If you were to look back 10 years - or even 5 years - and examine how you used to interact with your banking provider for everyday transactions and for larger dealings, it’s almost certain that what you did and how you did it was very different to the interactions you have today. Not only can you now access the majority of services online or via an app, but the physical layout of the branch - and its functionality - is altogether different.

This shift is largely due to the changing face of the customer. With an ever-increasing selection of services and providers, combined with multiple access channels, customer expectations are changing rapidly. Banks should embrace these changes and adapt accordingly, ensuring these trends are incorporated into their bank branch strategy.

How customer preferences are shaping the future of retail banking

Mobile vs human

Pre-financial crisis, banks followed a simple distribution-led growth strategy: the bigger the branch density, the larger the total market share of deposits. Over the last decade the link between branch network and market share has weakened considerably. It can be argued that we have seen the trend of branch contraction many times before, however, this was mainly during times of economic contraction. Now, branch contraction is happening at a time where we have seen consistent economic growth.

The ascent of “digital natives” is increasing the willingness of customers to buy products online or on mobile, rather than visiting their local retail branch, and has no doubt contributed to this contraction. Even when visiting a branch, customers are more prone to use the self-service function than speaking to a banking teller or a branch adviser.

Customer loyalty

The close relationship between customer and bank is a thing of the past. A survey by Statista1 showed that a third of UK banking customers have more than one account with multiple banking providers, using different providers for different products. For example, customers will have a mortgage with one bank, a deposit account with another, and a loan with a third provider. Challenger banks have been utilising this trend by selecting the most profitable, or a specific market segment, to compete in. Whilst the challenger banks’ customer database and access may not be as strong as the traditional players, by offering best in class customer experience they are improving their level of competitiveness.

Customer experience

Regardless of industry, all customers are clear in what they want; simple, quick, and seamless transactions.

Banks have been investing heavily in recent years to meet these customer expectations, but must still contend with internal boundaries, including legacy IT systems and data silos. Customer experience leaders in the industry know that customer experience is not just about the look and feel, but the end-to-end mapping of the top - or most popular - customer journeys that have the biggest impact on customer experience. Banks that revisit these customer journeys and re-design them to ensure the process centres around the customer, and not the internal IT systems or processes, see improved customer experience. However, this in isolation won’t suffice.

One stop-shop

The fragmentation of banking products and services has reinforced the trend for customers to mix and match their banking providers and products, but will this trend continue?

With the unbundling of products, the returns and market share for traditional banks will decrease, increasing the level of competition for customer acquisition and retention. To return to a single-provider model, banks must provide their customers with a compelling offering. Not only would they need to have a product portfolio or service that is convenient, but it would also need to provide unbeatable value. With large amounts of data available to them, the larger banks are able to produce unrivalled customer insights - a clear advantage when developing more targeted ‘one stop shop’ packages.

Amazon is an example of an organisation that has harnessed their customer data well. Through customer insight, Amazon now provide financial services – offering short-term financing for purchases, insurance products and loans for businesses selling on their platform. Another example of good customer insight is Danske Bank, who has used its knowledge of customer behavioural patterns to extended their service offerings by developing an app providing customers suggestions for each part of their property search journey. Looking at a non-financial provider, Zoopla – known as a property search engine - is now acting as a mortgage broker as well as providing insurance services.

With the aim to offer truly unique customer experiences, should banks look beyond the traditional boundaries of retail banking and take direction from industries which offer synergies and cross-selling to their customers?

The bank branch of the future

The shift in customer expectation is here to stay. Recognising and adapting to these shifts is key for banks’ survival. Many banks have already adopted elements, or all, of the above trends when shaping their branch strategy, but there are further insights which will shape what the bank branch of the future will look like.  

Services offered should be tailored on a branch by branch basis 

Through the use of advanced analytics, banks are able to optimise their branch network by understanding customer preferences in certain populations and geographies, as well as micro-economies within those geographies. Density is likely to differ on a region-by-region basis, with each branch or geography offering different products and services tailored to that customer base. All complimented by branch employees possessing varying required capabilities. 

A shift to experiences and advice rather than products

With the right mix of technology capabilities, branch employees can offer an enhanced customer experience. Customer preferences, behavioural and spending patterns, immediate - as well as long term - plans can all be known to the branch representative as soon as the customer provides personal information, such as their name or bank account number. The conversation, and subsequent offerings, can then be tailored to that individual. In addition, according to the demographics and demand profiling, branches will be equipped with agents specialised in the areas of most relevance, i.e. small business banking, larger business banking, technology, and so on, providing an additional value to customers. Banks can learn from disruption within retailers where offline store assets are having to reconfigure to a showroom style experience and less on the legacy distribution model.

An introduction of cutting-edge technology and implementation of effective AI

Using automation technologies, such as natural language processing, artificial intelligence and image recognition, a customer will be able to enter a branch and carry out the majority - if not the totality - of all transactions without the aid of a branch representative. Technology giants have already trialled the use of virtual advisors for more complex transactions, such as mortgage onboarding and servicing, where a customer can talk to an advisor in branch or at home using their mobile to query the process, send documents, or simply seek advice.

A home from home

With the onset of automated technology and AI, why even visit a bank branch?

When choosing a banking provider, customers generally only consider a small number of providers before deciding on the final, and this decision is often led by brand preference. Brand preference is the first step, but banks should seek to develop into brand loyalty - a key element of customer acquisition and retention. Banks must invest in their brand and differentiate from the competition – but how? Lloyds’ flagship branch in Manchester city centre does this by offering a ‘home from home’; allowing customers - and non-customers - to enjoy refreshments offered by local suppliers and providing them with a place to run their businesses via their laptop or phone in a relaxed environment. Banks and branches that offer this level of customer experience will not only ensure customers have a positive connection with the brand, but that they return again and again. 

 

Customers are changing the way they bank, and where the customer goes, the banks should follow. Banks have an opportunity to redefine the role of their branches as a place of providing advice, dealing with complex transactions and an enabler of customer acquisition and retention - a big shift from dealing with day to day transactions and cash. Embedding new technologies in the customer journey and experience, advancing the use of customer insights to build personalised experiences, and using the branches to support brand loyalty will not only respond to changing needs, but will put banks on the right path to strengthening their customer base and therefore sales growth.

 

 

https://www.statista.com/statistics/467248/total-number-of-current-bank-accounts-held-uk/

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  • Tony Farnfield
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