The Customer Effect
Striking the right balance between branch and mobile banking
- Mobile interactions incur a cost of about 10 cents, a small fraction of the $4 cost of a teller or call-agent interaction.
- U.S. banks would save $11 billion annually if customers’ branch and call-center use declined to the Dutch level.
The common mode of thinking pits mobile banking against the traditional bank branch as a zero sum game. Though consumers do appreciate the ease of use and convenience of mobile banking, for the most part, they like to know the branch is there. Mobile banking is a top strategic priority for most banks, not just because of the good customer response, but also because of the cost reduction associated with it. Each mobile interaction incurs a variable cost of about 10 cents, a small fraction of the $4 cost of a teller or call-agent interaction, according to Customer Loyalty in Retail Banking 2016, a recently published report by Bain and Co. When comparing the two, both on price and customer satisfaction, mobile is a clear winner. However, the off-the-cuff conclusion, to gradually shut down most branches, is a false one. In most countries surveyed, shutting down branches was accompanied with some sort of negative business outcome. Many customer either switched banks after their branch closed or didn’t switch but started using products of other banks. How can banks ensure access to tellers while keeping costs down? Some European banks might have the answer. The Netherlands was one of the first countries to adopt mobile banking and Dutch banks began to reconfigure their branch networks a decade ago. Dutch banks have not completely eliminated the traditional branch, though headcounts are way downs. Instead, they changed the nature of the branch. ING, for example, has side counters in bookstores and tobacco shops. SNS has franchise arrangements with insurance agents and others. Most customers still have access to a banker in walking or biking distance, but in a streamlined, low-cost format. Bain and Co. estimate that the 25 U.S. banks would save $11.4 billion annually in aggregate if customers’ branch and call-center use declined to the Dutch level, and the banks reduced headcount accordingly. These findings are especially important for small or regional banks which might be struggling in an environment of high capital requirements and low interest rates and are looking to cut costs.