November 16, 2012
As I’ve been talking to people around a particular interest area of mine – banking in the digital age – I’ve noticed an interesting cyclical progression. As digital technologies came to prominence in the 90’s, and banks looked for ways to cut costs and increase profits we saw a number of banks accelerate the trend that had been apparent in the decade or so prior and close down large numbers of branches.
The orthodox thinking at the time was that branches were outdated historical locations that would be better off removed and replaced through primarily digital channels. The thinking went that customers wanted to achieve their banking aims in the minimum possible time and that human and branch-based approaches were an impediment to this – humans introduced “drag” into the process that was best carved out.
It’s been fascinating then in the past decade or so as marketers and those responsible for delivering customer facing solutions have become much more mature in their outlook and have realized that a modus operandi that was purely focused on hyper-efficiency left significant amounts of value on the table – rather a relationship based approach was a far better way to look at meeting a customer’s banking needs.
In light of this, it was interesting to read a post from Forrester’s Auke Douwe Veenstra, and eBusiness and channel strategy analyst for the fire. Veenstra opined on what the future holds for bank branches – this was in light of the assertion from a head of retail banking at a major bank predicting that within five years his company would have no physical branches left.
Veenstra’s bottom line was that branches will not disappear, but that they will change – they will move from being transaction processing hubs to being more sales and advice driven. The drivers for this are obvious – banks are neither the most efficient location, nor the most appropriate place to handle transactions – these will continue to move to digital methodologies – as bank upgrade their core infrastructure to be able handle real-time transaction processing and more open architectures – the idea of bank tellers being involved in processing at remote locations will seem archaic. Add to this the fact that self-service and mobile banking is growing massively and we see both customer and bank centered reasons that transactional branch models will go the way of the dinosaurs.
What WILL remain however is the branch as a relationship hub. Veenstra gives two compelling reasons why this is the case:
You still have to visit them on occasion.In many countries, the pace of development of new legislation is not in sync with customer adoption of new technology. For example, to open a bank account in many countries, you are still legally obliged to show up in person to prove your identification, despite any online onboarding functionality that may exist.
You still want to visit them. This also varies according to country and cultural habits but, in general, face-to-face appointments still matter for specific “big-ticket” banking matters like mortgage advice or investment decisions. At Forrester we think branches will continue to play an important role in these services.
Veenstra went on to give the example of ANZ bank which is, in his words, “not only redesigning the branches , including videoconferencing equipment, but also making them more “digital” by equipping them with devices to handle contactless or cardless transactions and investing in next-generation ATMs”. I’m not convinced that this kind of “digital storefront” is the correct approach – it smart of lipstick on a pig, delivering solutions better off achieved through purely virtual means. I concede that banks need to enable multiple touchpoints – both virtual and physical, but simply putting in place a physical delivery channel for a digital banking experience doesn’t cut it in my view.
Rather I agree with the perspective of EMC consultant Rachel West who reported the thoughts that Virgin Group CEO Richard Branson articulated at the recent BAI retail delivery conference when he said that:
To be truly customer-focused and differentiate your bank, these branch offices will have to shed the cold and sterile techno-centric image and become a place that’s welcoming and reassuring. They will need to become a place where people want to come, spend time and enjoy a community atmosphere, a community that is secure and informative, guided on their very personal financial matters
A truly integrated banking experience – where transactional engines are delivered in their most efficient guise (generally digital) but relationships and an understanding of the customer and their needs are augmented by physical storefronts that are re-imagined as banking and financial services boutiques – is key here. Imagine banking not as a series of products or services, but rather as a platform (despite that being a very trite term). Imagine building that platform in an open way – one which allows the bank itself to deliver innovative virtual offerings, but also to wrap a boutique physical delivery channel around it. Imagine too opening up to let third parties (with physical or virtual presences – or even both) to build their own niche solutions on top of core banking data and transactional engines.
Banks have a unique opportunity here – they have existing bricks and mortar, they have a deep insight into customer behaviour and they have the resource to really drive an expensive change in their industry – all they need now is the vision, the appetite for self-disruption and a focus on innovation. Exciting times!