By Sudeepto Mukherjee, Senior Vice President, Financial Services Lead EMEA & APAC Publicis Sapient
Even before the COVID-19 crisis, the rising popularity of mobile banking coupled with the strained finances of banks, was putting the viability of bank branches in question. Between 2012 and 2019, the total number of bank and building society branches in the UK had fallen by ~22%.
However, in spite of this shift branches have continued to play an important role for both consumers and banks themselves. Research has shown that a majority of consumers still prefer branches for more complex financial needs. Research from data specialists CACI has found that surprisingly, the decline of branch visitors has been modest, equating to just 1-1.5% per year, with digital channels supplementing the customer experience rather than replacing it. For banks, branches play an equally important role in brand engagement, ability to offer differentiated services (e.g. premier offerings) and providing essential everyday banking needs for consumers and institutions – all of which are vital for creating loyalty and acquiring new customers. A recent study by Move Your Money showed that branch closures dampen SME lending growth by 63% on average in postcodes that lose a bank branch demonstrating the importance of branches in meeting economic needs.
So, what will the impact of COVID-19 be on the role of branches? Can banks redefine the operating model of branches without jeopardising their reputation with customers or damaging the overall economic recovery that is so desperately needed?
The pandemic has accelerated digital adoption, condensing two years’ worth of digital transformation into a couple of months. Forced to transact digitally for a majority of their everyday needs, more and more consumers/institutions will now be open to embracing a new model where branches are no longer the primary place for servicing their needs. Given the high cost of maintaining a physical network of branches, this creates a unique opportunity for Banks to leverage this shift in consumer preference to reduce branch numbers further and create a new service model.
So what role should branches play in this new model and how can banks make this important transition?
Customer First Approach
Banks need to take a customer centric lens to consider how a reduced branch network can still meet the needs of their customers and shareholders while increasing efficiency.
Branches can still be a powerful channel for creating brand engagement and driving sales. However, the role of branches should shift to focus on fewer high value services like giving complex advice or helping acquire new customers by demonstrating key products/differentiators. Other cash transactions should be automated as much as possible with next gen ATMs or moved to digital channels. We’ve seen examples of this in other sectors like Apple who have used a small number of their flagship retail stores to amplify brand and increase customer loyalty.
However, this needs to be complemented by other strategies to ensure that consumer expectations and service standards are maintained. These should include:
- Revamping call centres and creating innovative ways to provide services outside branches: Call centres need to be scaled up to provide more personal and complex services. This requires upskilling of staff and using the latest technologies to ensure that the right data/tools are used to meet user queries quickly. Banks also need to look at innovative ways to provide services like opening more self service centres where video conferencing or interactive teller machines can assist customers without human contact and introducing secure delivery services to enable the elderly and more vulnerable to do banking at home.
- Creating a strong digital infrastructure to enable an omni-channel service: Banks need to provide more and more services (like account opening, loan/mortgage applications) online and ensure that there is a consistent customer experience across channels. This will make customers more comfortable using a broader ecosystem rather than their local branch.
- Bringing customers along on this journey: All this will work only if there is also a strong focus on educating customers on how to use alternative channels and ensuring that they can access relevant services securely and with ease.
Making this transition will not be easy. Constrained finances and a higher compliance burden, have resulted in a large technology debt and complex operating models in most banks. Banks have to take a more ambitious approach to “jump” to this new model. Digital leaders like Amazon and Netflix have shown how a shift from physical stores to a more digital centric ecosystem can not only be more efficient but also create value for consumers.
Now is the time for banks to seize this opportunity to redefine the role of branches and create a new service model that is future-proof, allowing it to thrive in the new normal that we all find ourselves living in.