Don’t rush to write off the branch

The human-powered branch bank is not going away. Branches may reduce their footprints, they may reconfigure their designs, they may deploy a different mix of staff, they may offer a different portfolio of products and services, and there may be fewer of them. But they will also endure.

The challenge for financial services organization leaders is how to reimagine their branch networks. Analytically focused organizations continuously review and adjust their offerings. Branch networks must adopt that data-driven methodology if they expect to stay agile enough to maintain and build market share. The need for analytics is greater now than it ever has been. It must drive your organization’s strategic choices, and it must happen now. Otherwise, your organization will be left behind.

The data can be surprising, even counter-intuitive. In the 2021 BAI Banking Outlook research, for example, we asked four generations of customers in 2020 how they prefer their primary financial services organization to contact them about product and service information.

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Conventional wisdom suggests that baby boomers, who have traditionally relied heavily on their branch to conduct their banking, would prioritize that channel. However, as branches temporarily closed or reduced hours during the height of the pandemic, boomers adapted by turning to digital channels.

Of all generations, boomers had the longest runway when it came to embracing the digital channels. Social media was their No. 1 information channel; notification via mobile app was No. 2. So much for the notion that boomers are averse to messaging from social media and mobile channels. That is why analyzing the data—rather than relying on gut instincts or conventional wisdom—will take on critical importance for leaders when planning the future of a branch network.

As for Gen Z, millennials and Gen X, they ranked social media as their top choice for learning about their financial services provider’s product and services offerings. The branch was second for those three generations, higher than the boomers’ ranking of the branch. As the younger generations’ financial lives become more complex, they are more apt to turn to a human for advice, and this advice is often served up in the branch.

Each generation begins to emulate the behavior of the next-older generation as they advance in their life stages. For example, Gen Z and millennials might visit a branch for an explanation of a 5/1 adjustable-rate mortgage, or they might have a question about putting their money into equities versus a fixed-income fund. The focus at the branch is becoming more consultative than transactional.

When we asked millennials to project their channel usage over the next three years, 22 percent said the branch will be their preferred channel, only slightly behind online and mobile. By comparison, 23 percent of boomers said the branch will be their preferred channel. More than a third of boomers said online will be their top channel by 2023—the highest of any generation.

Across all generations, consumers said 20 percent of their banking will be in the branch in the next three years and 20 percent will be via mobile. They were surpassed only by online in anticipated usage. The projection of branch usage was up a bit from when we asked the same question in 2019, while mobile dropped seven percentage points. Rounding out the 2020 survey were ATMs (16 percent), drive-thrus (14 percent) and contact centers (8 percent).

Striking the right channel mix over the next three years will require financial services leaders to be extremely market sensitive. Branches will need to be modified at a faster pace than in the past and in accordance with what individual markets require.

Branches, according to our survey, are beginning to add more specialized roles. Forty-three percent have a personal banker/s; 38 percent are staffed with a universal banker/s; 37 percent have a commercial banker/s; and 26 percent have a small business specialist/s.

More than ever, leaders cannot rely on their branches to keep doing what they have always done. They will need to continue to evolve, and the data will provide the insights on how differently branches must be positioned, designed and staffed.

Karl Dahlgren is managing director of research at BAI.

Download “What’s in store for bank branches?” for more insights on the role branches will play in the future.