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Digital Technology and Customers Drive Branch Transformation

Why are so many banks talking about and trailing alternative approaches to traditional high-street banking? Although economics plays a role, the primary driver appears to be customers and their increasing expectations of a digitally enabled branch.

Ernst & Young recently released the key findings of its third annual Global Consumer Banking Survey in a report titled Winning through customer experience. Central to these findings was the fact that banks are under mounting pressure to transition from a siloed, multichannel approach to an omnichannel model in order to cope with a fundamental shift in consumer banking habits. This shift has seen our preference for predominantly in-branch interaction give way to a greater blend of in-branch and remote channels, such as mobile and internet banking. Furthermore, these interactions are increasingly split between self-service and assisted transactions.

In response to this, financial institutions are incorporating newer self-service technology in their branch locations, as well as promoting open-concept formats. For example, Metro Bank,  one of the UK’s newer challenger banks, is focused on delivering customer convenience through its ‘stores’ (how they refer to their branches) that are open until 8 p.m. on weekdays, offer on-site coin-counting and sorting machines, and even provide water bowls for dog owners. At each of the stores’ desks, rather than desktop computers, there are tablets which can be used to process and open new accounts.

Virgin Money, on the other hand, is offering two different kinds of locations: Virgin Money Stores, which have replaced and transformed the entire network of Northern Rock branches as part of its “fresh approach to high street banking,” and unique new Virgin Money Lounges. Both offer free services such as Wi-Fi and refreshments, as well as a comfortable location to relax in the community, hold meetings and more. However, what makes the Money Lounges unique is that they don’t contain sales counters and no attempt is made to sell banking services to customers using them; they are simply designed to complement the nearby retail branches. The approach is clearly working, with Jayne-Anne Gadhia, chief executive at Virgin Money, reporting to The Financial Times that stores (branches) located near one of the Money Lounges have recorded a 200 percent uplift in sales.

The UK’s more traditional big banks have also been responding to customer expectations around technology. Lloyds Bank recently announced its plans to move toward a ‘digital’ high-street bank. Its vision includes branches where tellers walk the floor to interact with customers rather than being separated by large glass partitions. Additionally, it plans to install more self-service tills and video conferencing facilities in some locations.

Capgemini Consulting underscores the importance of these changes in the report, The Future of Bank Branches: Coordinating Physical with Digital. It believes that the banking industry is at a similar inflection point to the retail industry approximately ten years ago and that “banks can learn from the experience of retailers that have transformed their front-end and back-end operations with digital tools, thus blurring the online and offline divide.”

Financial organisations are under pressure to deliver enhanced customer experience from a new generation of web and mobile-savvy customers who are more willing than ever to explore alternate financial services providers. Although it won’t be an easy or inexpensive transition, banks who want to succeed in today’s environment of increasing customer expectations and use of technology, simply must adapt. Customers still seek the convenience of a physical branch (or store) for some types of transactions, but it will be important for financial institutions to provide more advanced self-service technology and deliver a seamless customer experience, regardless of location (offline or online).

If they don’t, their customers will switch to a bank that can.



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