By now it’s a fact of financial life, or perhaps even life immortal: Like a cat with nine lives, or mythical, money-green beast, bank branches simply won’t die. In fact, the most technologically nimble retail banks have embraced their branches more than ever, despite the long-held assumption that in-person banking was on the outs.
But if branches are to survive and thrive, how will they change to meet the needs of customers in the future? The assumption that financial institutions can simply graft on the latest high-tech wrinkle is too simplistic, especially given the assets and customer loyalty at stake. Nor, of course, is gazing into a crystal ball—though some forward-thinking institutions are fashioning portals to future. Far from the realm of the white paper or demographic survey, these “smart branches” operate with real customers in real time, collecting real-world feedback as to what works.
Take for example BMO Financial Group, which recently opened three experimental new branches in the Midwest. The Toronto-based banking company, which operates in the United States as BMO Harris Bank, opened its first true smart branch in Chicago’s Rogers Park neighborhood in March 2015, after testing concepts in Madison, Wisc. and elsewhere in Chicago. The smart branch features a two-way video service, where customers can talk to bankers at the contact center after basic branch hours, or meet with specialized bank product experts in a conference room. And that’s just the start. Customers can also withdraw “mobile cash” using a cell phone instead of a debit card; access roaming bank staffers who use wireless laptops and tablets to interact with customers; obtain issued debit and ATM cards; and use public Wi-Fi and digital displays.
BMO has opened similar smart branches in Chicago’s Pilsen neighborhood and the western suburb of Naperville. “With the evolution in customers’ banking behavior, new services and products must become available to customers in ways that suit their preferences,” says Fabio Fichera, senior manager for physical channel strategy and execution for BMO Financial Group. He adds that bank customers today “are looking for a more personalized experience coupled with the use of technology.”
Though traditional branches hold their own, it’s no secret branch traffic has declined with the rapid uptake of online and mobile banking. According to FMSI’s 2015 Teller Line Study, branch-based transactions have dropped more than 45 percent since 1992. But that downward slide seems to be leveling off, with teller transactions dipping only an average 1.9 percent total within the last five years. Despite the popular prognostication by Javelin Strategy & Research that eight out of 10 U.S. consumers will be bank by mobile device in four years, it’s far from a mobile-only world: Banks and thrifts still run more than 94,000 U.S. branches.
Recently embattled for questionable sales tactics, Wells Fargo & Co. is still seen as an early adopter and purveyor of high-tech banking options that include virtual reality. Now, it has piloted the “Digital Express” concept in its home base of San Francisco. It features tablets where customers can pre-book their branch visits or share and sign documents digitally to speed account-opening later on. In fact, Wells Fargo (with its $1.8 trillion in assets) still conducts more than 600 million teller transactions and 1.5 billion customer interactions yearly at its 6,000-plus branches. Though it had a digitally adept client base, three-quarters of Wells Fargo’s deposit customers see a branch banker or teller at least once every six months.
Jonathan Velline, a Wells Fargo executive vice president and head of ATM and store strategy, doesn’t disparage or underplay the role of the branch in this increasingly mobile and online-dependent world. “Our customers use all of our channels, and they appreciate the personal connection they share with our bankers,” he says.
As such, and at more of the bank’s branches, customers can begin their transaction at an ATM—but move to an employee in the branch, alerted on a wireless tablet to provide assistance in completing a transaction. “This innovative option allows us to deliver the best digital experience without compromising on personal service,” he adds.
But it’s not just the mega-banks with huge existing installed bases of branches that are seeking to find a new approach for their real-world channels. Known more for its specialty credit cards and its funny marketing campaigns than its physical footprint, Capital One Financial Corp. projects it will more than triple its spending – from $50 million in 2015 to more than $160 million in 2016 – on updating its 840 U.S. branches.
Similarly, smaller and mid-sized banks are also taking a more thoughtful tack when it comes to renovating their physical spaces. Wilmington, Del.-based WSFS Financial Corp. just last month opened the doors on its inventive new branch in West Goshen, Pa. Rather than follow the prevailing winds of simply shrinking this new outlet and installing video kiosks and tablets, executive vice president and chief retail banking officer Rick Wright says the new concept in focused on creating specialized spaces.
At the West Goshen branch, universal bankers—who can handle most tasks, rather than specializing—can sit with customers in a den-style “pod” to conduct transactions or discuss a service issue, while back office areas allow staff members to use a phone or computer in private.
For the $5.8 billion bank, this is also the first branch that has no teller queue.
But more importantly, it caters to new focus of branch-based communication. “The reason the branch is evolving is that people, even Millennials, are still coming in for advice and to resolve problems,” rather than to deposit checks or transfer funds, says Wright. Hence, “Flexibility is a big deal.” As such, Wright says the new branches do not contain safe deposit boxes or cash drawers (using cash recyclers instead).
As for where his bank’s cash goes, it’s a classic example of forward thinking meeting prudent spending. After all, the form and function of tomorrow’s bank branch remains in a constant state of flux unlike anything the industry has seen before.
Says Wright: “I don’t want to dump a lot of money into a set, permanent structure,” he notes, “since whatever we do, we’re probably going to be wrong three years from now.”
Karen Epper Hoffman is a contributor to BAI Banking Strategies and has written about banking and technology issues for nearly a quarter century.