By JD Metcalf, Laura Watson and Nicole Pawluck
Several of our thought leaders have recently addressed the changing role of brick-and-mortar stores in an increasingly digital retail world. Do they still matter? Or is brick and mortar dead? Frank Grillo, CMO at Harte Hanks, explored the continued need for physical store locations in light of the recent Amazon acquisition of Whole Foods, while Jon Dome, Director of Customer Engagement at Harte Hanks, offered insight into what it takes for such stores to adapt to a more holistic, experience-oriented functionality.
But retail is not the only industry struggling to determine the future of their physical locations—banking and financial services grapples with the same question. This is a space in which we have also seen an exponential shift in consumer preference of digital interactions. The Financial Brand states that, as of October 2017, an average of three bank branches are closing per day. According to JLL Research, the number of bank branches in the U.S. will soon fall to 71,500 from the existing number of 90,000.
The current standard branch design is a relic from the 1700s in England when the bank’s primary job was protecting gold and currency. Tellers used to stand in small windows that made it harder for someone to reach in and steal money. Plus, a teller could quickly close the window (often lined with a gate or bars) to protect the money (and themselves) if there was a robbery. Consider the fact that we still use the antiquated description “teller window” when completing a transaction at the local bank branch.
So, how does the bank branch as we know it need to change to stay relevant while still balancing the need to provide a familiar and comfortable place for customers to conduct financial transactions?
Digital Is Making Change
This study by CACI indicates that digital interactions between consumers and banks will more than double over the next five years, while branch visits are expected to drop approximately 60% (possibly more, depending on the demographic). Additionally, desktop banking is anticipated to drop 63% as mobile apps and services become more accessible across demographics.
Does this drop-in foot traffic and swift uptake of new digital methods mean there is no value left to be found in the bank branch? No—well, at least not yet. This article discusses the potential path to Augmented and Virtual Reality ultimately replacing the physical bank branch, which is key to being on the forefront of innovation and solving unmet customer needs, but we’re not quite there.
So what do we do in the meantime? As you begin to reevaluate your branch locations, there are a few key points to consider.
Deliver Value to Receive Value
Wells Fargo’s Head of Community Banking, Mary Mack, has observed that her branches serve a valuable and specific function to visitors—especially those that primarily engage with the bank online. She says,
"Our customers come into our branch not to get a product; they come in because they want to buy a car or they want to buy their first home, or they want to repair their credit and they need some help doing it."
—Mary Mack, Head of Community Banking, Wells Fargo
“If you go into a branch, I believe, you’re looking for something of value. You’re looking for somebody to understand something that may be a little bit more complex. Our customers come into our branch not to get a product, they come in because they want to buy a car or they want to buy their first home, or they want to repair their credit and they need some help doing it.
So, the way I think about branches are that [there are] team members who can help customers understand what it is they’re trying to do. They’re not as interested in loans, deposits and mortgages. They are interested in homes, and cars and rebuilding credit. So that’s where we start, and our team members in the branch help solve those problems.”
Despite more customers than ever using digital or mobile banking, a J.D. Power report states that 71% of all bank customers visited a branch an average of 14 times over the past year and index 27 points higher in overall satisfaction with their bank. A clear indication that while technology solutions are important, consumers are still finding value in their local branch.
Jobs-to-be-Done Strategy at Banking Branches
The changing role of the branch lines up perfectly with the Jobs-to-be-Done theory. Banks need to design their branches around what jobs their customers need help with. It’s a better use of the customer’s time and a better use of the bank’s resources. Bank profitability is being squeezed, so if there's any efficiency they can gain in their branch design, they should do it.
So, again we need to look at why customers visit bank branches. What jobs are they doing there? Most of the time, it's to deposit and cash checks.
For simple transactions like these, banks should take a cue from Southwest Airlines. For several years, the airline has offered multiple kiosks for customer self-service check in with one or two lobby agents available to help with technical challenges or complex transactions. This is a benefit for both the bank and the customer. Higher volumes of transactions can be managed, and with fewer resources.
Infrequent branch visitors usually visit to talk to a banker about a loan, mortgage, credit card, or some problem with their account. The jobs that these visitors are trying to solve require more care are typically resolved with longer-term, higher-dollar products (e.g. mortgages and auto loans rather than checking accounts). These customers need more guidance, regulators require more disclosure, and expect more service while completing jobs like buying a new home—and both customer and bank can benefit by offering more human interaction and personal value. Offering more value for these types of jobs can result in higher value customer purchases and longer, more loyal relationships.
Can bankers be mobile and visit these infrequent customers in their homes? Why not do it via Skype? It’s worth the investment to help these customers complete their jobs as efficiently as possible—they are usually the most profitable.
Deliver Value Through the Branch Experience
In addition to optimizing your branch strategy around customers' jobs to be done, you can't forget to also optimize the customer experience.
There are tests already happening in the retail sector with businesses scaling back the number of physical locations, given consumers' digital preferences for ease and convenience. However, they are still making flagship and key locations (in neighborhoods where strolling and window shopping are the norm) feel more like a specialty destination than a chore. It’s all about the in-store experience. A new term—consutainment—has actually been coined to describe the mix of ultra-convenience, consumption, and entertainment that these locations aim to provide for consumers.
In fact, the internet itself has become less about pure information and more about infotainment catered to helping people solve their unique challenges, or jobs to be done, in a way that feels less like a job and more “palatable.”
Retailers like Bonobos are already using digital dressing room technology, and Lowes is testing the LoweBot, a customer service robot. Some banks and credit unions are already following suit, implementing technologies like lobby trackers to identify who’s next in line for service and be able to quantify wait and assist times. Banks are also deploying service kiosks that invite members to easily provide feedback by clicking a range of happy, neutral, or sad face icons, which members happily interact with (about 4,000 responses per month).
Capital One entered the consumer banking space in 2005, and has been evolving the way customers engage through Capital One 360 Cafes. This goes beyond the notion of simple informational and transactional bank engagements with customers, while still providing them with a comfortable experience. Since money is one of the most stressful situations for people, these spaces serve to make conversations about finances feel more accessible in a relaxed environment.
These experience-boosting efforts are ultimately rooted in facilitating the customer's job to be done—helping customers to easily get the right items to their dressing room to try on or helping them to quickly talk to a service representative that can assist with a car loan.
But how could the branch go further in adding value to the customer experience? Consider Boost Mobile's decision to use their storefronts as polling places. Are there similar ways banks can repurpose their locations to provide value to their communities? And how can pop-up branches contribute to this value beyond traditional location testing or facilitating events? Let's get really crazy for a moment—instead of food trucks, what about bank trucks? What financial services could literally be made mobile—and would that be valuable for the customer?
The point is that we need to think outside the box and outside the traditional four walls of the branch to create an experience that delivers consutainment while ultimately helping customers to complete their jobs.
Branching Out to Connect with Customers
This is an opportunity to connect with customers and prospects at a key point in their journey. By understanding and addressing the ultimate job to be done—and not just the product to be sold—branches offer a unique connection between bank and customer that has so far proven difficult to replicate online.
So, yes there is a definite role for branches. They just need to be designed around the Jobs-to-be-Done approach with an eye on creating an ultra-convenient and entertaining experience. And all of this should be part of an omnichannel strategy. Call centers, chatbots, virtual assistants, ATMs, branch and online banking should be designed the same way and coordinated so that a customer can move between them with little to no friction.
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