The future of banking in-branch has been under threat for quite some time. About a third of the UK’s branches closed between the beginning of 2015 and August 2019, while the US lost two thousand branches in 2018 alone; the picture is similar across most countries. 

Then COVID-19 hit and the banking world, like many other sectors, changed overnight. Although many branches stayed open throughout lockdown, all but essential banking services had to move online and, in addition, banks were responsible for the digital roll out of government loans, mortgage holidays and paycheck protection programs.   

The pandemic seems to have spurred the digital transformation of a sector that was previously slow to implement emerging technologies in banking, but is this the final nail in the coffin for in-branch banking? Our colleagues at Paragon DCX recently hosted a webinar with banking and financial service experts from the UK and the US to answer this and other questions about the future of banking; here are the top four takeaways from their discussion.  

1. Human interaction is as important as ever

Years ago, many banks invested heavily in robo advisors based on the prediction that millennials would demand an entirely digital banking customer experience. These predictions never materialised, however, and while this generation “snacked” on digital – completing simple transactions online and through apps – they still wanted to speak to a real person about more complex services like investments and mortgages. This still holds true and, while the pandemic has resulted in a massive spike in digital banking engagement, this change in customer behaviour has been driven by necessity rather than by choice. Only some of these changes will stick because customers still want personal interaction with their banks, so it's vital that banks retain the human touch when considering future digital strategies.

The next challenge banks will face is to get the right balance between tech and touch – to align digital and face-to-face interactions so that you provide the right service, using the right channel at the right time. Banks should aim to use technology to develop human relationships, using digital tools for easily facilitated transactions and driving high-value interactions into the branch where technology can enhance the experience further. A seamless customer journey is essential and customer data should be shared across platforms so that a process started at home can easily be picked up in branch. Importantly, digital tools should always include “trap doors” so that customers can easily speak to a human at any point – whether that’s via webchat, telephonic banking or in-branch. 

2. Digital banking is crucial, but complicated

While it’s fair to say that the banking industry has lagged behind other sectors when it comes to the digital experience, the only channels that could move fast enough to deliver the various financial support and relief schemes during lockdown were digital. But, the banking sectors’ performance during the pandemic doesn’t mean that we’ve solved the underlying issues that historically prevented the industry from delivering digital customer experiences that compare with other sectors.   

There will always be regulatory drag in banking and the financial services industry – the regulations are never going to be up to date with the technology being developed, so digital banking teams are unlikely to be first to deploy cutting-edge digital technologies. COVID-19 has exacerbated this situation further, delaying regulations that were in process to 2021 while everyone focuses on getting through the pandemic. Most banks in the US also run on the same technology stack which limits their ability to innovate and can create a lowest common denominator effect where “good enough” is the norm.   

But customers don’t compare one bank’s digital services with another’s. They’re comparing your services with those offered by Uber and Netflix, and there’s a huge appetite for tools that improve the banking experience. Banks that hope to compete with other digital providers will need to take ownership of their technology stacks and develop tools that can be rolled out quickly and “fail fast.”  The trick is to do this while maintaining resilience so that you balance innovation and service delivery.  

3. Bank branches are being reinvented 

In-branch banking is definitely not dead. The physical presence of a brick-and mortar bank makes customers feel more secure and builds trust – they want to know they can visit a branch and “look into the whites of someone’s eyes,” even if they don’t intend or need to. Bank branches also play a key role in ensuring that communities have free access to cash. But, with around £700 million a year being spent on unprofitable branches and ATM’s in the UK alone, in-branch banking is also not viable in its current state.  

Bank branches remain an essential part of banking operations, but they need to be redesigned and re-engineered to suit the new market and future banking services. Some concepts that are currently being considered and tested include: 

• Shared banking – a number of different banks share one space to save on overheads
• A “We Work” approach to banking – a flexible space for professionals to work or meet which also provides on-site banking services 
• Free event programmes – in-branch cafés provide free events programmes  
• Cash pick-up services – customers use online tools and apps to order cash which they pick up from various locations on the high street  

4. The customer is king

Banks have myriads of customers, spanning generations, all with different banking needs. The pandemic has highlighted that, now more than ever, it's really important to listen to customers so that we can understand the challenges they face and create solutions that respond to their unique needs. While some banking customers happily migrated to an entirely digital experience during lockdown, many others simply waited for branches to open up again rather than using digital tools. Similarly, whereas some of us haven’t handled cash in months, there are at least 8 million people in the UK that would struggle without access to cash, and this number is predicted to increase as a result of the crisis.  

Almost a hundred years ago, community banking played a large role in helping the US come out of the Great Depression by focussing on knowing and understanding their customers. Today’s banks could be as instrumental in the global economic recovery from COVID-19 if we apply these same principles.   

ORM’s view

Change is never easy, and it’s especially hard when you're working for an institutionalised bank that has been around, and done things the same way, for many decades. One of the biggest mindset changes is for staff to stop categorising clients as “online” or “in branch” and to recognise that sharing customer data across teams benefits everybody. This can be achieved by demonstrating how data from the analytics team, for example, can help the branch team build better customer relationships and improve their service.     

Bringing about cultural change and shifting co-workers habits isn't easy, but adopting a future banking model that uses digital tools to build human relationships will ultimately be rewarding, both internally and for the end customer.

Hear more on how the global pandemic is creating a mindset change for some of the world’s leading banks, by watching the webinar on demand now.