Cafes, lockers and more small-business services: What the bank of the future should look like

Bank of America's Sharon Miller is looking forward to a year of more hiring. “You know what I hear a lot of?” said the bank's small business banking head. “'Sharon, we need more bankers, we need more bankers!'” Miller oversees more than 2,500 small business banking specialists across 4,600 branches in 90 different local markets. In the next year she plans to continue hiring more bankers, branch managers and local market presidents — as well as staff for the mobile and online businesses, she said, though she didn't share specific numbers. And that kind of focus on small business customers could be the future of physical branches. There isn’t very much consumers can do at a branch that they can’t do from home, but there’s a lot of potential for small business customers — a customer segment spending more and more time in branches, at least at Bank of America, which originated more than $11.6 billion in new small business lending in 2016 -- a 9 percent year-over-year increase. Diebold Nixdorf, a manufacturer of connected commerce and self-service products in the banking and retail industries, has been testing locker storage, or having conversations about it, with four potential U.S. bank customers. There are a number of reasons a bank could invest in them for branches, said Dave Kuchenski, Diebold’s director of business development, new technology and design innovation. But pickups for small business customers is perhaps the most compelling case. “If I'm a small business owner and I need to go to the bank every morning and pick up X amount of ones, 10s or 20s, I can have the branch stage that transaction for me ahead of time and save me 20 minutes of my morning,” he explained. Service for individual customers won’t leave the branches, probably. There will be some branches focused on customers being able to get in, complete a transaction and get out quickly. But small business customers have a broader set of needs where the branch can play a bigger role, said Michael D’Esopo, director of brand strategy at Lippincott. For example, similar to the way Capital One has created cafe-branches in partnership with Peet’s Coffee, banks should get creative about other ways to utilize the branch space beyond the transactions and the banker-to-customer meetings. Providing meeting space for small business owners that might run their company out of their homes and not want to conduct face-to-face meetings there could be one way of doing that. “There are things where there’s greater complexity than straight transaction processing,” he said; like additional information required to sign up for a business checking account, or whether to apply for a small business or personal loan to finance a small company. “There are different ways the branch can become an extension of small businesses and a way for them to engage with their customers.” Branches are having an identity crisis Banks have more thinking to do about why people need branches — not because they don’t need them at all, but because they need to innovate them to keep up with their own digital experiences and stay competitive with consumer experiences in other retail spaces. In the digital era, banks compete with others companies for their own customers’ relationships. First they competed with fintech startups; now they compete with retailers and e-commerce companies. They also take inspiration from them. Branches are evolving, becoming more compact and digitally oriented machine-human hybrids. But banks don't fully understand the role of the branch today, industry analysts say. Banks are “floundering” because they don't have a clear strategy coming down from the boardroom and in the meantime, they’re merely repurposing the existing branch network as a bottom up solution, according to Louise Beaumont, strategic advisor at SapientRazorfish and co-chair of the Open Bank Working Group. Branches need to move away from being a center for transactions and stop focusing about foot traffic, said Alyson Clarke, a principal analyst at Forrester. “It’s not about waiting for someone to come in and deposit a check to try to slog them a mortgage,” she said. “It’s a relationship game.” Banks also need to add emotional value to the branch experience to compete with other experiences, Clarke said. Forrester identifies three main elements of any brand’s customer experience: ease, effectiveness and emotion. Banks do well on ease and effectiveness — “they spend all their time helping us do things quickly and get stuff done,” Clarke said, but they get stuck on the emotion factor. That’s perhaps why a large company like Citi with marketing dollars to spend is pushing an “experiential marketing” strategy that includes concerts, pop-up ATM gifting machines and nostalgic ad campaigns. “Allowing ourselves the permission to be an experiential brand and not just about the banking and the financial services we offer — what else does our brand unlock for consumers?” Jennifer Breithaupt, CMO of Citi’s global consumer bank, said in September. “If we can be part of those memories, that’s something you want your brand attached to.”