“Did we expand too quickly?” and “did you see that another branch closed yesterday?” were two questions I often had to answer in my last couple of years managing bank branches before making the leap to the banking software side. Well, after over a decade of being fully immersed in the industry, I can say from experience that things are definitely changing, and changing quickly.
After reading "Will Branches Ever Die?" written by The Financial Brand, as well as a white paper recently published by Temenos, "The Rise of the Digital Bank", trends and behaviors I have seen in the industry over the past five years are being confirmed. There are some eye-opening statistics out there for the financial services industry as a whole. Consider this, a study conducted by Bankrate showed that, since 2006, almost 50 percent less account holders are visiting branches to conduct typical (deposit, withdrawal, transfers) banking business. In that same Financial Brand study, Financial Management Solutions Inc. (FMSI) states that average branch monthly teller transactions are down more than 45 percent in the past 20 years. Commercial bank branches and savings institutions have shrunk almost 50 percent in 20 years according to the FDIC. Also, since 2012, there are now over 6000 less branches in the United States.
So, the sky is falling… right? Better just keep my money under my mattress. (I can’t tell you how many times I have been told that!) But Temenos studied and found in "The Rise of the Digital Bank" something that I have also seen, it’s premature to announce the death of the branch.
Many account holders still prefer face-to-face interaction, and certain transactions will always be best handled in person. Over the next few years particularly, the focus will be on new and renovated buildings, locations, design, lower square footage, no teller counters, new branding and signage. Another trend in the very near future will be that successful financial institutions (and their branch network) will adopt a boutique style store with virtually no tellers that will still offer traditional transactions but with more focus on advisory services and an increased emphasis on a consultative sales process. Think Apple store ambience instead of stodgy branch traditionalism.
Financial institutions that are looking for sustained future growth are starting to adopt the above approach now. Bank Director conducted a 2015 survey showing that financial institutions will be opening less branches and decreasing their teller staff.
Technology is a re-occurring theme for this industry and should be a huge takeaway from all of this. Banks and credit unions that want to continue their past successes must invest in banking technology solutions today to ensure that they aren’t one of the statistics that was mentioned in the beginning of this blog. There are solutions, like the Temenos Lifecycle Management Suite, that are light years ahead of what many financial institutions are currently using. This software, coupled with a dedicated focus on providing quality service everyday will create the “specialized and unique” feeling that banks and credit unions need to adopt now in their branches. Account holders need to be wowed in a branch, similar to an experience in an Apple Store or a Mercedes-Benz dealership.
Finally, the rise of digital banking is here and growing at a furious rate. More and more customers are not just paying their bills online but they are now opening new accounts, applying for loans, and servicing their current accounts in the digital realm. Every financial institution that wants to be viable in the future must have a digital banking plan of attack. They should offer a solution that is robust enough to handle their account holder's requests as well as deliver an experience that crosses all devices, complete with mobile optimization. Who doesn’t have a smart phone today? Exactly, it is rare to find someone not using a smart phone and everyone wants to do as much on it as they humanly can. As long as financial institutions realize that this isn’t a passing fad and embrace the age of digital banking (and they have a solution to surpass account holder expectations) they will continue to be successful and grow within the market.
Branches will not disappear tomorrow, but banking as we know it has changed. Although change can be scary it can also be exciting, and in this case, much needed. With more emphasis on creating “experiences” for your customers and members through a higher level of personalized service, and technology solutions that can match and exceed the consumer expectations branches will not end up extinct like our friends in Jurassic Park.