Is your branch channel ready for Banking 4.0?
Fewer—and smaller—bank branches. A bigger focus on financial advice. Customer-centric service.
These are just a few predictions for the banking industry and the role of bank branches in a post-pandemic world. And they come from Jean-Pierre Lacroix, president of Toronto-based design firm Shikatani Lacroix Design.
BAI recently spoke to Lacroix to get his take on the impacts of the pandemic and the evolution of banking more broadly. Responses have been edited for brevity.
BAI: Prior to the pandemic, how were banks designing or redesigning their branches?
JP Lacroix: Banks were right-sizing their branches. A lot of branches were built in the ’80s and ’90s and were 7,000 to 10,000 square feet, which obviously doesn’t represent how consumers today shop for financial products. Banks have been downsizing branches to around 3,500 square feet. They’ve also been relocating their branches because populations have shifted to urban centers, and most branches were concentrated in high-density suburbs.
The other focus has been on integrating technology, providing consumers with a seamless banking experience and the ability to bank wherever they want. Banks are now going paperless—moving away from having consumers fill out forms for both onboarding and conventional savings and checking transactions.
How do these changes fit into the longer history of transformation within the industry?
There are four major phases in the banking industry, including one that is starting to occur now.
Banking 1.0 was building trust with consumers as they transacted at city-centric or regional banks. This was at the turn of the 20th century.
Banking 2.0, from the 1950s through the 1980s, saw established banks providing convenience through rapidly growing branch networks. Banks wanted to get closer to the customer.
Banking 3.0 saw the emergence of digital technology. Banks are looking to tech to lower the cost of low-value transactions so they can focus on higher value, advice-centered transactions—things like loans, mortgages and wealth management.
We’re heading toward Banking 4.0, which is moving to a truly customer-centric approach. Banking 4.0 is all about curated services that go beyond banking, and this is where banks are struggling. Banks have trouble differentiating their products and services because they’re so heavily regulated. It’s not just about selling financial products; it’s about offering financial advice and tools.
What have banks learned about consumer behavior during the pandemic that they didn’t know beforehand?
They realize that relationships matter and the human touch to banking remains crucial. They see the value in the branch network to build relationships with customers and to get deeper into the lives of customers and their needs.
Close to 63 percent of consumers in North America have a high degree of financial anxiety. That’s enormous. Take the savings rate in North America; it’s through the roof right now. People are saving for a rainy day because of high degree of anxiety about the future.
How will the pandemic permanently alter bank branches going forward?
Appointment-setting banking is here to stay. It’s made it so much easier for consumers to go to the bank. They don’t have to wait in line. They can identify the purpose of their visit, so the branch can advise ahead of time if they need to bring certain documents or information with them—and that eliminates a key banking pain point.
Touchless technology is going to continue to grow. Biometric, facial recognition PIN security is coming in a big way. Customers don’t have to worry about a PIN pad; their face is their card. It eliminates many friction points: forgetting a card at home, not wanting to touch a PIN pad, or worrying that somebody might steal a PIN.
The days of teller lines are coming to an end. Increasingly, bank branches have “advisory pods” for better engagement with the customers. It allows those customers who go to the branch with an appointment to have a superior advisory relationship with their banker.
You are going to see banks spend much more effort on financial education, perhaps through financial educational centers similar to Royal Bank of Canada, which built branches that are strictly for financial education. It’s shifting the perception that banks don’t provide financial advice and overcoming deficiency in the marketplace by going beyond the expected.
Amy George is a contributing writer for BAI.
Get more insights on the future of branches in the BAI Executive Report “What’s in store for bank branches?”