This blog was co-authored by Amin Zaman and Michelle Palomera.
While brick and mortar may not be considered the future of banking, it is not yet in the rear-view mirror either. Until we reach a point where banks truly don’t maintain a branch footprint, firms of all sizes (except for the neo-banks) need a strategy where digital channels, contact center, and the branches work harmoniously rather than in parallel. Digital engagement is increasing rapidly across consumer banking and that change cuts across generations. 64% of customers use online banking at least weekly and eight in ten use a smartphone or laptop to complete banking activities. 55% of customers say they will do research online then buy in branch (Global Webindex 2020).
Remember when the ATM was introduced, and bank tellers were predicted to disappear in a matter of years? Yet, here we are, more than 50 years later, and teller job openings continue to be backfilled because many customers quite simply still visit branches (at least did prior to COVID-19). So instead of eliminating tellers, banks often used ATMs as a way to expand reach by plotting machines beyond their footprint. In many cases, this resulted in branch expansion near high usage ATMs, so ATMs inadvertently drove growth in both branches and tellers.
So why are we talking about tellers and ATMs? Because since its inception, digital banking has posed a similar threat to brick and mortar, yet many firms still maintain a sprawling branch network. To make up for the trickle of walk-in traffic, they then task bankers with calling customers once a quarter in the hope someone picks up the phone and decides they do in fact want to spend their Saturday morning in the branch for what will be a forty-five-minute sales pitch veiled as an “account review.”
If this sounds familiar, it’s because the banking model of today is largely built upon the conventional wisdom of yesterday. Firms are attempting to embed digital plays into the same tactics they’ve used for years, whereas they truthfully need to rethink the playbook because the game itself has been changing. COVID-19 has certainly accelerated that change and is undoubtedly forcing banks to turn many of their temporary branch closures into permanent ones. This puts firms in precarious positions, especially the ones that rely heavily upon their retail network. To make sure they don’t fall behind, banks need their digital capabilities to finally catch up to the technology that’s available. What was once on a bank’s five-year digital roadmap should now be part of its 2021 book of work.
While none of this is a shock to anyone, banks are alarmingly unprepared. For years, digital and omni-channel have been buzzwords used by bank leadership teams to show that they’re thinking “ahead.” The reality, however, is that it often amounts to little more than a mobile app and incremental improvements planned around quarterly technology releases. Additionally, banks usually have a dedicated team responsible for developing and executing the digital strategy. While that sounds great in theory because it centralizes ownership to one group, it also pits the digital team against all others in the organization to compete for resources and leadership attention.
So, what’s the answer? Find harmony amongst the customer facing channels. Here are four steps on how to achieve this:
1. Stop viewing digital as a strategy, and start treating it as a core part of how you do business.
The branch network, contact center, online banking, and mobile are all channels to meet your customer’s needs. Don’t treat them as parallel entities that require prioritization over one another. Digital should support all channels and be the glue that ties them all together. Reorganize execution around journeys vs. products and establish cross-functional teams to own them. Tie in performance reviews and variable comp to ensure success and shared goals. Establish common ways of defining problems and digitization outcomes, as well as how results are measured. Test, learn, and evolve to hone the best model and balance.
2. Reduce the branch footprint and reinvest that savings back into your business.
Typically, branch rationalization efforts are all about expense save – that approach doesn’t cut it anymore, and it does nothing to help your customers. Keeping your customers safe isn’t wearing masks, offering hand sanitizer, and placing social distance markers in your branch. What would keep them safe is enabling them to conduct all of their business remotely. The money saved from branch rationalization should be reinvested back into efforts that will help improve omni-channel capabilities. Don’t forget to re-evaluate policies that often create CX friction. Now more than ever, consumers expect to be able to do more from home… if you don’t let them, they’ll find the bank that will. No retail bank, digital, or AML executive can look a customer in the eye and say, “the check you want to deposit on your phone is too large, so please come to the branch to risk your life and deposit it in person."
Also, be careful that you don’t just close giant waves of branches in a hurry though. Doing so will panic your customers and employees. Large balances will attrite, and talented employees will jump ship thinking the drastic actions are signals for lay-offs. Determining which branches to close and when is a thoughtful, analytic exercise. Communication for these closures is all about positioning both internally and externally. Don’t make it a legal exercise, make it a marketing effort. And better yet if you can demonstrate the how closures will allow you to redirect funding to better, more client friendly technology (spoiler alert for number four below).
3. Embrace branch based remote servicing.
Why is it that customers can do more when they reach out to the contact center, than if they call their local branch? There are dozens of reasons for it (policies and procedures, conservative L&C, limited technology, and so on), but these should all be updated for today’s world.
The analytic exercise from point two above should include a thorough review of customer channel preferences and banker performance. Use this data to develop servicing strategies that actually make sense for the customer based on how they like to bank andupdate your variable compensation practices for customer facing staff so that you’re not pushing widgets.
For the customers that have shown a propensity to using the branch, video chatting with a banker at a local branch (one that will of course remain open) could curb some balance attrition. Use that time for the banker to empathize with the customer for the closures, but also to demonstrate new capabilities designed to make their banking more convenient such as video appointments, document collaboration, e-signature, text, email, and phone servicing. Do this right, and you may even win some outside balances.
4. Reinvest the savings from your footprint reduction back into tech, ops, and partnerships.
Update your back-end technology to bring it to the current decade. This will reduce risk and costs and enable better plug and play with more channels, customers and partners to drive more revenue. We’ve recently seen major regulatory consequences for banks failing to keep technology up to date – don’t be next.
Find greater savings in your operations by automating the rote processes that require manual handholding. Leverage industry utilities that can take some of the cost burden out.
If the customer facing capabilities mentioned in point three aren’t available at your firm, you’re behind. Launch tools that allow customers to do most things from home. Synchronize these with your CRM tools to ensure your branch and contact center teams can help service hiccups the customer encountered minutes ago. This isn’t as daunting as it sounds because quite frankly, you don’t need to do it all yourself. There are scores of tech firms (both large and small) that are eager to get into banking, but don’t have the expertise. Let them provide you with the technology you need, while you provide them with the banking know-how they need. The banks that are already doing this are ahead of the curve.
Firms everywhere should be re-evaluating their digital roadmaps, and re-prioritizing based on both their existing customers as well as their key target segments. The typical branch rationalization playbook is a bank-centric one. This time around, in an environment where consumers need comfort and reassurance, show them the steps you’re taking to make things safer and easier for them. Not all segments will want to bank remotely or have the capability to do so. That’s ok. Building your business around the customer experiences will help you get back to business, but not as usual.