Five charts that show how physical bank branches are here to stay

Despite all the worry (or excitement) about banks getting rid of branches, banks aren’t getting rid of branches.

Sure, they’re reducing the number of branches and using the remaining ones in a way that’s more in line with consumer behavior in a digital world. But branches remain one of the most important parts of their business, particularly outside of major cities and urban areas. And, despite many young people’s inclination to do most of their banking digitally, having a branch and ATM presence is still a big factor in where they decide to bank, even if they never use them.

“It’s becoming increasingly clear that banks that can get the balance right between digital and personal interactions will be those that build the strongest customer relationships,” said Jim Miller, senior director of banking for J.D. Power.

The following five charts show that while non-traditional branchless banks like Ally Bank and Capital One 360 have an edge over brick-and-mortar branches, both are equally important to customer experience and satisfaction.

Banks are improving digital strategy, but digital-first banks have happier customers
J.D. Power’s most recent Canadian retail banking satisfaction report shows that a well-executed online virtual business model leads to higher customer satisfaction. Canada’s largest banks led the customer satisfaction index rankings, each with scores over 750 on a 1,000-point scale. Midsized banks performed only slightly better. Tangerine, the digital lender owned by Bank of Nova Scotia, still outperformed them all, with an index score of 840.

Bank customers are still using tellers, ATMs and the telephone
More people may be using mobile banking apps — and usually, all they’re doing is checking balances — but branches and call centers are still handling high levels on routine transactions: depositing, withdrawing and transferring funds. Last year, for example, 90 percent of customers visited a teller in the third quarter and half called their bank, according to a Bain study on transaction migration.

customers still use ATMs, tellers, phone

And it’s not true that older people are less open than the young to mobile or digital banking, according to Bain. They’re half as likely as the youngest group to bank on mobile or web browser, but ATM and phone use falls off among the older segment and that they’re just as likely to bank online suggests they’ll embrace mobile when the circumstances are right. And older respondents have rated their banking experiences on smartphones or tablets highly, more so than younger customers, who tend to be critical of app quality, appearance and functionalities.

Customer satisfaction is highest in branch visits, but also the least consistent
Among the channels measured for interaction satisfaction, branches had the highest performing with a high score of 927, but they also ranked lowest in satisfaction, with a low score of 813. That means there was a 114-point difference between the two. Mobile however, had the shortest range, with a high of 898 points and a low of 842.

The figures show how much further banks need to go in making customer experiences consistent across all channels. To do that, they’ll have to define the expectations for experience, train frontline staff on key behaviors, track performance and reward employees who meet expectations.

Tellers are often a last resort

bank-branch-call-center-traffic-jam-fig-11_full

Sometimes there are hidden fees, sometimes there are privacy issues. But many people resort to tellers because other channels proved too difficult, Bain found. The line was too long, the ATM was taking too long, there were access issues with their login information or they didn’t have their bank card. More than 70 percent of transactions failed or were abandoned simply because the experience was too complicated.

Mobile banking growth is plateauing 

Mobile banking has plateaued in most countries, but it actually declined in China, which is probably at least in part to do with the fact that Chinese customers have so many financial services available through its mobile payments platforms.

customer-loyalty-in-retail-banking-2016-fig-04_full

The number of consumers that use their bank’s mobile app leapt from 32 percent in 2012 to 52 percent in 2015, according to Bain, then to 55 percent in 2016. That shows that early adopters — ahem, “millennials” — have already adopted. Older customers like digital banking and may soon embrace mobile. Branch users still need to be convinced.

3 things banks can do to move more customers out of the branch

Mobile banking growth is leveling off. Many early adopters are already comfortable using their smartphones to take care of simple banking activities. Nearly six in 10 banking customers prefer to use digital, according to a Gallup study.

But as mobile banking adoption rates show, a significant part of the population still tends to favor dropping by their local branches.

That’s a challenge for banks who want to funnel more users to digital channels, which have drastically lower costs and higher satisfaction ratings. It’s going to take time to migrate more people out of branches. There are a variety of activities banks are engaged in to do just that and help a broader range of customers embrace digital, self service channels.

Use more in-branch kiosks

The automated teller machine is a key node in the march toward getting customers transacting on their own. Banks rely on ATMs to help customers help themselves and financial institutions are upgrading and expanding their networks. Local branches continue to get shuttered and are being replaced with more machines.

ATMs aren’t a complete godsend. There are still teller activities that they can’t replace. Customers frequently approach tellers for assistance with cutting cashier’s checks or withdrawing cash in specific denominations, for example.

Source Technologies’ Personal Teller Machine can handle these types of transactions. The Charlotte, North Carolina-based company has a 30 year old history of providing check printing technology to financial institutions. As personal checks are being phased out, the company looked for other opportunities with self service technologies. Source’s new machine, which has a footprint of just one square foot and a 21 inch screen, is designed to help banking staff move people out of line to perform self-service inside the branch.

“These aren’t ATMs. They don’t run on ATM rails — they integrate directly to a bank’s core platform,” said Suzi McNicholas, Source Technologies’ vice president of marketing. “Think of it like the grocery self-checkout model. If you have one or two items, you do it yourself. If you have a cart full of things, you go to the cashier. If you’re walking into a bank branch for a cashier’s check, you can use the self-service device. If you’re a merchant customer and need more service, you’re going to want to see a banker.”

The company signed a distribution deal with CO-OP, a technology firm that runs Shared Banking, a national network of credit unions that share facilities to give members thousands of locations to perform financial transactions. It plans to roll out the Personal Teller Machine in 2017 and 2018.

Adopt mobile video banking

Getting customers to try mobile banking is just the first step. Most mobile experiences are still subpar, turning off users who want something that works as well as online and telephonic banking.

One of the challenges of moving people to mobile is how to provide assistance if they do need more help when technology proves to be limiting. Mobile video banking is a good example of human-assisted technology. According to a recent survey, 93 percent of banking providers in 52 different countries think customer satisfaction would improve if a high-quality video banking service for mobile devices were to be implemented.

“This is good news for consumers,” Financial Town‘s Gene Pranger explained during a video chat on his firm’s BankOn app. “Now bank service staff can appear and resolve problems at a customer’s moment of need. That’s also great if you’re a sales guy at a bank and want to react and close quickly.”

BankOn’s media exchange within the app really makes it different that using Skype or FaceTime. For example, a teller working with a customer on a mortgage application can push a signature panel through to be signed by the user directly within the app. Customers can open up new accounts, sign documents, scan identification documents, and apply for loans directly through the BankOn app as they’re chatting with a teller.

Design better digital experiences

Digital banking still has a long way to go in terms of hitting customer expectations. When the experience is good, older users tend to rate their satisfaction even higher than younger ones. It’s just not happening enough, though, to entice the large swath of people who use their branches to switch to digital channels.

This isn’t just about getting better acquiring new digital customers — it’s about convincing them to stay and adopt the channel. There are a variety of technology and service firms working in this area. Banks like ABN AMRO use Backbase‘s omnichannel banking platform to streamline the customer experience across all devices. Personetics uses AI to preemptively service customers, personalizing their experience with their financial providers. Glassbox Digital provides customer experience analytics to help financial institutions cross the divide between offline and online with more engaging journeys for their customers.

Mobile banking can lower costs and improve outcomes. It’s a challenge to get banking customers using self service when it’s still easier and more convenient to enter into a bank branch. If banks use technologies that help bridge the online and offline world, they’ll continue to help migrate users over to other channels outside of company-owned real estate.

 

The 2016 Tradestreaming Awards winners: Online Banking

Online banking offerings are enjoying somewhat of a renaissance as incumbent financial players work hard to provide the functionality and experiences their customers expect.

The Tradestreaming Awards recognize the talent, energy, and vision that are required to create great digital financial products. The following are our inaugural winners in the online banking category.

Best Online Consumer Bank

Awarding the top online consumer bank or bank-like technology that touches customers, provides a rich and innovative user experience and has found a way to scale. Pure play digital banks and online arms of incumbent banks are both candidates.

chase

WINNER: Chase Mobile Banking

JPMorgan Chase has done a great job of creating one of the best online banking apps by enlisting the help of top designers and technologists. The user-friendly Chase app gives clients of the bank access to bill pay, money transfer, account management, and check deposit.

Best Online Banking Tools

Awarding the best tools that complement online banking experiences, including personal finance managers, savings apps, and similar technologies.

rbs

WINNER: RBS DigiDocs

RBS DigiDocs is the UK’s first omnichannel document solution. Customers of the bank don’t need to enter a branch to sign account docs. Instead, they can use DigiDocs to sign and return important paperwork. Internally, DigiDocs offers RBS a streamlined way to process their customers’ docs. 92% of RBS customers polled said they were “statisfied” or “very satisfied” with the solution.

Best New Entrant Into Online Banking

Awarding the most transformative and creative new offering in the online banking arena.

digit

WINNER: Digit

Digit is a fintech app that proactively monitors spending to find opportunities to squirrel money away to a savings account. After connecting to a user’s bank account, Digit saves a little bit of money every few days. Through an automated chat interface, users can transfer money out of their Digit accounts for spending on big ticket items.
Come join these award winners at our first Tradestreaming Money Conference as we explore the impact technology is having on big finance.

Mambu’s Eugene Danilkis on who wins the race towards digital banking (hint, the customer)

Eugene Danilkis is CEO of Mambu

What’s Mambu all about and what was the personal inspiration behind creating the company?

Eugene-Danilkis, CEO of Mambu
Eugene Danilkis, CEO of Mambu

Mambu is about giving organizations who want to challenge the way banking has traditionally been done, the technology platform to be able to rapidly and easily bring their vision to market. Whether it’s socially-minded businesses focusing on financial inclusion on the two billion underbanked around the world, commercial lenders servicing the much-neglected SME lending market or fintech startups who want to rethink banking, Mambu is the platform and partner for them.

We want to empower these organizations to be able to launch whichever products through whichever channels they have in mind and not have to deal with the complexity of the calculations behind the scenes and empower their developers to integrate into the ecosystem. My personal inspiration was to build a great company that can be at the heart, and a driver, of the change that we think we’ll see in banking this century. We wanted to solve a challenge that we saw in common from big banks to non-profit organizations while creating a terrific product and a lasting company that has the potential for transformative impact around the world: advancing both social and economic goals.

What’s the driving force for the surge in digital lending? How are incumbents reacting to pure play startups in the space? When can digital be used to deliver competitive advantages against traditional banks that once monopolized the space?

Lending is the ‘easiest’ part of the bank’s business to attack strategically from a startups perspective. The demand is certainly there and the need is there as well in various areas from MSME finance to alternatives to payday lending. Macroeconomic conditions such as low cost of capital are also accelerating this and empowering the rise of new entrants. Digital-first approach can be used to build better custom experiences, easier processes and automate away high-cost low-value aspects of traditional banking.

Who wins longer term — banks which are moving slower yet have all the customers or the startups?

The customers wins. Some startups will prove to become big players in their own right and at the very least will force banks to transform and reshape their services as well. Some will make this transition successfully and smoothly and others won’t. So we envision the ecosystem still being a mix of new and old organizations in the decades ahead, but both would have been reshaped by technology.

How do you win new business — what objections do you have to hurdle to bring in a new customer?

A lot of business we currently win is through referrals and word of mouth. Mambu occupies a unique position in the market of ‘core banking systems’ or ‘portfolio management systems’ (depending which perspective you look at it) as the first and strongest SaaS solution and one of the few viable alternatives to traditional core-banking systems and providers. Our biggest challenges in the sales cycle is if the company itself, at a relatively small size and young age, is able to manage so many projects and customers at once.

Where are you taking the business in 2016? What should we be on the look for?

We’ll be raising capital and expanding the team quite a bit from what we have so far. Mambu has always been a product-first and product-focused company but we will now start to build out our business development, sales and marketing teams. We’ll also be expanding our own footprint out of Europe to be able to better service customers in the Americas and Asia with regional office in 2016 and 2017.

I also expect us to be working more with larger established financial institutions in helping to bring new digital products to new markets while at the same time helping the startups they’ll be competing against. All of this should solidify Mambu as the best alternative to traditional core banking systems or the challenges of re-inventing this technology from scratch for every lending and banking business line.