The transition to banking services being offered remotely by bank branches has highlighted the costs of running multiple legacy operating systems that combine to negatively impact productivity and efficiency. The ability of traditional banks to design an internal digital centralised platform that allows branch managers and bankers to plan, communicate, measure, and implement changes will be crucial to improving productivity and branch execution.
Banks would be best suited to follow the lead of retailers who have successfully traded their disparate collection of legacy systems that did not function in unison for a single, all-encompassing platform that seamlessly combines management of staff, sales, and analytics. This allows for greater understanding of their operational abilities and how they can add most value to their customer base.
In particular, it would be best to follow the model of technology giant Apple. Its stores serve as the locus of customer service and assistance, as well as being the prime location for purchases. Branch-based banks need to make a concerted effort to make branch visits an “experience” – one that excites customers and can be expected and relied upon to solve their problems and get them access to the products and services they need.
The impact of Covid-19 and the ensuing lockdown imposed to mitigate its spread has accelerated the need to repurpose banks branches, as the lack of footfall and accessibility to services opens up the possibility for digital banks to increase their market share. A shift in the role of branch-based services could prove to be the lifeline needed to keep bricks-and-mortar locations open, whereby branches serve as a centre for optimising digital usage and onboarding as well as offering their traditional range of services.
This has already begun to take place as BBVA, one of the most technologically advanced banking providers, has proceeded with its expansion plans in the US and introduced the “banker bar” to its new locations in Texas. The new, smaller-scale, socially distanced branches will offer assistance with a range of tasks including the onboarding of customers to digital channels and originating accounts.
The ultimate goal of the banker bar and new branches is to do away with the traditional role of tellers and even bankers in favour of service stations that use data analytics to monitor accounts and target sales at specific customers during regular financial health checks. This type of system (the “branch digital assist program”) is currently being piloted, and as with the banker bar is likely to be rolled out to existing locations as well to radically change our relationship with banking providers.
However, digital adoption should not be viewed as an event that takes place but rather an ongoing process that requires constant innovation and support from banking providers. For BBVA this new model of viewing digital adoption and usage is part of a five-year strategic plan the bank launched this year. As part of this, the bank is re-skilling existing employees to be able to handle complex digital inquiries as it focuses on enhancing the range of services digital users access.
It also aims to capture the full business of digital holdouts and infrequent users on channels where the cost to serve is significantly lower. As social distancing measures appear to be with us for the long term, these attempts to make the branch experience less cumbersome and more streamlined will be key to competition across the industry.
Whilst BBVA is one of the first large financial services providers to implement these future-focused plans, other banks and providers have not reacted with the same levels of agility. Some banks have been successful in migrating operations online, though the strain on resources caused by the transition has left the majority of banks with no integrated plan for the future of branch services.
Long term, the value of branch locations is decreasing. The challenge for banks remains how to maximise their utility whilst not incurring added expense at a time when profit margins have already been significantly reduced. Contrary to the lean digital-only business model that lacks any in-person service, the role of physical locations in onboarding and communicating with customers and the community is likely to remain crucial to customer acquisition and retention, as evidenced by the fact J.P. Morgan and several other banks are all opening new locations despite the surge in online banking.