By : Neill Malcolm Harris
November 27, 2018 08:00 AM
Are banks closing the wrong branches?
You want to increase the relevance of your physical branches, but changing the branch to meet the needs of an increasingly-connected digital population gets more difficult by the day.
The services customers need – deposit, withdrawal, balance updates and information about credit products – are available via ATMs and digital banking, so it might be logical to believe the branch’s role has diminished significantly in the last decade. And research by the Federal Reserve of Philadelphia suggests demand for physical branch locations along with, “increased merger and acquisition activity following the Great Recession, changes to firm strategy, and consumers’ increased reliance on mobile technology” resulted in banks strategically closing branch locations.
This prompts something of a chicken-and-egg question: did digital banking explode because physical locations were closing during the recession, or vice versa? Whatever the answer, the outcome is that the bank closures between 2008-2013 weren’t randomly selected, they were based on where banks concluded future business might be.
Neighborhoods with higher average credit ratings and lower rates of home ownership or other credit products were more desirable for a branch than locations with fewer residents who’d be able to take advantage of bank offerings or become customers.
Research shows low and middle income families with a bank nearby are more likely to have a bank account. Deposit accounts are a leading indicator that a customer will use other bank products. So it should follow logically that the biggest opportunities for banks to scoop up more customers for all products is with branches in these neighborhoods, because branch banking matters to these customers. And while consumers are using online and mobile channels to complete transactions, research by Novantas shows that, 60% prefer opening their accounts in a branch as opposed to a digital channel.
Digital vs. physical: branches in the balance
Digital banking usage has been increasing since its introduction, but McKinsey & Co research reveals only 20% of consumers are “bank in my pocket” customers that don’t use branches.
While traffic may be down in the branch, 85% of consumers still go into a branch for discussions about their accounts and new products. Key takeaways for the industry are:
ATMs and ITMs offer a way to elevate branch experiences
No matter what neighborhood a bank is in, the needs of its visitors remain the same: a real bank employee at a time that’s convenient to the customer. So the challenge for financial institutions is to provide longer hours and more flexible branch formats that help retain and grow business. A current favorite industy topic is small/micro-branch formats deliver great service while occupying as little as 200 sq. feet. Some features of micro-branches are:
Making “bankers’ hours” a thing of the past
Rivermark Credit Union and Consumers Credit Union have deployed unmanned micro-branches using NCR Interactive Teller technology to service members away from traditional branches, extending the reach for the FI and the service hours for their consumers. An Eastern bank branch in Revere, Mass. has created manned locations in a micro 200 square foot location. There are zones for “banker hours” and 24/7 service that utilize NCR ITMs.
It’s clear that financial institutions will continue to experiment with branch size and formats and the technology deployed in these micro locations to keep up with the expectations of today’s banking consumers.