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A Look Ahead to U.S. Retail Banking in 2016

Top retail banking executives, at institutions both large and small, are expressing a mix of optimism and uncertainty as they look ahead to 2016.

Self-Service Revolution

Customers are migrating to electronic channels, making payroll reduction a necessity, but they still desire the same, or an improved, level of service.

Creating the Branch of the Future, Today
Banks can take several useful actions today to move toward their Branch of the Future without totally revamping their networks. by RAJA BOSE
Jan 10, 2014  |  2 Comments

Robust digital channel adoption and rapidly changing consumer behavior have made the branch as we know it today irrelevant to many of us. The problem (or rather opportunity) is that branches still account for the majority of all new banking relationships and accounts. Why? Because customers still want a personal relationship with their financial institution. Dismiss all those preconceived notions that Gen Y and Millennials have no use for the branch. It is absolutely true that younger generations have taken to online banking and mobile banking faster than other generations and that they see little value in going to the branch to transact. However, younger generations actually prefer to go to the branch more than older generations when it comes to starting a new relationship, opening a new account or solving a complex problem.

We’ve all seen pictures of ultra-modern branches (sorry…stores) with ceiling-to-floor digital walls, tablet-carrying staff and gourmet coffee as customers lounge on fancy Italian leather couches. While I commend these new designs, most of the banks and credit unions in the U.S. aren’t vying for a photo spread in Architectural Digest; they are trying to do the best with the branches they have.

The good news is that you can start to meaningfully transform your branches today without having to build a new (and expensive) showpiece office. Most of these changes should focus on making changes to the customer experience because ultimately that’s really what branch transformation is about:

Upgrade your branch staff. Right away. What does your branch have that your digital channels do not (other than cash)? People. Your people, the ones responsible for representing your brand to your consumers. Too many institutions have dedicated tellers to transact for customers and platform staff for everything else. As fewer customers come to the branch to simply transact, this division of labor no longer makes sense. Unfortunately, previous attempts to cross-train tellers to be more sales-focused have produced mixed results at best. Invest in the right people, give them the right customer experience goals and sales goals and the tools they need and you will see a change.

Create your choreography. Once you have your new staff, you have to tell them what to do and how. This is where you can create the unique branch experience that brings customers back. Think of the little things that employees do at places like Nordstrom, Ritz-Carlton or Trader Joe’s that make you want to come back. What could you do in your branch to create that differentiating experience? Financial institutions have deployed branch “concierges” for some time. However, most of the time, these employees simply point customers where to go to get served. The more successful deployments have employees meet customers upon arrival and stay with them throughout their entire branch visit.

Change the environment. Assuming that making major changes to your branch layout is too costly, what else could you do to make your branch more inviting, comfortable and easy to navigate? Consider changes to furniture or lighting to make it more comfortable. Is there any place in your branch for consumers to privately sit and think through their finances? Consider reconfiguring so you have clearly distinguishable zones for certain functions, such as transactions, service, learning and advice.

Bring self-service inside the branch. Today, if customers decide to forgo your drive-thru ATMs or vestibule ATMs and come into your branch, you have no other option than to have a teller conduct their transactions for them. Consider deploying additional self-service devices to not only provide your customers with other options, but also to provide your employees with an opportunity to demonstrate how self-service works and the value that it can provide to your customers. I have seen several instances where deploying self-service in the branch not only drives additional transaction migration (reducing your cost-to-serve), but also improves the branches’ sales performance. This is also a great tool to properly on-board your customers.

Connect your digital channels with your branch. Historically, branches have been digital islands. There has been very little connectivity to other channels. Today’s consumers expect to start a transaction in one channel and pick it up in another seamlessly. If I can use my smartphone to check the wait time and place myself in line for an $11 haircut, shouldn’t I be able to do that for a $250,000 mortgage? Consumers have repeatedly shown that they prefer online and offline integration. What does that mean in your branch?

Don’t forget your small business customers. As retail consumers increasingly adopt digital channels, the mix of small business and commercial customers in the branch will increase. What are you doing to cater to these highly coveted and profitable customers? Are you providing them a dedicated space? A separate entrance? Are you assisting them in promoting their businesses? Many institutions are left with relatively large branches that no longer align to their transaction volumes or the brand image they wish to communicate. I’m sure many of these locations have a sizeable small business or commercial customer base. Why not create a “business center” for these valuable customers? Provide them with free Wi-Fi, coffee, a printer or a conference room. These actions may not drive sales immediately but surely will go a long way to improving their overall experience. And… you may have the space already.

Stop cross-selling. Build relationships instead. Let’s be honest: cross-selling in the branch is moderately effective at best. It is extremely difficult to reach a customer exactly when they are looking for a new product and happen to be in the branch. A more effective approach is to build a deep, lasting relationship with customers by asking about their financial needs and challenges while delivering an exceptional branch experience at the same time. I have visited an institution that has built an interactive, self-service branch that leverages ATMs inside the branch for most routine transactions. They also employ a handful of highly competent personal financial representatives – not tellers – and they deploy ATMs in the drive-through that are as technologically robust as the devices inside the branch. Yet, customers still come into the branch all the time. Why? Because they like and value the relationship they have developed with the financial representatives and look to them for financial advice when they need it. Would it surprise you to know that these “interactive” branches outperform this institution’s traditional branches by hundreds of percent?

All of this is not to suggest that institutions should not be considering more overarching changes to their overall branch networks – they likely should be. However, change of that magnitude takes time and patience. Starting with some easier-to-achieve and tangible changes will provide you great insights into what works (and what doesn’t) for your institution. It will also generate some real results that you can measure and share with decision makers within your organization. It will be those results coupled with the lessons learned that should give you the knowledge and confidence to continue your branch transformation journey.

Mr. Bose, a former banker and management consultant, is vice president, branch transformation & advisory services, for Canton, Ohio-based Diebold Inc. He is based in Charlotte, N.C. and can be reached at Raja.Bose@diebold.com.

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einar thor einarsson
1/14/2014 4:11 AM

Are bank branches capable of following the technology changes, or are bank branches becoming extinct and all customer interaction will be performed thru smart tablets and phones? When my son buys his first house 12 years from now, will he apply for the loan over his smartphone/tablet or will he use the local branch?

siddharth srinivasan
1/13/2014 2:32 PM

very good write up reinforcing the fundamentals of branch banking with context to the changes to be done for this decade. most banks in their journey for digital modernization tend to move towards depersonalization and in fact digital is more personalized than pure branch banking and relatively more complex to achieve relationship connect.