Time for bank branches is up! Think again
When Vivian received an mail from Citibank informing her that three london branches at Cabot Place, Hanover Square and St. Pauls will close for operations from May 2017, she thought it was a joke. Surely they would be more branches in London for Citibank. There weren't.
The same email informed her that cheques will no longer be available and as an alternate, she should use Citi Mobile and internet banking for her transactions.
Citi is not alone. Since the financial crisis, global as well as local banks have closed thousands of branches in their footprints. In some cases, exiting entire markets. In the US alone, more than 10,000 branches have been closed since 2008–09.
So, is it the beginning of the end of Branch banking? And should banks gear up for a branch free future servicing their clients only through internet and telephone channels?
The answer is a resounding “No”.
Branches will not just survive but will form a key component of the future bank strategy. They will
- Continue to serve valuable cohorts of client
- Champion the omni- channel experience and
- Use digital integration to become productivity and service powerhouses
Understanding the retail banking client cohorts
Everyone is not a digitally savvy millennial and all millennials may not want to bank digitally
While smartphone penetration is undoubtedly at critical mass across the world, the preference for financial transactions using mobile devices is still very low. Even in the most digitally advanced markets not more than 25% of clients are ready to move all their financial transactions to mobile channels.
For more on how to accelerate digital adoption click here
The argument of millennial digital adoption leading to the same pace of digital banking adoption does not hold. Using social media and messaging applications is not the same as doing mobile banking transactions. There are clients who have had poor transaction experiences and there are those who simple do not trust the security of digital devices. These clients will continue to lean on branches for key transactions.
The Silver segment — These are valuable clients with up to 40% of deposits balances. While they can be guided to adopt internet and mobile banking, there is a combination of inadequate programming from banks and a natural reluctance towards new technology. In either case this cohort will insist on access to branches.
Finally we come to wealth clients who require complex transactions such as wealth investments and portfolio planning for which multiple iterations and discussions would make physical conversations more attractive. So unless universal retail banks wish to put 70% of their revenues at risk, it is very likely that branches will continue to handle the ‘my wealth’ transactions.
It’s not multi, it’s omni channel
If we write an email from our laptop, we expect the same to appear in the sent items on our mobile phone. We can add an item into the amazon mobile app and checkout on our PC. Our experience with technology services is ‘omni-channel’. With our bank we do not expect this level of channel sophistication. However that is changing.
Here comes the opportunity to get the physical branch at the heart of the ‘Omni-channel’ experience. Clients have hitherto been going up to branches. However the branch is now coming up to clients.
Umpqua banks BFF — Best Financial Friend is an excellent example of how branches are playing a critical role in optimising costs while not compromising on the human touch that is required by cohorts of clients as we read earlier.
What Umpqua Bank has shown is that optimisation of branches does not mean shutting them down. Yes there will be some rationalisation of branch foot prints but effectively using branch resources will be the key to bringing an omni channel experience to banking clients.
Better technology, better service, better productivity
The intersection of biometric, centralised client data and intelligent analytics algorithms have the potential to elevate the branch experience to a completely new level.
The ‘optimised’ branch should make a judicious use of technology and human interaction to deliver a superior client experience. For instance: repetitive transactions such as deposits and withdrawals should be moved towards self service channels while complex products advisory such as mortgages and legacy planning should be led by human interactions.
In either of the cases, technology should seamlessly work in the background to deliver a superior friction free experience.
Freeing them up from the need to fill up a paper form with signatures, clients can be pre-authenticated using biometric sensors on their mobile devices against a centralised digital identity database. Singapore’s MyInfo and India’s Adhaar are successful examples of such an experience.
For complex products, advanced proposals can be generated using intelligent data analytics and the branch relationship manager can have the closure discussion in face to face meetings at the branch itself.
The final piece will have to be delivered on re-organising the branch workforce. Supported by technical tools, the branch staff will not only need to perform multiple roles (of teller advisors and service experts) but also be adept at multi channel interactions, face to face, online and video.
In conclusion the net reduction of bank branches that we saw in the earlier graph is likely to taper off in the next 5 to 7 years to a stable well optimised network that will continue to be a critical contributor of retail bank’s revenues and balances.
This article is also available on www.fynsights.com
Disclaimer: The views expressed here are my own and not representative of my organisation in any way
