Co-working spaces as …new banking branches?

Read full story in the new issue of Money Of The Future 2016\2017 report

With coworking spaces around the world endowing people (sometimes for free) with place to work, involving vacant areas of schools, hospitals and train stations as new centers of activity, why can’t bank branches, struggling to find their place in digital economy, be a mix of digital banks’ showrooms and co-working spaces for bank customers?

WeWork in Shanghai in opium-factory building

Idea Bank, a Poland’s most innovative bank supporting the country’s dynamic and vibrant entrepreneurial culture, started turning branches into office space for SMB’s. With branches becoming increasingly irrelevant in a mobile age, in 2016 the bank began refreshing some of its sites, offering firms free access to co-working space, conference rooms, Wi-Fi, office facilities and beverages.

Idea Bank, a Polish lender focussed on small businesses, is boasting that the free office facilities that it provides entrepreneurs have proved so popular that it is being forced to close them to non-customers.

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With branches becoming increasingly irrelevant in a mobile age, last year the bank began refreshing some of its sites, offering firms free access to co-working space, conference rooms, Wi-Fi, office facilities and beverages. “Demand for Idea Hubs’ unpaid office facilities and conference rooms is so high that Idea Bank decided to close them off to non-account holders.”, according to the bank.

40% of regular visitors use Idea Hubs at least once a week. Only one fifth of all visitors use Idea Hubs the same way they would a typical bank branch. The remaining 81% consider them a place to work, conduct business meetings, attend workshops and training sessions, or engage in various networking activities — shows a survey by Idea Bank. 27% also pay close attention to the location of a branch. Other important factors include: pleasant ambiance, interesting design or a desire to visit a much talked-about venue. In the era of emptying bank branches, it is the frequency of visits to Idea Hubs that’s probably the most surprising. 40% of the respondents use IB’s free co-working facilities at least once (22% — a few times) a week. 79% visit them on a minimum monthly basis. Only 6% have used a Hub just once.

The first Hub, located in Warsaw, was opened in January 2015. Currently there are four similar branches available in the capital city of Poland, including one seasonal venue at the Vistula beach. The branches are equipped with a total of 43 desks and 9 conference rooms. Idea Hub in numbers: 22,5 thousand visitors, 55,5 thousand cups of coffee consumed, 111 business workshops, 1 000 trained entrepreneurs, 15,7 thousand fans on Facebook. “We wanted to popularize the Hubs, fill them with entrepreneurs and freelancers, make them visible in the cityscape. But today’s daily agenda is that clients come to Hubs and cannot find a place to sit’, sums up Dominik Fajbusiewicz, Idea Bank board member and the creator of Idea Hubs.

With the beginning of October 2016 free office space will become available only to the bank’s clients, though this decision will not impose any costs on non-account holders determined to use the Hubs anyway — the bank has a wide portfolio of unpaid accounts. Entrepreneurs find using IB’s services highly beneficial.

The project’s business effects are a lot more important — and they are impressive as well. Idea Hubbers open twice as many bank accounts as visitors to regular branches, and the experimental branches report four times higher sales of Tax Care accounting subscriptions.

The 2,782-square-foot branch is likely the first in Portland to have an in-bank library. Customers — and non-customers — are free to sit and read the books or take them home. The goal is to make the bank more welcoming and less intimidating. In 2015 Umpqua Bank opened a 2,728-square-foot branch in Fox Tower. “We want people to hang out,” said Eve Callahan, senior vice president of corporate communications. “We want the store to be relevant in the community.”

Portland-based Umpqua has long been known for its unique approach to branch banking, including offering a proprietary blend of coffee and free dog treats. Each Umpqua branch, which the bank refers to as stores, also has a lobby phone that dials directly to the desk of CEO Ray Davis.

The most notable is enhanced meeting space. The branch features two conference rooms and numerous seating areas. The public can reserve the space free of charge. Callahan said the space is designed to “add value to the surrounding area,” which is home to numerous small businesses that might not have access to appropriate meeting space.

The counter just inside the entrance to the branch of Umpqua Bank offers locally made hand cream rather than deposit slips. It has recently been used to peddle pottery, bike components and glasses frames, among other local products; eager local merchants have booked up the stand for the next year and a half. Much of the rest of the branch is put to unusual uses as well, including art exhibitions, yoga classes and “stitch and bitch” sessions (group knitting). At another branch located near an old-persons’ home, the manager hooked up a gaming console to large monitors hanging on the wall to create a popular virtual bowling league.

Umpqua Bank has branches spread across Washington, Oregon, California, Nevada and Idaho. This sort of expansion runs contrary to accepted wisdom, which holds that cheap competition from internet banking is killing off the physical sort. To the extent that branches still make economic sense, runs the general view, it is in clumps (for efficient marketing), filled with aggressive salespeople pushing ancillary products.
 Umpqua, in contrast, is trying to create outlets that neighbourhoods will welcome and people will want to visit. It attempts to make even the most mundane transaction a treat. Tellers, for example, hand out a chocolate with each cash withdrawal. It goes to great lengths to cut the time and form-filling involved in obtaining a mortgage — typically an agonising process. Prominently displayed at every branch is a phone which connects directly to the desk of Ray Davis, the bank’s president. If he is at his desk, he answers. Typically, he says, the caller just wants to know if the line is genuine.

The bank prides itself on doing everything differently. Instead of sending out junk mail offering consumer loans, Umpqua employees attached small flyers to potted plants and placed them on 1,700 doorsteps in the neighbourhood they were targeting. Every day begins with a “motivational moment” (read something inspiring, play marshmallow dodgeball or hold a trivia quiz; do not refer to corporate memos or procedures). Phone calls are answered with the words “Umpqua, the world’s greatest bank”.

Umpqua’s success suggests that banking is not merely about hard numbers. Umpqua has shown an ability to delight customers and avoid the censure that has bedevilled its bigger competitors. Its rise is evidence that a small bank can indeed be different. It must now prove that a large one can be as well.

Any Umpqua’s location feels more like a contemporary store or upscale café than a bank branch. It features mobile concierges, iPads, interactive touch screens, outdoor seating and a free “loaner” bike.

“It is built to be a community hub in every sense of the word, boasting an innovative store design aimed at fostering collaboration and interaction,” explains Eve Callahan, SVP Corporate Communications at Umpqua. Callahan says technology is changing the way people interact with their bank, and Umpqua is trying to embrace those changes rather than resist them. That’s why the branch is jam packed with iPads, six projectors and dozens of LCD screens.

This is strategy is clear — literally; the location’s entire exterior is glass, opening the space up to the public and passersby. LCD screens facing the street feature a twitter feed using the hashtag #umpquasf, local weather, a calendar of events and bus schedules. The branch will be continually staffed with two “Mobile Concierges,” roving bank associates equipped with iPads and headsets that help them open and service customer accounts anywhere in the store. The transaction area (if it’s even fair to call it that) is intentionally designed to look more like a hotel registration desk than the teller ramparts seen in traditional banks. With the rollout of this new location, Umpqua is also introducing the use of paperless instead of printed transaction receipts. And hey, if someone needs to borrow a bike for a couple hours, no problem. They can check one out from the bike parking stations Umpqua keeps up front for just such occasions. Arguably the most pronounced and profound feature in the branch is the “Catalyst Wall,” a 20-foot long multi-part display exploiting all the five human senses — sight, sound, touch, taste and smell. The “Spark Resource Center” space includes publicly available iPads loaded with subscriptions to publications such as the Harvard Business Review. There’s also “Recharge Bar” where anyone — customers or the general public — can juice up their mobile devices.

The “Business Lounge” is an invitation-only space is designed for larger group meetings or sessions, and will feature events with local business and thought leaders. Umpqua’s “Exchange Rooms” are flexible-use spaces open to everyone, not just customers. Umpqua associates can use them to meet with clients, but small groups can also reserve the rooms for free, where they can deliver presentations, hold virtual meetings or simply have a meeting.

CheBanca! is the digital first bank launched in 2008 by Mediobanca. Mediobanca provides merchant bank services in Italy and had never had a retail bank before. Therefore, it made sense in the post-meltdown digital age to implement a fintech bank fit for Italy, and CheBanca! claims to be that bank.

Anyways, being a digital first bank does not mean being a digital only bank. A digital bank with a branch? Yep. CheBanca! has launched almost 50 of them so far, with more to follow. This has proven critical in getting trust and deposits, with the main aim of achieving three things that digital only does not achieve: Trust, Brand, Service. These three things are harder to achieve when you are unseen, unproven and unknown, although some are bound to disagree.

For example, once you get inside, it looks a bit empty (PDF-presentation). All you can see is a concierge with an iPad, a machine that looks like a teller (but isn’t) and something at the back that might be a Star Trek transport station (and is). Looking back the other way across the branch (which is in an L-shape), you see a few teller stations. These are stations to chat with people about account opening, service and advice, and the typical staff member here is from Gant, Massimo Dutti, PC World or similar retail stores by background. They’re not bankers, but customer agents who are enjoying the experience of joining a bank that helps people live their lives, or so they tell me. Finally, at the back of the L-shape are a few rooms with frosted windows.

These are the serious advice stations. They operate by customers making appointments to see wealth managers, mortgage advisors or similar and then, when they turn up, they check-in and can see which pod they’re going to go to and who they’re going to meet. However, you don’t need to wait if it’s about advice, as you can go to the transporter room. The transporter room is this weird funky station at the back. Once you sit at the station, it’s got all sorts of cool features like biometric recognition using digital signature and shared screens with video operators.

This particular small branch serves around 259 customers a month at these videostation, and it has proven successfully at broadening and deepening customer relationships using those old bank metrics of cross-sell and up-sell. According to the bank, the service videostation has a 15% cross- and up-selling success rate. Finally, if you just want to deposit a check or cash, you use the funky self-service machine.

CheBanca! boasts over half a million customers overall, since the bank opened for business in 2008, and is now rolling out its digital branch formats. Today, there are four branches based on the new format. By the end of September 2015 it is already eight in a selected sample of medium and big towns. Equally, the bank intends to roll-out the videostation experience via Skype from September. All in all, there’s lots of things I liked about the digital branch concept.

CheBanca! is gaining 4,000 new customers per month with 45% from branches and 37% from remote contact (the bulk, 30% of that 37% is generated by the internet). The remaining balance of 18% is generated by third party physical channels. That means a whopping 63% today is coming from direct physical contact. Third, customer behaviours demonstrate that, for service, they prefer digital with 37% of customers handling all of their transactions and operations just through digital access. Then there are a second group of customers, 26% of the total, who deal with CheBanca! purely through remote servicing via the web and call centre. A third group that represent around 28% of all customers, use all the access points (web, call centre, branch). 89% of all contact is via digital access, three times the volume of contact that takes place in a branch.

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Read full story in the new issue of Money Of The Future 2016\2017 report