I went to my local bank branch last Saturday. The teller windows were shuttered, but the branch was open for business.
The future of banking has arrived in my neighborhood, and brought with it a whole new way to bank.
A New Way to Bank
A dramatic shift is underway in the banking industry. Banks are rethinking how they provide services to their everyday customers, which could result in the eventual demise of traditional branches and tellers, and find us banking from home, on the road or at the beach.
Banks are closing branches, shrinking branch footprints, “digitizing” branches, and trying new branch formats to match changing customer behaviors. The bank branch model in the US, which peaked at roughly 95,000 branches, is down to 86,000 branches and falling.
In Asia, online and mobile banking have leapfrogged the creation of brick-and-mortar branches in many countries. And in a number of European countries, more than half of the traditional bank branches have already disappeared.
Even the long-held belief in the importance of branches to a bank’s brand is changing.
Building the Branch of the Future makes the case that the notion of branches as brand “billboards” is being reimagined. What happens if a location is deemed important for the brand, but has little demand for advisory services? Automate! “Many large banks in highly visible locations in New York City, Chicago and other large metropolitan areas have replaced entire 'billboard' branches with clusters of ATMs.”
A New Banking Workforce
Like most other industries, banking is changing the face of its workforce. In particular, banks are looking to shift their employee ratios as they reconfigure their branches. One large bank has already flipped its traditional legacy location ratio at its new compact branch centers. The bank has gone from 60 percent transactional staff, 40 percent advice staff to 60 percent of the staff providing financial advice.
What if a customer still wants to speak to a banker for basic transactions? Well you can, but you may well be talking to a person in cyberspace, or even a human-like avatar.
While branch tellers might be an endangered species, financial advisors — either in-person or remotely — continue to associate with the branch, and new knowledge worker roles are emerging at branches, including “digital ambassadors.” During my latest experience at my local bank branch, a friendly digital ambassador, who used to be my teller, came over to show me how to use the new ATM self-service station and my mobile app.
The Rise of the Machines
Cash dispensing ATMs have been a familiar sight at bank branches and other retail locations for some time now. Now next-gen branch technology is taking hold globally in the form of advanced ATM and multi-function self-service terminals.
Most large US banks have been rolling out the new technology, sometimes known as eATM, that perform more services akin to tellers. Interestingly, one of the major providers of this technology is not a FinTech newbie, but rather Diebold, a US manufacturing company that was founded in the 1800s. eATM functions include deposits, account balance checks and allowing customers to withdraw different dollar denominations.
European ATMs offer advanced features as well, routinely allowing users to pay utility bills, and chip-and-PIN credit cards.
A Citibank rollout in Asia of next-generation ATM technology, called Citibank Express, includes an online banking connection, video conferencing and biometric identity authentication. A customer can start online transactions, such as applying for a loan or obtaining a cashier’s check, and complete them at the ATM, and vice versa.
A Better Customer Experience
One thing is certain: Our expectations for banking have changed forever. FinTech digital innovators are jumping on those changed expectations to present a significant threat to the traditional business models of retail banks. And banks in turn are looking for ways to give customers a better experience — one that’s faster, cheaper, more convenient and enabled by tech … and ultimately one that provides choice.
While branches are shrinking in size, technology and staff are being used at brick-and-mortar locations to reduce reliance on service staff over time. A new type of branch with different centers or “experience zones," is a way for banks to continue providing services without the tellers.
Avatars perform transactions such as balance transfers, deposits and withdrawals. Should customers get frustrated with the avatar, software can detect a problem and switch the customer over to a real person.
Bank of America is rolling out a "digital bar" — think Apple's Genius Bar, but for bank customers — at more than 1,000 branches over the next few years, and at locations that will soon include New York.
In Asia, basic transactions and sales of simple products are increasingly migrating to digital channels. Branches more often serve as showrooms for complex product sales and as venues for expert advice.
FRANK by OCBC branches in Singapore could pass for hip clothing stores. Go to its web site and you will see the invitation to “Visit us at any of our 5 fabulous stores. Our super friendly FRANK Ambassadors are ready to help!” Clearly FRANK targets young consumers. It offers edgy images on debit cards and a simple savings account. What you don’t find at FRANK are tellers or cash.
Brazil’s Banco Bradesco Next branch in São Paulo includes state-of-the-art banking technology including biometrics, digital avatars, large, wall-mounted touchscreen displays and interactive tables, and in-store touchscreens that customers can interact with via their smartphone's e-banking app. And Bradesco’s online Internet Banking site offers “more than 690 products and services without you leaving home.”
The Branch is Dead, Long Live the Branch
A major sea change is in progress.
Customer traffic in bank branches has fallen dramatically.
According to The Unbanked Generation, 94 percent of consumers under 35-years-old bank online. Overall, 700 million global consumers have begun banking on their phone over just the past five years. Traditional branches have simply become too costly to support the declining “non-digital” customer base, and many no longer generate enough new business to pay their way.
No wonder then that the banks are taking steps to push more customers onto digital products: creating Digital Ambassadors and automated compact mini-branches, and experimenting with new kinds of branches that range from Starbucks-like coffee houses to Apple-like genius bars.
Will all this reconfiguring of retail branches be a fool’s errand? As Jay Sidhu, chairman and CEO of Customers Bancorp, owner of the BankMobile app, put it in a recent CNBC article:
"Putting screens in branches ... Why, when we all have screens in our pockets?"
Our smartphones may yet become the bank branch of the future, but keep in mind that a recent CEB survey found that while 40 percent of customers prefer to go online for most banking activities, they are still reluctant to open accounts that way.
So say goodbye to your favorite teller, but don’t bury the neighborhood branch just yet.
Title image Chris Lawton