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What links banking apps, margarine, and WWII bombers?

One of the first things taught in the theory of statistics is that correlation does not mean causation. Falls and rises in a couple of trends may match up, but that doesn’t necessarily mean that one causes the other or that they are linked in any way.

You can see this in the work of statistics researcher Tyler Vigen, who has found that data can show a link between divorce rates and margarine consumption, or the age of Miss America and number of people murdered using steam.

Clearly there’s no link there – but what about the recent report from Bain & Company, which suggests that consumers that use digital channels to bank are 40% less likely to switch than those who tend to use the bank branch?

The report’s author has been quoted as saying that 60-70% of branch visits in a typical bank are either bad or avoidable: “Most of the time, a branch visit results in an inferior customer experience and comes at a higher cost for the bank. Clearly, the branch as currently configured is headed for extinction.”

It’s clear, then – banks need to move as many of their interactions to digital as quickly as they can. The branch is outdated and banks should embrace the move by challengers such as Atom Bank – a purely digital offering is obviously what customers’ really want.

But what if this conclusion is false? What if branches are still important?

During the Second World War, statistician Abraham Wald was asked to help the British Air Force decide where to add extra armoured protection to their bombers. He looked at where anti-aircraft guns had hit the bombers, requiring repair. And then he recommended extra protection where he found no damage.

This seems counterintuitive. But his reasoning was sound – no bombers were damaged in these places because those that were didn’t make it back to base.

Those claiming that the branch is dead and digital is the answer need to think a bit more like Abraham Wald. For decades, banks interacted with their customers through the local bank branch – have they really become so bad at what was once the core part of their business? Like the bullet holes, perhaps branches are a misnomer?

It’s important to consider why so many branch visits are so “bad”, and why those who use digital channels are more loyal. It is not that branches are suddenly awful at customer service, but for most customers it’s the channel of last resort. When a customer cannot do something on their laptop or by mobile, and the call centre cannot help, then they will sigh and trudge to the nearest branch. This scenario is never going to result in a satisfied customer.

The problem is that customers must visit the branch because the online and mobile user experience doesn’t meet their needs. That’s to say, there is nothing wrong with the branch in and of itself.

Take Metro Bank in the UK. Chairman and Founder Vernon Hill’s conviction that the U.S. Commerce Bank model can work in the UK has been supported by research. According to a survey by Deloitte, UK retail depositors place a high value on branches and service levels when choosing where to place their current account or savings.

The answer is not simply shutting branches – they are still important to the target audience.

Instead, banks need to work at creating an online service that means customers do not have to contact the branch if they do not want to. A branch visit does not result in an inferior customer experience – it is in fact often caused by an inferior customer experience. Banks need to identify where this bad experience in their digital service is happening, whether it’s down to poor navigation, a lack of features, or cumbersome authentication.

It is in banks’ interest to build a truly digital bank. Not one that simply replaces paper processes with digital ones. To achieve this, more and more functionality must be reinvented, rather than simply pass ported, to online and mobile. Products and services have varying degrees of risk associated to them, as do customers. To make the digital experience compelling, and ensure that branches don’t become complaint centres, access must be proportional, and, ideally, ask the customer to do as little as possible. This dynamic is essential if customers are to embrace digital.

If banks simply close branches without making sure a good digital experience is in place, they will make customers more likely to switch, not less. 



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