch problems…and take a hard, often difficult look at what is (and could) make them unique to those they want to attract as customers, and build their business model (products, culture, branches, technology) around them.

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    1. Agreed for the most part, Randy. As far as the having branches so people can get more complicated advice done, is that because we don’t offer good experiences outside the branch that they have to come in for that? Quicken Loans has a fantastic mortgage application process and no one has to go to a branch. They are the second largest US mortgage originator behind Wells. Banks can keep telling themselves that branches are needed for advice, but someday they are going to realize that advice is happening outside that branch and they are not going to be ready.

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