Branches gear up as pandemic winds down

Customers are returning to the branches as the pandemic fades away. But it won’t be the same as it ever was.

Customers—some who got their first taste of online banking when branches closed during the lockdown—want a combination of face-to-face and digital experiences that work hand in hand. Digital-first, but with a human touch.

Financial services organizations attuned to the new normal will readily accommodate their customers’ wishes by enhancing both the human and the digital channels.

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In our recent BAI Banking Outlook on digital acceleration, we asked 200 bankers which digital resources they plan to invest in their branches. The leading response was digital advocates, cited by 42 percent of financial services leaders. Appointing branches with digitally savvy staff makes complete sense when consumer sentiment is clearly leaning toward the best of both human and digital.

But digital advocates—in most cases regular staff with a digital touch or those who’ve received specialized training—won’t be working their way out of a job by sharing tips with customers on the latest electronic tools. Although 84 percent of the 600 consumers we surveyed in the same research project said they plan to maintain the same level of digital usage once in-person banking resumes, they still want the branch.

Their branch may be sporting a new look. Interactive teller machines, video ATMs and interactive digital welcome screens will enhance some branches in the post-pandemic era. Basic transactions will increasingly go to the digital channels; more complex matters like mortgages or resolving problems with an account will go to the branch.

But not necessarily. When we asked consumers why they visit a branch, the No. 1 response of every generation was to make a deposit or a withdrawal, and No. 2 was to cash a check. For Gen X and baby boomers, No. 3 was to work with a human; for Gen Z and millennials, No. 3 was to solve a problem with an account.

Banks and credit unions not only need to decide how to strategically staff and digitally equip their branches, but where to place them in their communities.  The pandemic demonstrated that, thanks to video communications, people no longer have to live where they work. People are on the move, and financial services organizations need to determine where customers are heading to seek the services of a branch.

According to BAI research, consumers are less inclined to commit all their accounts and activities to a single institution, preferring instead a hybrid approach. For example, 31 percent of millennials said they will keep a checking account at a bank to have access to branches, but they will consider keeping some accounts at a direct bank for better rates. That’s up from 21 percent in the 2020 BAI survey.

The preferences of the three other generations also reflected the trend toward hybrid banking. Banking with a traditional institution with branches remained the most popular model for all generations—ranging in 2021 from 44 percent of Gen Z to 64 percent of boomers.

Traditional organizations, while losing some ground to the hybrid model, are still considered better than the direct bank or fintech competition in key areas, according to BAI research. Nearly two-thirds of consumers said traditional banks offer the best safety and security, versus 26 percent for direct banks and 9 percent for fintechs. Fraud remains the greatest hindrance to digital adoption—according to ID Insight, fraud is 11 times higher online than in-person.

Fifty-five percent of consumers said traditional banks have the most helpful contact centers, which were put to the test during the height of the pandemic as branches closed. In many cases, customers called to ask how to use digital banking. Call center staff served as the front line of digital advocacy during the pandemic. More than 70 percent of banks and credit unions said their contact center staffs required additional training on digital products to handle calls during the pandemic.

By a wide margin, consumers said their primary financial services organization is the most trusted to handle their financial products and services. Fifty-four percent of consumers—up slightly from 52 percent in 2020—indicated their primary financial services organization was most trusted as compared to nontraditional players. PayPal ranked second at 12 percent, a sharp drop from 19 percent the year before that likely reflects a flight to the perceived safety of traditional banks amid pandemic-related uncertainties.

The pandemic has helped clarify banking’s future. The pent-up demand for in-person banking undermines the prophecy that financial services organizations need only invest in the digital channel while allowing human channels to atrophy. In essence, the pandemic is the crystal ball that foretells a robust omnichannel future that combines the best of human and digital services.

Karl Dahlgren is managing director of BAI.

Watch “The impact of digital acceleration,” a webinar that reviews the latest BAI Banking Outlook research.