Welcome to the bank branch of the future. Several financial services firms have been tinkering with their formats. Other banks have recast their tellers as “relationship bankers” who help patrons navigate smart ATMs or instruct them on how to deposit a check via their smartphones.
Such experimentation comes as banks face unprecedented threats from seemingly unrelated industries. In China, e-commerce platform giants have moved into banking and it’s possible the top U.S. platform companies – the ones you use for your e-commerce purchases and web searches -- could consider doing the same.
The lure is not so much the business itself as the deep data the companies could accrue by tracking consumers’ spending.
There is a case to be made in fact that there is no reason for a bank branch to even exist anymore since consumers can conduct most of their business via ATMs and even execute more intensive transactions, like apply for a loan, via videoconferencing. A slew of digital-only banks like Green Dot’s GoBank prove that such a model is viable. But industry analysts say that the bank branch isn’t going anywhere. It will just become smaller and more digitally focused as employees become more like financial coaches than traditional tellers.
Brick and mortar works best for complex transactions
Since the financial meltdown of 2008, banks have closed some 10,000 bank branches in the U.S. -- about 10 percent of the total. Lower interest rates and more stringent regulation are to blame for much of those.
Technology is another factor. In 2018, check cashing has been automated and consumers use cash a lot less, so they have less reason to visit a branch, much less interact with a teller. That’s fine with most banks since such transactions are an expense, rather than a profit center.
Pareto’s Law states that 80 percent of revenues come from 20 percent of customers. But with banks, the 20 percent supply 100 percent or even 110 percent of revenues. How is that possible? As Steve Reider, founder of consultancy Bancography, explained, consumers with very low balances cost banks money.
The people in this 20 percent are usually made up of well-heeled older consumers and small business owners -- demographics that prefer the human touch. But that’s not the only reason that bank branches persist. The average consumer -- even a young consumer -- prefers to talk to a human when disclosing personal information to get a loan or to resolve a knotty problem. “Consumers want the branch there for problem resolution,” Reider said. “If they have questions or if anything goes wrong, they want a friendly face to yell at.”
More automation, on- and off-premise
Over the past few years, banks have trained consumers to use ATMs for routine banking chores, like cashing checks. The next step is to get them used to using a hybrid of digital and in-person services.
Some banks now provide a mortgage application process that occurs almost completely online, though recipients have to show up in person for the closing. Others now allow for the entire process to be executed via videoconferencing.
Anthony Burnett, customer experience director for Level 5, an Atlanta-based building consultant that designs branches for banks, said that most of his clients offer videoconferencing. “You can come up and say you need to meet with a mortgage person and they'll say well we don't have one in this branch, but go to the queue and queue it up,” he said. “There's always someone available because they staff accordingly in the call center.”
Burnett said that in the near future, it will be common for consumers to start their loan application on the phone and continue on their laptop or tablet. When it comes time to talk to a human rep, the bank will route them to a human representative that they can visit in-person or set up a videoconferencing call. “I think that's what's going to happen to make it easier to consumers and let them buy how they want,” he said.
Of course, all of this automaton and digitization of touch points means there’s a greater need for a robust broadband connection. WesBanco, a Wheeling, West Virginia-based bank with a footprint in the Midwest, recently found its T1 and D3 circuitry didn’t support those needs and called in Comcast Business to install a 1 Gigabit Ethernet Dedicated Internet line. “Successfully deploying to an internet-based infrastructure would open up new opportunities, eliminate geographical barriers, and position us for future growth. Long provisioning timelines, and expensive bandwidth circuits would become a thing of the past,” said Mike Krupinski, the company’s CIO.
The banker as financial coach
Such upgrades are increasingly necessary to meet the needs of new customers. Just as digitization and easy access to information is turning doctors into health coaches, bankers are becoming financial coaches. This role has dovetailed nicely with the maturation of Millennials. The average student debt is now $30,000, according to Mark Kantrowitz, publisher of Savingforcollege.com.
Though Millennials do copious online research before making a financial purchase, they often supplement their research with an in-person visit to a branch. Some 25 percent of Millennials who purchased a retail banking product in the last 12 months visited a branch as part of the research product, making them not so different from other generations, according to Forrester.
What is different about Millennials is their access to digital and mobile media. Some financial services apps, like Acorns, have found favor among Millennials because they simplify and automate some aspects of budgeting and saving.
Some banks are looking to meet that need as well. Sean Keathley, president of Adrenaline, a design experience agency, said that one community bank he worked with introduced a “banker in your pocket” that was available for a conversation via text or video call. “It is absolutely going to be the next step in the mobile app experience because it will be giving it a humanistic feel,” he said.
That means providing a seamless back-and-forth between digital and offline and making the banker more of a resource for information and advice than a place to park your money. If they can’t provide that type of experience, then the platform giants appear to be happy to step in.