While banking as a business has evolved over the decades (albeit gradually), the branch itself has not changed much from the earliest days of banking. Most brick-and-mortar locations still feature long teller lines separating staff from customers, hidden back offices for more complex financial needs, and large but separated spaces for consumers to navigate in their search for solutions. With the advent of digital banking, that model is changing. Banks in the future—and sooner than you think—will look very different from the marble halls of the past.
The very purpose of the bank branch is changing. Once the central purpose for the branch, the number of in-branch transactions continues to fall as online and mobile transactions become the norm. "Our entire culture is being digitized, and the trend of integrating the physical world with the digital will have a tremendous impact on how we do branching in the future," said Andy Grinstead, vice president of strategic insights at Fiserv. "It's already happening today, and the pace will accelerate." As a result, bank branches must adapt to a new purpose: customer engagement. "People are going to look for expertise on financial services rather than just coming in to conduct a transaction," explained Dan Peterson, president & CEO of the Stephenson National Bank & Trust, Marinette.
This new customer motivation provides banks an opportunity to become a destination rather than a chore, according to Jennie Sobecki, founder & CEO, Focused Results, LLC. "Be the financial services experts in your community, because you are," she added. "Many bankers don't like to stand out, but they'll need to." As a result of this change, tomorrow's branches will be designed to foster relationships. "Successful bank branches will acquire and develop customer relationships by providing personalized interactions in an easy-to-use multi-channel environment that offers customers the choice of full-, assisted-, or self-service based on their personal preference," said Susan Doyle, senior vice president of retail banking at North Shore Bank, Brookfield. Millennials in particular, Doyle notes, value advice and solutions from bank specialists they trust in addition to digital access to transactions.
With a new focus on customer relationships rather than conducting transactions, tomorrow's branches will be more open, with most utilizing the Universal Banker model that is already gaining popularity. "We'll have more open layouts," said Sobecki. "The Universal Banker model is more user-friendly and focused on relationship-building." Peterson also predicts most successful branches will feature teller pods rather than traditional lines. According to Doyle, branch design will promote customer access to bank staff, space for customers to discover and learn about the bank's products and services, and opportunities for consultative discussions and account fulfillment. This, in turn, will require a higher level of expertise from front-line staff. "The knowledge and skill of branch staff is evolving upward," said Doyle. "Staff must be knowledgeable people who can handle complex transactions, engage in conversations about financial needs, provide counsel and connect customers with experts."
These new design features will allow branch footprints to shrink, reducing the bank's overhead. "With less space dedicated to teller transaction windows, branches need less square footage to serve customers and fewer staff members dedicated to processing transactions," said Doyle. In some cases, excess space may even be leased out to the bank's business clients, or perhaps converted into space where bank customers (and potential customers) can learn about digital offerings. "Branch design will also include open offices and meeting centers, digital media to tell the bank's story, and also provide easy access to eServices with a genius bar or eService Education Center," said Peterson. For example, Stephenson National Bank & Trust has placed an eLab in their main office. "People can come in and use a variety of devices—different brands of tablets and phones—and we can demonstrate how to use our online services," Peterson explained. "We're training our customers how not to come into our branches to conduct basic transactions, but encouraging them to come in for education and financial advice."
Right-sizing branches and the services they offer will also be a key component in a successful branch strategy by maximizing the impact of each customer touch-point. "Branches should reflect the needs of the consumer and market in terms of size, staff and services offered," said Doyle. The model that North Shore Bank uses includes hub, spoke and kiosk branches, all of which work in combination with the others to create a distribution system that works for the customers and communities they serve. With this system, a large, full-service hub branch supports a regional network of smaller satellite offices (the spokes) and forthcoming video teller/ATM machines that offer customers a direct connection to branch staff (kiosks).
Machines bank customers can use to conduct basic transactions will be central to the branch of the future. Interactive teller machines, depository ATMs and cash recyclers will all help streamline the customer experience. "Technology can do the basic transactions. You need the people to be customer-facing dream-builders," said Sobecki. "The banker's job isn't counting cash well; it's building relationships and finding out what the client wants, then positioning the bank's products and services to help them achieve those dreams."
Using technology to recognize customers is a perfect example of this partnership between technology and human customer service, and Grinstead predicts its use will continue to grow. For example, a customer books an appointment online and when they arrive at the branch they are identified through geolocation technology (such as a beacon) or a biometric (such as facial recognition), notifying branch staff instantly of who they are and why they're there. "That ability to connect with the person who can answer your question right away will be critical," he said.
Another common feature will be remote video support, allowing customers to communicate face-to-face with bank staff from anywhere. The concept of "banking from anywhere" will be the primary driver behind many of the changes in branch banking. "Just ten years old, smart phones have and will continue to be a game changer," said Doyle. "They will continue to alter how customers choose to conduct their banking business." However, mobile devices are also a source of competition and drastically transforming customer expectations. "Banks are being matched up against the technology of other industries today, not just the bank up the street," said Grinstead. "You're being compared to Apple and Google."
The good news is, the transition from the traditional branch model to the future model does not need to be immediate. In fact, bank management should take care not to rush implementation of any new branch strategy. "Embed it into your strategic plan," Sobecki advised. "Technology isn't cheap, so you need to know in advance what your plan is." Both Doyle and Peterson say they sought information from other banks who had installed similar features to learn what went well (and why) as well as how to manage or avoid common challenges. However, discerning the best course of action for your institution also requires dedicated due diligence. "Start with data," Grinstead advised. "Start with intentionality by completing a branch optimization and transformation study." The study will enable bank management to understand the current performance of each branch as well as market opportunities around that branch through customer market research.
Branches should not be evaluated solely on transaction volume, however. "The number one thing is revenue per square foot," said Sobecki. "You have branches in mature markets and growth markets, so it's also important to look at your year-over-year growth, not just the dollar amounts." At Stephenson National Bank & Trust, Peterson says they have begun evaluating the bank's digital performance, too. "Rather than evaluate the different office locations, we're evaluating our virtual branch," said Peterson. "We've established a general ledger for analyzing how our customers bank with us digitally." Grinstead recommends measuring relative profitability (rather than fixed costs) and analyzing growth based on whether or not the branch is capitalizing on the opportunities present in its market.
Communication with customers and staff about upcoming changes must also be carefully planned and executed in order for the branch transformation to succeed. "As a high-touch community bank, listening to our customers regarding their preferences is requisite and our most important tool," said Doyle. "The branch needs to provide a platform that takes into account varying rates of change and provide customers with choices on how they want to bank." Staff must also understand their role in any upcoming changes well in advance, not only so they can explain the new features to customers, but to gain their support. "Buy-in from the staff will determine the success of the changes being made," said Peterson. "If not communicated or presented in a positive manner, reputational risk will be an issue."
Envisioning Tomorrow's Branches.... Today!
Left: A view looking from the Knowledge Desk to business partner offices in the branch, which include mortgage, investment and business banking. Center: Jenni Dolata, deposit operations officer, training Stephenson National Bank & Trust employees on the eTeller. Right: View from North Shore Bank's new teller pod in their Green Bay branch. The branch features an interactive kiosk, a fulfilment desk, and a connection area with a personal banker and video conferencing.