The impact of digital banking, artificial intelligence, machine learning and changing customer preferences is prompting banks around the world to rethink their branch strategies.
Digital services have transformed both customer experiences and expectations and it’s important that the future branch network does the same. Increasingly, banks are being forced to make strategic choices about branch locations and formats as they look to provide a more compelling proposition whilst continually driving operational efficiency and profit.
Deciding how to compete in this new world is a complex issue that involves many different factors. However when re-assessing the branch network, defining the role the future branch will play in the bank’s brand value proposition and competitive positioning is key to establishing what the future branch network should look like.
The role of the branch
Branches have traditionally been the cornerstone of physical contact between banks and their customers. But after many years of adhering to the golden rule “the more branches, the bigger the market share”, the way banks manage their distribution networks has had to change. Driven by significant pressure on cost income ratios and the shift to cheaper distribution channels, the number of branches has been in decline for years.
However simply reducing the number of branches isn’t the answer. Understanding customer needs and expectations from a branch and creating the right mix of locations and services is key – as well as integrating new technology to create enhanced and more relevant customer journeys. Whilst this sounds simple enough, it is a challenge that shouldn’t be underestimated.
New and emerging branch formats
The general consensus is that a bank can reach 80% of its customers through strategically located branches. Truly understanding the geographic and demographic make-up of your customer base and overlaying this with an assessment of segment needs is a great starting point for evolving a bank’s branch network.
With this information at hand, financial institutions can start to create customer experiences that match the needs of customers in each location. This could range from personalised services which offer high-end advice on financial products or day-to-day transactional tasks that require speed and convenience.
This re-assessment of formats and locations is giving rise to new types of branches, as financial organisations look for new ways to use space, deploy new technologies, provide cross-channel services and create a better customer experience.
At one end of the scale express and ‘pop-up’ branches are offering flexible services in high footfall locations, such as in train stations, airports and shopping centres. With a focus on small branch footprints and high levels of automation, these should be strategically placed to offer fast, convenient transactions at times which suit the customer.
At the other end of the scale, banks are also investing in flagship branches that promote their brand with a clear focus on offering a premium, personalised customer service, as well as introducing new offerings through self-service technology. There are a wide range of examples of alluring new formats, including cafe-style branches that entice the customer with a fundamentally different customer experience whilst enabling staff to have value added conversations.
Delivering enhanced customer experience
As the only physical channel with face-to-face interaction, the branch presents a number of opportunities to positively influence the customer and reinforce key brand messages. Retail studies show how enticing customers into physical outlets has a positive impact on sales success and net promotor scores and banks should be looking to achieve the same.
Many financial institutions have already taken away the traditional glass wall barrier between staff and customers and are focusing more on human interaction. This a crucial element of the customer journey and should be considered as a fundamental part of strategic branch planning and design.
Technological advances have also played a significant role in branch transformation plans and will continue to be an enabler for new processes, services and ultimately the overall customer’s experience. Bank branches will continually adapt as digital technologies advance and the only way to provide a seamless customer experience is to ensure channel technology comes closer together.
Getting the right mix of flagship sites and community-focused branches, which provide full-service capabilities and act as advisory and engagement hubs for financial advice, combined with express branches that offer speed and convenience for transactional services, is important to achieving an optimised and sustainable branch network for the future.
Richard Broadbent is VP Software UK/Ireland, Diebold Nixdorf