Branch Banking Is Ripe for Innovation
“The retail bank branch is dead!” screamed talking heads in the mid aughts, encouraged by the growth and popularity of online banking, whose arrival was heralded in the 1990s.
The clamor around the demise of the bank branch intensified as the perception that millennials shunned anything brick and mortar took root. Millennials were thought to opt for the ease and convenience of mobile banking over visiting a branch to transact business, adding to the conundrum.
We can reflect back on this period knowing full well that millennials never failed to embrace the in-person banking experience, rather they desired a more personalized experience supported by digital tools.
Research conducted by BAI as part of their 2018 Banking Outlook highlights that millennials averaged more than 70 transactions per month with their financial institution – versus 60 for Gen Xers and 45 for baby boomers – and expressed the most frustration with digital channels. Not surprisingly, millennials are opening more accounts than preceding generations, as they are beginning to acquire assets and wealth.
The final nail in the bank branch coffin was said to be the onset of the Great Recession, which buried the industry in the perfect storm of regulation and red tape beginning in 2008. Innovation was stifled and merger and acquisition activity crawled to a stop, as banks focused on liquidity and capital reserve issues, pushing performance to the back burner.
Alive and Kicking
The retail bank branch is most certainly not dead. According to David Kerstein of Peak Performance Consulting Group, banks and credit unions still open about 1,000 new branches a year. While overall bank branch transactions have seen a drastic reduction with the advent of online and digital options, those that do occur at a branch have become increasingly complex. Staff roles have evolved along with this shift in transactions, resulting in employees being shuttled between different locations based on their areas of competency.
The industry has seen a reduction in the number of staff per branch, which would seem counter-intuitive as consumers of any generation demand more personalized banking interaction. The three most common drivers of interaction at branches include questions around investing, financial planning and account opening; all queries that mandate qualified staff are on hand with intimate knowledge of those products.
This quandary has given rise to multi-skilled associates, who are adept at resolving account disputes, competent when it comes to cross-selling financial products and are able to jump on the traditional teller line if needed.
Ultimately, what does all of this mean for the future of branch banking?
Buzzwords like artificial intelligence, robotic process automation and machine learning are all the rage in nearly every industry in 2019. Whether it’s self-driving cars, package delivery via drone or utilizing Amazon’s Alexa to adjust the thermostat, the latest technologies are impacting nearly every aspect of business and our home lives.
Why then aren’t we seeing this wave of convenience and automation in the banking industry, especially given the resources and capital of the larger banks?
Traditionally, banks and the financial services industry as a whole have been slow to innovate. According to a Bankrate.com analysis of 2017 annual reports, 12 out of the 15 biggest increased their operational budgets between 2016 and 2017, citing technology spending as the driver. However, Celent notes that almost three quarters of that spending went towards maintenance of existing platforms versus new technologies. In addition, continued spending on risk and compliance initiatives in the wake of the Great Recession weighs on bank tech spending.
While banks spend their ample resources conducting the day to day business of banking, smaller, more nimble fintech companies are delivering the true innovation. Banks typically try to mimic these innovations, or they resort to what may be a rebounding mergers and acquisitions market to simply purchase the latest technology.
The classic “build or buy” debate has arisen with the announced merger of BB&T and SunTrust. As part of their press tour, SunTrust CEO Bill Rogers told employees in a company-wide town hall-style webcast that the combined entity will spend $100 million on technology and innovation. Will this spur other banks to follow suit? Will it result in wave of mergers and acquisitions in the space? What technologies might impact the retail branch experience to the benefit of customers and employees of banks alike, or will part of that spend be simply a re-platforming on slightly revamped legacy systems?
Automation of Branch Tasks
Given the banking backdrop outlined earlier, customer experience, as is the case with most retail environments today, is king. Three clear areas that technology and automation can best impact the retail branch include agile staffing models, increased scheduling flexibility for employees and simplifying branch tasks and activities that don’t directly involve a customer.
By optimizing staffing, branches will naturally increase employee productivity. Retailers were an early adopter of these workforce management solutions, forecasting peak times of traffic and deploying store associates in an efficient manner via machine learning. Other pain points alleviated by these solutions at a branch can include forecasting of what-if scenarios, ensuring compliance with ever-changing labor laws and support for branch specialists (wealth, mortgage, etc.) Benefits include an increase in sales, more efficient labor costs versus manual scheduling and a boost in customer service satisfaction.
But staffing is only a piece of the bigger puzzle. Flexibility is important given the complexities of the multi-faceted roles associates are handling nowadays, especially with unemployment at historic lows. Branch managers would be empowered by app-based shift swapping for associates, while improving employee retention and satisfaction.
The final piece involves funneling all non-customer branch tasks, requests, and follow-up actions onto a dashboard, on the same platform managers and employees are using to manage their schedules, time worked and attendance. This enables forecasters and managers to accurately identify the resources needed for these non-customer requests and audit their impact on branch staffing optimization. This information can be used to drive changes to the types, volume, priority and time allocated for these non-customer tasks: improving the efficiency of non-customer activities and allowing colleagues to devote more time to actual customer interactions.
Whether achieved via internal build-out, the acquisition of a competitor or by engaging a vendor, the banking industry is on the cusp of transformational change, driven by innovation. The timing could be very prescient, or just flat out lucky, should the robust economy take a downturn over the next several years. Better to commit to transformational technological change now, creating operational efficiencies and happier bank associates and customers, then to have to play catch-up if the economy sours.
Long live the retail bank branch!
This blog was originally posted on BankNews.com.