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The Evolution of the Bank Branch Strategy and the Role of Technology

According to research from Apptopia and Adjust, more than half of Americans (52%) are visiting their bank’s branches less amid the COVID-19 pandemic, and 49% of respondents said that they would gladly never visit their bank’s branch again.

Those statistics are significant… but not surprising. Rather, the pandemic has put a fine point on a topic that’s been rattling the banking industry for years: “What is the future of the bank branch in the midst of a digital boom?”

Long before COVID-19 made going to a bank branch a high-stakes errand, the role of the bank branch for consumers and businesses alike had already started its evolution. Digital experiences (both websites and bank apps) were incrementally improving, and slowly but surely bank customers could accomplish most routine tasks without going to the bank. A contraction in branches was imminent.

Between 2017 and 2020 (before the pandemic), more than 4,400 bank branches closed in the U.S. — a 5.1% drop from 85,993 to 81,586 — but the overall pace of branch closures has accelerated since 2008. Capital One has led the pack, closing nearly 32% of its brick-and-mortar presence since 2017 – aligning (likely not coincidentally) with a strong investment in and sweeping changes to their digital platforms.

However, this contraction isn’t the entire “new branch strategy” story. In fact, it’s not even half of the story.

According to a 2020 JD Power study, “The most satisfied retail banking customers use both branch and digital services to conduct their personal banking, while the least satisfied are those who have a digital-only relationship with their bank and do not use branches.”

The truth is, branches still play a pivotal role for many banking customers. Not only are some complex tasks easier to complete at an ATM or with a teller, sometimes the only place customers feel comfortable completing those tasks is at the physical branch. However, even tasks that have to be completed in-person start at home, online, and likely on a mobile device. The branch is often the last stop in a process, not the first.

So while the banking process has evolved, how can the bank branch evolve to meet the demands of that process? If customers are going on a journey across digital platforms, banks must go with them.

The New Normal: Online to On-line (at the branch)

Against many analysts’ predictions, the pace of branch closures overall has slowed in 2020. For most banks, rather than abandon the branch altogether, the strategic demand is optimization — deliberately closing branches in some geographies, opening “mini-branch cafes” in others, and across the board streamlining branch operations with technology.

Beyond the numbers and locations of each branch, the new branch strategy must include studying, analyzing, and optimizing the following:

  • the experience at each branch
  • services and value-adds available at branches
  • seamless digital-to-branch experience
  • employees’ ability to support cross-platform engagement

At WillowTree, we help banks tackle two core areas of this evolution:

  1. Strategizing and building digital-to-branch experiences
  2. Empowering employees to best support these cross-platform customers

Let’s take a closer look at a real-world example: Something unusual shows up on a customer’s bank statement, their balance drops unexpectedly, and a transfer needs to be made ASAP to avoid penalties… but there’s nothing they can do about it through the online portal. They need help; the online support ticket won’t be answered for at least a day, the 1-800 number wait time is long, and the clock is ticking. It’s time to go to the branch.

But when they get to the branch, the teller or branch manager asks the customer for all the information they’ve already entered into every form they found online. The customer is exhausted, anxious, frustrated, and their problem still isn’t solved. The question is: Why not? The information is there, but the infrastructure is not.

Data and interviews from S&P indicate that consumer behavior and preferences has evolved to reflect the perspective of:

"How can I use the branch as an extension of digital?” rather than thinking of “digital as an extension of the branch.”

Because user data can be synchronized from the app to the branch for a seamless customer experience, banks need to update or overhaul their front- and back-end to support it.

Of course, changes to a bank’s branch strategy not only impacts the customer experience but also the employee experience.

As the branch becomes an extension of digital, the need for employees to fulfill more complex and technology-driven roles become elevated. Customers who walk into the branch will increasingly expect branch employees to deliver an experience that is:

  • Contextualized
  • Individualized
  • Comprehensive

Here’s what that might look like in practice: Take the example from earlier. A customer gets a notification that their account has been overdrawn. They scour their account for errant withdrawals, double-check the dates of auto-payments, and investigate if there was an issue with an expected deposit. It looks like a deposit has been sitting in limbo for a week. They’re panicked. They open a chat with a representative but the representative can’t do anything to help. They need help right away, so they get in their car and head to the branch.

When they get to the branch, the teller swipes their ATM card and notices the negative balance. They say, “We see you have a negative balance, and that you’ve been trying to connect with a representative online. Unfortunately, it looks like they weren’t able to help you. Let me help you with this.”

Rather than feel frustrated, that customer feels seen. They feel like their time is appreciated. They become more loyal to the brand.

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In a 2020 Financial Brand survey of hundreds of bank executives, the majority of respondents indicated that their bank has not leveraged technology to help employees improve the customer experience. In fact, 75% of respondents said there has been little progress in upskilling employees for digital or technical needs. This must change for two reasons: First, to keep up with the way customers are expecting to interact with their bank, and secondly to empower employees to embrace the evolving role.

Now is the time to address both the evolving demands of customers and the impact this evolution has on employees as a part of your broader branch strategy — and WillowTree can help with user-centered product strategy, research, design, and engineering. To create an experience that is seamless and integrated across every channel, get in touch with WillowTree today. We’d love to hear from you.

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