The Customer Effect
Mobile-first, but not digital-only: Why the bank of the future may still center around people
- Although bank branches are disappearing, customers still feel the need to connect with them for specialized advice.
- Analysts say the future of the branch will be more about customer retention than acquisition.
With the talk of "employee-less branches," bots and cognitive agents, the notion of being able to meet all of one's banking needs without any kind of human intervention may still be quite far off. While the decline of the old-fashioned retail bank branch is well-documented -- a JLL study estimates that the number of bank branches in the U.S. is expected to drop 20 percent over the next five years -- recent research shows people still want to come into a branch. Banks -- even so-called virtual ones -- are experimenting with technological solutions to get the mix of human and virtual interaction right. "Branch revenue growth has slowed down, and a lot of financial institutions are looking at how to address that," said David Albertazzi, senior analyst at Aite Group. "They're trying to figure out how to maximize their yield on their most mature channel, the brick-and-mortar branch." For one new entrant in the virtual banking space, Luvleen Sidhu, president and co-founder of the branchless BankMobile, the branch won't disappear, but its purpose will change. "Although we are a mobile-first strategy and we bank millennials with an average age of 27, about 60 percent of our customers feel a bank branch is important to establishing a primary banking relationship," said Sidhu. "It adds an element of security and credibility." The virtual bank, which was set up two years ago and has two million accounts, said it will open up "pop-up branches" at universities to reinforce the connection to customers. Another new virtual bank, Iam Bank, will launch in the U.S. this fall with customer experience centers on the ground. These smart branches will be equipped for technologically-savvy customers, but in-person staff will guide those who need a little more help. "We will also have behavioral psychologists and independent financial advisers at our member experience centers, so that members can speak in confidence with professionals who will hopefully be able to help them through managing their finances in difficult times," said Simona Stankovska, Iam Bank's head of communications. The incumbents aren't saying much publicly on their future plans, but recent moves show they are experimenting with the right amount of 'human touch' combined with digital tools. Among the big banks, Citi has opened digital branches where customers review their banking details on computers while bank staff members assist. Bank of America's minimally-staffed branches let customers make the most of mobile banking tools and allow them to connect to banking representatives through video conferences, with employees on hand to provide guidance when needed. "Although our clients are using our digital tools more and more, they still rely on in-person conversations with financial center professionals for some of their more complex financial needs, such as buying a home and saving for retirement or college," said a Bank of America spokeswoman. The new type of brick-and-mortar branch allows a more digitally-literate customer to stay connected to the brand. "If financial institutions are able to make their branch more digital, they’ll be in better position to drive incremental sales, build customer loyalty and provide that outstanding experience that customers are looking for," said Albertazzi. For Samsung, which said it's working with many leading U.S. banks on branch modernization through technology, the branch that acts as a fast track to expert advice is what meets younger customers' expectations. "Millennials still want to visit the branch, but they don't want to meet with generalists as much, they want to access experts much more quickly -- they'll want to speak to a mortgage adviser about a mortgage, and branches need to invest in technological solutions to have video conferencing capability," said John Curtis, vice president of regulated markets at Samsung. Curtis said the company is working with banks to make the banking experience more seamless for customers, allowing them to easily video conference experts, with branch employees available to assist when needed. The branch, said Sidhu, is becoming more of a tool to retain customers than to attract them. "I think what's dead is the branch serving as the primary customer acquisition strategy for banks," she said. "Banks are only opening one net new checking account per branch per week -- through our unique strategy of replacing branches with technology we are opening about 10,000 accounts per week. This is the future."