Branches 2.0: The Reemerging Relevance of Physical Banking

FAQs

• What is the current relevance of physical bank branches in the age of digital banking?

  Yes, physical bank and credit union branches are still important to consumers, despite the fact that more people are banking remotely using their mobile devices and personal computers due to the advent of digital banking.

• Will the traditional branch-based model survive without transformation?

  No, branches must transform to remain relevant in today’s digital-centric environment. Research indicates that “Just under two-thirds of banking executives agreed that the [traditional] branch-based model will be ‘dead’ within five years”. The future of retail banking must involve both digital and physical environments, with the unique value in each complementing the other.

• How have consumer banking habits shifted, particularly regarding the use of physical branches versus digital channels?

  Consumers were already increasing their use of digital banking tools and banking remotely before the COVID-19 pandemic. Initially, priorities like convenience, security, and access to products were important in both environments. However, the limitations imposed by the pandemic caused consumer habits to shift even more dramatically towards digital options. Customers now increasingly use their devices to perform ‘high-touch’ activities traditionally reserved for physical branches, such as applying for loans or remotely opening new accounts. As a result, physical branch traffic has decreased, and 85% of Americans report they will continue to use digital tools to complete some or all financial transactions after the pandemic.

• Given these trends, how are banks adapting their branch strategies for a new multi-channel approach?

  Banks are closing some physical branches and reallocating those investments toward digital channels to support more complex transactions and interactions remotely. While a branch-centric model may no longer be relevant, banks must recognize that branches remain ideal environments for face-to-face consultations and various high-value transactions. For a branch resurgence to occur, banks must ensure that they meet modern consumer expectations for security, convenience, and personalization as the branch’s role evolves.

• What are the key opportunities banks should pursue to improve the in-person retail banking experience and integrate it with their digital environments?

  Banks and credit unions need to invest in both their digital and physical banking environments and determine how the two can complement one another to offer a more holistic customer experience. Four key areas for improvement include:

   

  • Advanced Security Across Environments: Since “Over 96% of consumers want security and fraud protection features from their banks”, institutions must create a more seamless yet robust security infrastructure spanning both digital and physical settings. This can involve aligning features such as multi-factor authentication or biometric data use across personal devices and branches.
  • Appointment Scheduling: Consumers are less willing to tolerate waiting in line at a branch. Banks can adopt appointment scheduling software, allowing customers to book in-branch services via their personal devices for convenient times. This investment is growing, with 35% of banks already using this technology in 2020, making the physical experience more efficient.
  • In-Branch Devices for Customers and Employees: Modern consumers expect to expedite in-branch experiences using digital tools, influenced by experiences like digital kiosks in retail stores. Banks can harness mobility to enhance the branch experience using technology, which can be utilized by customers waiting for service or by bank employees who need to access critical customer data, scan documents, or execute online transactions in real-time.
  • More Personalized Services: With customers using remote digital tools for basic needs, they prioritize branches for complex or interpersonal interactions. Advanced access to customer data and analytics allows branch staff to take on a more personal consultative role, offering recommendations based on individual financial habits, such as suggesting ways to consolidate debt, pay off a mortgage faster, or make smarter investments. Successfully leveraging personalization means going beyond targeted marketing to create customized, relevant end-to-end customer experiences.
• For banks that are uncertain about their new in-branch strategy, where should they focus their initial efforts?

  Banks can start by identifying customer interactions for which there is currently no genuine digital substitute available to them. For example, if a bank cannot successfully implement remote video chat, it should not expect to replace complex interpersonal interactions with digital-only exchanges. Instead, they should focus on enhancing their in-branch experiences to make them more appealing to modern consumers. The most successful banks will be those that utilize their physical branches to deliver exceptional customer experiences, invest in digital tools to serve customers regardless of their preferred banking method, and secure the right technologies and strategies that align with their core strengths, such as serving a local community or providing advanced investment services.