Transforming the banking branch

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  • Transforming the banking branchThree essential roles for the branch in the everyday bankBy Frederic Brunier, Dr. Christian Ptsch, Friederike Stradtmann

  • 2 Transforming the banking branch

    Branch innovationMany banks have already closed, or plan to close, at least some of their branches. Branch networks are costly to operate and, increasingly, customers choose to purchase financial products through digital channels. But reducing or streamlining their branch presence, or moving to the extreme and adopting a wide scale branchless model, may not be in a banks, or its customers, best interests. Customers value branch interaction78 percent of US-based consumers said they expect to visit their local bank branch just as much or more frequently in the next five years.1 As a result, banks must reposition their traditional branch model. By taking advantage of digital innovation, banks can transform the branch network to offer banking services that are more personal, immersive, and relevant for their role as an everyday bank.

    New customer experiencesTomorrows banking customers will take advantage of both digital and physical channels in managing their finances. If their local branch closes, 43 percent of US-based consumers would simply use another branch location of their primary bank.2 Customers that combine digital and physical channels:

    Undertake detailed research online to compare services.

    Visit the branch to validate their online findings and sign up to products or services.

    Tend to have more products and be more profitable over the customer life cycle.

    There are many reasons why closing a banks branches can result in poor outcomes; the loss of high street presence can shrink a banks presence in the public; competitors are in a stronger position to seize market share; brand equity can be compromised, and customers could lose confidence and seek out another bank.

    1 Accenture North American Consumer Banking Survey 2015 2 Accenture North American Consumer Banking Survey 2015

  • Transforming the banking branch 3

    The millennials are a good example of a strong behavioral response to a banks branch strategy. Younger customers, particularly those aged 18 to 24, make the greatest use of branches and in-branch value-added activities (Figure 1), with around one-half of them engaging in at least one value-added service during their last visit.3 While customers in this segment are most vocal in wanting exceptional online and mobile banking, they do not view digital as a complete substitution for branches. Research shows that this age group has a noticeably greater bias towards physical interaction, all pointing to their need for face-to-face contact, advice and reassurance in the initial stages of their own financial journey.

    Figure 1. Younger customers lead the way in undertaking value-added activities in-branch

    77 78 73 76 68 66 66 61

    40

    Source: Accenture UK Financial Services Customer Survey 2014

    Transactional activity

    Depositcash/check

    Withdrew cash Checked my balance

    4841

    19

    46 44

    18

    52 47

    17

    4639

    16

    Made/set up a payment

    Got information on productor service

    Changed my details

    Opened an account or purchased/renewed a financial product

    Value-added activity

    Responses to the survey question: Which of the following activitiesdid you do during your last visit to your banks branch?(figures shown are a percentage of responses by age bracket)

    18-24

    26-34

    36+

    3 Accenture UK Financial Services Customer Survey 2014

  • 4 Transforming the banking branch

    Three essential rolesThree key roles are vital if branches are to attract and retain future customers: digital ambassador, advisor hub for specialized services and problem solver.

    The branch as digital ambassadorMost consumers now use some form of digital banking. Research shows that 80 percent of the digital generation, or Gen D, are embracing digital for daily banking needs, but only 22 percent act completely self-directed.4 Baby boomers, the majority of Gen D, regularly use social media, yet digital advisor access and tools are of relatively low value to them. Branches can help increase the digital penetration of a banks customer base and lower bank transaction costs by educating digital laggards. Branch employees can offer advice on using digital tools for everyday banking needs and invest in in-branch digital capabilities. More than one-half of consumers rank interactive screens as the most important in-branch technology (Figure 2).

    4 Accenture Generation D Europe Investor Survey 2014, https://www.accenture.com/us-en/insight-generation-d-emerging-important-investor-segment-summary.aspx

    Figure 2. Importance of in-branch technology services

    Interactive screens

    Self-service remote advisor

    Biometrics52

    38 37

    Source: Accenture North America Consumer Banking Survey 2015

    Response to the survey question: Rank potential in-branchtechnology services in terms of importance.(figures represent responses from the United States and are shown as a percentage)

    AIB promotes digital banking storeSince its launch in 2015, AIBs The LabIrelands first digital banking storeis thriving as a space for customers to explore digital banking. Located in the much-visited shopping, business and leisure development, Dundrum Town Center, The Lab offers customers a friendly and informative environment to experience first-hand the latest developments in AIBs self-service banking, Internet banking, mobile banking and tablet banking apps.

  • Transforming the banking branch 5

    The branch as advisory hubAlthough the use of online banking services continues to grow, the offline demand for complex and high-value products is still high within branches. Globally, two-thirds of complex, high-margin products (such as mortgages and pensions) are selling over branch networks. The branch can play to that strength and become a full-service advisory hub for complex products, long-term financial planning and other highly-specialized services. In this way, the bank can:

    Center full sales and service support around customer preferences and needs.

    Provide the human touch through specialist staff that are on-hand to advise on different or complex services.

    Offer extended hoursweekends, late nights or on-demand remote services via video conferencing.

    Initiate conversations, setting up and closing business in the branch, then maintaining the dialogue online.

    Enable value aggregation with other providers in the everyday bank ecosystem.

    Erste Bank launches new advisory branchIn May 2015, Erste Bank in Vienna opened its first, large, newly-designed advisory and service branch center. More than 45 financial experts are on site to advise customers about the banks product portfolio. Erste Bank plans to open 30 large advisory centers in large rural towns, and 17 light service branches in highly-populated locations in Vienna that provide advice on simple products, such as account opening. Customers have access to an expert for more complex inquiries via video-conferencing in a specially-designed customer-advisor meeting room.

  • 6 Transforming the banking branch

    The branch as problem solverFirst-contact resolution is key to retention. Of the consumers who switched to another provider due to poor service, more than 80 percent said they could have been retained, mainly if their issue had been resolved on their first contact with the bank.5 While bank customers very frequently use online banking for prospection and access to services, 65 percent of them use the branch to fix problems.

    Modern branches need to convert issue resolution to a competitive advantage, particularly for payments errors, new portfolio scenario modelling in the banks app and other content-driven problems. To do so, branches must integrate seamlessly with digital channels. For example, a customer who is uncomfortable using an online calculator to self-advise a mortgage decision might use it to first assess what he or she can afford, then follow up with a visit to the branch. Providing faster, better first-contact resolutions requires continuous training of branch staff and equipping them to excel in solving customer problemssuch as specialist advice around mortgages and pensions.

    5 Accenture Strategy Global Customer Pulse Research 2015 6 http://www.handelsblatt.com/unternehmen/banken-versicherungen/bankenbranche-

    commerzbank-will-keine-filialen-schliessen/12002032.html

    Commerzbank increases customers as other banks close branchesIn Germany, Commerzbank has undertaken branch consolidation following its merger with Dresdner Bank, and has been capitalizing on its experiences. By targeting its marketing activities toward customers of competitors who are closing their branches, the bank has been able to drive its own growth strategy. Alongside the slogan the bank at your side the branch is playing an important role, especially for more complex products such as handling mortgages and major investments, and is a vital ingredient in Commerzbanks multi-channel market presence.6

  • Transforming the banking branch 7

    Branch transformationModern bank branch networks must be innovative, providing highly personalized contact in the context of being digital ambassadors, advisors for complex services and problem solvers. Simpler, yet more comprehensive, they need to diversify branch types and integrate digital services. Such branch networks can give customers multiple and flexible service options, 24 by 7. They could also lower banks cost to build by 33 percent and their cost to operate by 25 percent,7resulting in greater busine