Bank branches key to fending off digital challengers - IDC

Bank branches key to fending off digital challengers - IDC

Digital evangelists predicting the demise of the bank branch could be in for a rude awakening, according to a new study from IDC Financial Insights which pitches the much-derided bricks and mortar outlet as the fulcrum of a healthy bank-to-customer relationship strategy.

With the rise of mobile and online banking, bank branches are evolving to play a new role in support of other channels while providing valuable face-to-face contact with customers, says the analyst house, noting that across Europe more branches are being refurbished than shut down.

Tellers behind glass barriers are being transformed into roving sales people equipped with tablets, allowing more customer information to be captured by the bank and providing a more interactive customer experience, says Lawrence Freeborn, senior research analyst at IDC.

"Just as the rise of new technology has threatened the branch in the past few years, it also holds the key to their continued relevance," he says. "By implementing the right solutions, a bank can ensure that its branches are cost-effective and play their role in offering excellent customer experience."

Just yesterday, the UK's Halifax released figures showing that one in every two visits to a bank branch now involves self-service transactions rather than human interaction, with staff deployed to offer more informed financial advice.

As Nick Williams, the bank's digital director noted: "A growing number of customers want the best of both worlds - the convenience of banking on the move, alongside a helping hand from their local branch when they need it."

On a day that Barclays Bank announced it had closed 98 branches, or six percent of its network, Andrei Charniauski, head of Europe at IDC maintains that branches are here to stay for decades and will continue to offer major competitive edge over digital-only financial services.

"This does not mean that banks can simply rest on their past successes — the branch must evolve consistently with other channels to continue delivering its unique value," he says. "Introducing innovative technology solutions will enable branch employees to serve clients in branches according to modern customer experience demands."

Comments: (11)

Derek Corcoran
Derek Corcoran - Avoka - Broomfield 29 July, 2015, 16:021 like 1 like

For how long?

WHY would I visit a branch if everything I need to do is available on the smartphone in my pocket, including a chat / video chat with a banking expert...yes a human? I can't do eveything today on my smartphone, so the branch is still necessary. But that won't be the case forever. 

Surely the reversal of Fifth Third Bank from growing branches to shrinking branches and Braclay's closing 98 branches in serious evidence of a trend. 

I don't believe branches are a defence against new entrants, I think they're an inhibitor. Money being spent refurbishing branches could be spent digitizing more of the services (including human to human interactions) currently performed by branches. 

Convenience is King. The smartphone in my pocket is convenient. Visiting a branch isn't. I go there because the bank makes me for certain transactions. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 29 July, 2015, 16:241 like 1 like

IDC's findings resonate strongly with my guess that better ability to sell at branches is the secret to their survival. Personally, I'm an omnichannel fan and don't think too much about going to a bank's branch if I'm closer to a branch or to its online banking portal if I'm closer to my laptop. But there could be others who hate going to branches and I know many banks who are doing a great job of widening and deepening their digital banking offerings to fulfill the preferences of that segment.

Russell Bell
Russell Bell - Fastbase Ltd - Wellington 30 July, 2015, 03:581 like 1 like

I've been walking into bank branches recently in search of a home loan.  Dressed in a suit.  We'll always need places for face-to-face contact when trust is at issue.

But I never go into a branch to do transactions, and these days it's hard to know why I'm obliged to borrow money from the same organisation I use as a payment service provider, it seems like a distinct function.

A Finextra member
A Finextra member 30 July, 2015, 11:431 like 1 like Interesting many comments on this article are all about 'me and my requirements' (a typical problem in banking). The readers of finextra and not representative of the general public and certainly unlikely to represent the demographic of people who NEED a branch. The UK banks already use the post office anyway to give coverage in areas where they don't have branches. So maybe the answer is more a social solution so the majority are serviced with online methods but certain areas of society are not excluded.
Andrei Charniauski
Andrei Charniauski - Misys - London 30 July, 2015, 12:571 like 1 like

Derek, great to hear from you - and thanks for commenting on our research.

Knowing how financially aware you are as a consumer, I'm sure you personally do not need to contact bank employees to make your financial decisions. This is not the case for 95% of consumers, I'm afraid - your average bank client still gets financial education from bank representatives.

This is particularly the case for complex products like mortgages, savings or investments - and those complex products tend to generate most revenue for banks, which is why it makes sense to retain salesforce to support those sales. This is not the case for basic products like current accounts, which is why it has been so tempting to fully digitise them.

Strong evidence suggests that product revenue in the banking industry is shifting towards complex products. It's going to be very hard for a bank to survive on basic products only as this segment is becoming extremely commoditised - not least by the entrance of new players.

This is why branches and salesforce will remain key in the battle for major revenue generating products - and this will continue to be the case for at least two decades.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 July, 2015, 13:15Be the first to give this comment the thumbs up 0 likes

@AndreiC + 1. Branches are also an unexpectedly good place for bankers to come up with "next best offers" that no digital channel can, like the one illustrated in my post Secret Of Survival Of Bank Branches.

James Bell
James Bell - IBM UK LTD - London 30 July, 2015, 16:031 like 1 like

Thanks Andrei and thanks for the research - I do have one question though - even for complex products (e.g. mortgages) where I agree most customers will want to go and discuss in person with bank staff, do you not think the 'initial' part of the search for the product will actually be online/via a comparison site? Though I did go and see a bank in person when getting a mortgage, I only went to visit the 'winning'  bank (e.g. had the best product). Currently my relationship with the bank is pretty much irrelevant to me when deciding who to go to, just the terms on their products. I see the future of bank offerings being in more personally tailored products (where banks can capitalise on a relationship with an individual and having a physical location would be part of that). Thanks, James

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 July, 2015, 16:55Be the first to give this comment the thumbs up 0 likes

@PattyL: I'd smoked the same pipe in From Multichannel To Omnichannel And Beyond! Good to know that it's not a pipedream! However, delivering a seamless journey across multiple journeys requires clickstream capture systems and they do seem to be priced outside the reach of all but the top tier banks. 

Derek Corcoran
Derek Corcoran - Avoka - Broomfield 30 July, 2015, 18:50Be the first to give this comment the thumbs up 0 likes

Millennials are the largest generation in history. 

Millennials are the future of every industry, including banking.

According to Gemalto research, 27% of them have never visited a branch. EVER.

The future of banking is not the branch. It will have a role to play for some time, but a diminishing one and banks should be investing heavily for the future. 

Yet, according to IDC Research, the biggest challenge for the CDO in a bank is securing budget. 

Russell Bell
Russell Bell - Fastbase Ltd - Wellington 30 July, 2015, 22:481 like 1 like

I'm definitely more middle-aged then millenial yet walking into a bank branch feels distinctly odd in this digital age.  Speaking only for myself, though I know a good number of quite elderly people who are entirely accustomed to transacting on-line.

Present personal experience, I'm halfway through the process of gettting a home-loan and certainly a mortgage is a complex product.  But that complexity is best dealt with via phone and email contact.  I don't walk into the bank branch to sort out complex issues.

I walk in wearing a suit and my best smile to help cement a relationship with the banks' lending specialist.  Likewise the bank is trying to create an impression on me, that they're solid and trustworthy.  The branch exists to help build trust, the human element of a long-term business relationship.

So what's to criticise in any of that ?  Only that branches are obviously expensive, all that prime real estate, all the friendly professional staff.  To what purpose ?  If I'm buying a product like a loan it makes sense.  But if all I want to do is make payment transactions then all that trust-supporting relationship-forming apparatus is superflous overhead.

The population of off-net people who truly need branches is decreasing inexorably everywhere especially since the mobile device explosion.  Considered as a market segment it's a steadily vanishing group, targeting it with a branch network is increasingly uneconomic, only possible with heavy subsidy.

Hari Subramanian
Hari Subramanian - Wipro - Greater New York City 31 July, 2015, 01:08Be the first to give this comment the thumbs up 0 likes

One area where banks have to definitely do better is the interaction between branch and digital channels especially as it relates to seamless handoff in terms of customer experience. Incidentally I wrote a blog just recently on this topic. See http://www.finextra.com/blogs/fullblog.aspx?blogid=11372

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