Why are banks -- including Royal Bank of Canada, Citi and Huntington -- spending millions of dollars on high-tech branch redesigns modeled after retail stores such as Apple's (as well as setting up small in-store branches in supermarkets) when branch traffic is in decline? With the proportion of truly branch-centric U.S. consumers dropping for the first time this year below 50 percent, to 43 percent, according to research conducted by Novarica (New York), why are banks investing in branches at all?
The answer is multifaceted. Of course, there's still that 43 percent of U.S. consumers who prefer banking at a branch over any other channel. Madhavi Mantha, principal and head of banking research at Novarica, breaks this market into four segments: obsessive service addicts, deliberate cash managers, struggling average consumers and branch traditionalists.
"One significant reason people interact with the branch is they want our people and our expertise," says Alan Depencier, vice president of marketing services and transformation, at Toronto-based Royal Bank of Canada. "Historically it's been a transaction channel. We see it in the future more as a place where people can shop, interact with our people, learn more about financial services and how we can help them with their overall plan. We see our retail store as a whole new experience where you're combining the best of retail with the best of financial stores."
Complex financial needs are another reason people still go to the branch. U.S. consumers across the board prefer to complete complicated financial transactions in a bank branch -- according to research conducted last year by Cisco, 70 percent of Generation Y (i.e., smartphone-addicted 18 to 30 year olds) said they would prefer to finalize complex financial matters, such as investment decisions, in a branch; this was more than any other segment.
"We all recognize that the online experience doesn't replace a consultative relationship that customers have with experts on the spot," says David Hawkins, SVP and director of customer experience at Huntington Bank. "While transaction-driven visits might be going down, the number of more in-depth visits and consultative sessions will increase over time."
Banks are well-positioned to be the financial experts that consumers trust for advice on retirement, mortgages and other financial-related life events, Hawkins adds. "You have to create an experience that's supportive of those conversations and relationships," he says. "The question always is, 'How do you create the space and experience that supports that?' It's about creating spaces where bankers and customers can do more together."
Another, critical driver in the branch revival is technology itself. Maturing technologies are available to help branch employees make more of the time they spend with customers in the branch, helping them sell, provide advice and transition customers from full-service to self-service.
One such technology is Microsoft Surface, the coffee-table-like touchscreen computer the company launched in 2008. As part of the overall makeovers of two branches, Royal Bank of Canada (US$732 billion in assets) deployed Surface in November.
Bringing Engagement to the Surface
RBC's Depencier says most bank clients come to the branch to conduct a transaction or ask a question. "Surface helps engage such customers by answering their questions or making them aware of new things," he asserts.
A so-called Discovery Zone at the front of the branches provides a setting for Surface that's designed to be comfortable, unintimidating and simple, Depencier adds. "We know clients have something on their mind when they walk in, but they're not always comfortable starting a conversation with us," he notes. "Surface was designed to help you engage the customer to start a conversation about what's on their mind in a fun, interactive way that's not intimidating."
The first app the bank built for Surface, along with Microsoft (Redmond, Wash.) development partner Infusion (New York), is referred to as the "drop a coin" app -- according to Depencier, the customer drops a coin on the screen to deploy the app, which provides information about the concept of investing regularly and being in a tax-free versus a taxable account. The app, he says, quickly shows that by putting a couple of dollars a day into a tax-free savings account, the customer can build up his or her nest egg. This has driven many customers to open new tax-free savings accounts, Depencier indicates.
"The uniqueness of Surface is, one, its size -- it's a very large surface that's engaging for the client and a great interface for staff and a client to interact at the same time," Depencier notes. "The second piece is the actual technology."