The branch bank network’s role and relevance has been diminished by the COVID-19 pandemic, but it still matters, says Jean-Pierre Lacroix, a visionary brand consultant and president of SLD, a Toronto-based strategic design agency.
“The key differentiating factor of retail banking is the branch,” Lacroix writes in his recent book “Think: The Future of Retail Banking.” Although digital channels can process transactions at lightning speed, the branch is where banks build emotional connections with customers and address their aspirational needs. Frontline staff provide the best opportunity to personally and effectively deliver key marketing messages.
Yet only 3 percent of customers view the branch as their primary source of financial information, Lacroix says. Things will have to change if banks want to continue using the branch as a significant channel to connect with customers and build their brands.
Speaking via Zoom from his Toronto office, Lacroix shared his unique vision of the future for branch banking.
BAI: You note that the key differentiating factor of retail banking is the oft-maligned branch. What do you mean by that?
Lacroix: Banks are spending heavily on technology: AI, digital, online, mobile. These are great tools, and they have come in very handy during the pandemic. But the focus on digital transformation has come at a cost of not paying a lot of attention to the role of the branch. There’s only so many strategic imperatives a bank can do at once.
Banks need to rethink the branch’s role because it remains the key driver for growth, as well as for connecting with consumers and building relationships. It’s important that banks balance and retool all channels as consumers shift to online, which is accelerated by COVID-19.
You’ve said banks that emotionally connect with their customers generate six times greater lifetime revenue than banks whose customers are merely “highly satisfied.” This emotional connection is probably something you can’t orchestrate digitally. Must it be done on a human scale?
Absolutely. That’s the new mantra, which is humanizing the banking customer experience. There isn’t a lot of margin for differentiation in a heavily regulated industry like banking. Banks can get an edge with a new product offering, but competitors can catch up very quickly.
That’s why the humanistic aspect of banking is so important. But it requires a lot of discipline. It boils down to every single customer-facing employee living that brand promise every day. That’s a lot harder to execute than creating a technology platform with one control point and pumping it out to the entire network.
You have described different levels of bank customer experience, with CX 4.0 being the most advanced and characterized by what you call “financial ecosystems.” Can you share an example?
An ecosystem provides customers curated and customized advice. It makes the branch the center of a community of like-minded customers and understands their pain points to provide them a total solution. Branches are built around the needs of customer segments, rather than around a set of standard banking products and services. Segments could include young families, startups or wealth management. Branch design must recognize the needs of the distinct customer segments.
An example of an ecosystem that holds great promise for branch banking is the small-business segment, yet very few banks pay attention to this segment. Small business tends to be the poor cousin of the consumer banking segment. But they’re the segment most loyal to the branch network.
So how would a branch bank serve those within the small business segment to keep that loyalty?
This is about looking at their needs, their anxieties. How does a bank enable them to succeed in the marketplace? What are the things they’re missing? What is it that no one is delivering to them? And what if somebody did? Would they have a competitive advantage?
Banks offer loans, lines of credit and other products and services. But that does not solve all of a small business’s needs because that customer is focused on growth. Banks have partnered with payroll companies, so why not join with HR organizations to help small businesses find and hire the right talent? Or help a small business determine the best IT infrastructure?
You have said that only 3 percent of customers regard their branch as their primary source of financial information. Why do you think that is?
When is the last time your bank invited you to a seminar on how to save on banking costs, or how to start a small business, or how to avoid the pitfalls of hiring and firing, or how to find the best marketing platform? Banks have so much expertise, and they need to start with the fundamentals of sharing knowledge. They have, for example, suppliers and partners with extensive knowledge of social marketing, advertising and web development.
Banking’s mindset must move from transactional financial services to content and knowledge management. In the past, people didn’t have time to leave their office to attend a seminar at the bank, but the pandemic has taught us to use a platform like Zoom. It is the future of education.
The pandemic, to a certain degree, has been a godsend in that it has accelerated a lot of changes banks were hoping to make. Now they need to look at the evolution of the branch and the ecosystem model. This can’t wait because, sooner or later, someone is going to fill that void, and it may not be a bank.
Speaking of the pandemic, how do you think banks should best create a greater sense of safety and security with their branch design?
Safe distancing is the No. 1 consideration. Controlling consumers’ access through appointment-setting is especially important. If you’re coming in via appointment, the role of the waiting area is gone. You need greater separation at the universal banker stations to create more distance between customers, as well as greater separation between the banker and the customer.
There is technology now that won’t let you enter the bank unless you have a mask. The role of the meeting room will also change as more staff, such as financial advisors, may be working from home. The meeting rooms will move from being physically staffed to enabling videoconferencing.
Edmund Lawler has worked as an editor and reporter at Crain Communications, Santa Barbara News-Press, Indianapolis News and Associated Press. He is a regular BAI Banking Strategies contributing writer who lives in New Buffalo, Michigan.
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