Future of bank branches is bright, if banks invest in technology

25 September 2017 Consultancy.uk 6 min. read

A new report examining the future of the bank branches has predicted that global banks should look towards digitisation to enhance the customer experience. According to the study, 88% of the industry believe that physical branches add value, and have a future. However, over half are already planning to change their model to integrate digital transformation into those locations.

Digital technologies are being employed across a range of consumer interfaces, as market leaders in sectors from retail to food and drink attempt to leverage the cost-cutting potential of automation. The financial world is also preparing to adapt its business models in this manner, as banks look to add new value for their consumers via multi-channel experiences.

Global financial services consulting firm Synechron has produced The World Branch Report 2017 in partnership with the European Financial Management Association (EFMA), with the findings showing that C-suite banking executives believe the future of the bank branch to be a bright one, given the proper investment into digital transformation.

Bank branches add value to my customers

The report, which is subtitled ‘Digital Branch Transformation – The Evolution of Branch Banking’, surveyed decision-making bankers from across the globe in order to examine the role which bank branches play in the current digital era and in a time of mobile-first thinking, and gather insight into where branch banking is trending.

Synechron, who launched a number of financial innovation labs across America earlier this year, are well known for their insight into digital transformation in the financial sector. The key findings of their research were that while 63% of C-suite banking executives are already planning to change their branch model to incorporate new technology, enhancing customer experience, and lowering costs, 88% believe physical branches do have a future, as they still add value to the consumer.

Over recent years, bank branches have been in steady decline with significant closures across the US, Europe and the UK. While this looks set to continue in some capacity, as nearly four in ten (39%) respondents here said they plan to decrease their branch networks, investing in change to the current model instead, Synechron’s analysis reveals that nearly a quarter (24%) of banks still intend to increase their branch network, while investing in changing the model.

Technology to Support People

Predominantly, Retail and Consumer Bankers are presently looking towards technology to improve the in-branch customer experience and evolve the role of their staff as opposed to motives around reducing cost and reducing FTEs. The top focus area for branch transformation as identified by those surveyed is to improve customer service/engagement, which 42% identified as a priority, followed closely by the evolution of the role of branch staff (40% ). This, however, is followed closely by introducing digital interactive experiences (38%) and self-service automated technologies (36%).

Physical presence remains important

The bank of the future will continue to have a physical presence, as 97% of bankers agree that only people can bring an emotional connection to the bank, and their role will be focused on bringing the relationship connection with the bank. Above all, no respondents of the survey suggested that they would wipe out a physical presence of staff. 0% of those surveyed said they foresaw a scenario with no people in branches. However, while the traditional branch model was historically centred around transactions, the branch of the future will evolve to serve as an advisory service hub, complimented by digital experiences and employing bankers with specialised skills that combine sales and service responsibilities.

Best Uses for Video Chat in the Bank Branch

Most respondents placed a strategic focus on using the branch as an education channel. Despite this, discussing certain kinds of innovation produced mixed results, particularly when the option of video chat to direct customers to quick advice was brought up. The most commonly cited case for video chat within branches was specialist advisory services, with 25% of respondents selecting it as the best use for video conferencing. However, contrasting with this enthusiasm, 23% of respondents said they had no plans to use video chat in branches at all. In addition, 15% suggested that video chat could be used to help sell products and services (in a way similar to selling specialist advisory services). These mixed results show a number of bankers remain unconvinced by the business case for video chat in branch. This is potentially interlinked with the technology’s remaining logistical problems, including band-width use and audio-visual capacities. However, this does not preclude the idea that alternative forms of chat such as text based communications might be of similar help.

Bankers’ reluctance to engage with video tech beyond sales may also be reflective of a broader attitude within the sector. When asked what they believed would be the best use of people physically stationed within branches, 70% of executives polled listed sales as a priority. This was second only to specialist advisory services at 74%, which was also the top priority for the use of video chat. While this suggests that both human and digital resources are being targeted mostly towards customer journey then, the banking sector retains a large interest in sales. This attitude is something that – amid increasing market competition due to newcomers leveraging technology – could cost valuable market share, as consumers shop around for better services, and with simple brand loyalty no longer enough to guarantee repeat business.

Best Roles for People in the Branch

Responding to the results of the survey, David Horton, Head of Innovation at Synechron, said, Through digitisation, the bank branch can reinvent itself to improve the experience for the customer while maintaining the personal and emotional connection which many customers value so highly. The coming years will prove significant for retail banks as they look to evolve their value proposition, acquire new customers, and retain existing ones through a culmination of digital and physical services.

Vincent Bastid, EFMA Secretary General, meanwhile surmised, “We are at a digital crossroads within the banking industry, and while digital and emerging technologies are taking the lead, our survey with Synechron confirmed that banks still value the physical bank branch, and are looking for ways to merge the two experiences to gain the best outcomes for both banks and their customers. Prioritising digital is no longer a ‘nice to have’ addition to a bank, but is critical in shaping their future strategic bank initiatives and the future of customer experience in the branch.”