Branch Of The Future – Where Does It Go From Here? (Part 2)

Read Part 1 here.

Several banks across the world have experimented with unique branch models as per their vision of the future. And as the examples suggest, there are as many models as there are banks. So, whose vision of the future will hold?

“Prediction is very difficult, especially if it’s about the future”, warned Nils Bohr, Nobel laureate in Physics. And perhaps Einstein had the final word about prediction when he said, “I never think of the future, it comes soon enough.” I am fully aware that I will be treading a risky path in this article. But I am drawing inspiration from Voltaire who said, “…the present is pregnant with the future.” It is indeed. Looking at the various trends amidst us and the technologies which are available or will become part of our daily lives soon, one can paint one’s own version of the future. And future is interesting because we will be spending the rest of our lives there.

Let’s start with the present. When people have been asked about bank branches, the following statements have frequently popped up, depending upon who you are speaking with:

• I like to do almost all my banking through digital channels, but I require face-to-face for advice
• I am a branch lover and I visit branches for most of my needs
• If a bank does not have branches, how can I trust it with my money?
• Where do I go when there is an IT glitch?
• How do I know that a bank is legitimate if it does not have branches?

Truth be said, in every country, there are fewer trips to the branch and more visits online. Customers are not only checking balances online, some are even taking remote advisory on complex products like a mortgage, provided there is enough information available online which makes the customer confident of a purchase. 

This presents a complex situation for the banks. Do brick-and-mortar branches have a role to play in the future of retail banking? Or do increasingly diverse and dynamic markets surrounding a branch reveal alternative strategies to balance footprints and formats? What looks inevitable is that the number of branches will reduce. And digital technologies will accelerate the branch transformation, not make them extinct.

Here is my recipe for the future of the branch. Feel free to agree or disagree with my point of view and do add yours.

India is a tale of many countries and each city is a tale of many cities. India has pockets which has the wealth of a Switzerland, or the mass affluence of a Russia or the poverty of a Malawi. A one-size-fits-all strategy will not work. I believe going forward a branch strategy will be built on the following 5 pillars.

1. Size and format of a branch

This will depend upon the micromarket in which the branch is operating in. Is the branch in an area where there are young customers which are wealthy? Or are there people who do not have lavish lifestyles and nearing their retirement? Is the area witnessing a rise in residential housing or is it full of people with low levels of disposable income? Is it a rural area or a blue-collar neighbourhood? Is the area surrounded by self-employed people or is it a residential area where people commute to work to the central business district? Branches will become bigger, smaller, more innovative or simpler. All this can be figured out with the help of demographic data and market intelligence. A clear majority of the 130,000 branches are not designed for how today’s customers want to bank in them. The answer perhaps lies in a tiered format, but this transformation depends upon the level of change the institution can sustain.

It must be stated here that banks understand the scope of the massive investments required here and that’s one key reason why the pace of change has been slow.

2. Flawless integration

With a host of self-service channels available, customers can solve their basic, standard queries without any human help. Generally, the unsolvable ones are brought to the branch. In such cases, customers want to comfort of speaking with a person. In these situations, customers want one of two things – solve my problem right here and now or take ownership and let me know by when you will solve it for me. For the branch it means a flawless integration with multiple back-end systems. Internal departments need to collaborate to have an end-to-end picture of the customer. Banks need to build seamless journeys and synchronisations from online to offline (O2O) which ensures that (for example) customers can start a form online and finish it in the branch.

3. Finding the optimal blend of people and in-branch technologies

Banks should look closely at people and technology together. Skill sets of employees must be updated so that they can use and serve customers in the most efficient and optimal manner. The technology being implemented in not just customer facing technology (ATMs, tablets, video conferencing, digital signage) but also the back-office technology that tellers are using to get their work done and streamline their interactions with customers. While the easier transactions can and should be done digitally or via an automated platform, there needs to be passionate staff in the branch who should take ownership and communicate enthusiastically multiple options to solve the complex problems of the customers.

4. Using customer data to drive decisions

Branch employees need empowerment and autonomy to listen to customers and respond with effective solutions, not a scripted one. Data warehousing, analytics, and artificial intelligence today is up to scale to enable that and to make that data flow to the front lines so that it can be used by the employees effectively to solve customer problems. The key is also not only to move decision-enabling data to the frontline, but to also to learn the creative solutions the frontline is using and make big data better, smarter and more effective.

5. The next wave of technologies

Branches will hold value for face-to-face interaction. However, in the future, this interaction will be blended into digital banking using augmented reality (AR) and virtual reality (VR). AR adds digital information on the top of the real world. For example, the Pokemon Go mobile game superimposes an animated character in a live view of the real world that’s being recorded by the phone’s camera. VR, on the other hand, puts the users in an immersive, entirely digital world. Thanks to the headsets that fill their vision and positional audio, users can become oblivious to their physical surroundings.

The current video conferencing solution is rudimentary compared to what is to come. Video conferencing is mostly non-interactive. Customers lack the ability to show to the bank representative a clause in the physical document, for example, with the home webcam lacking the resolution and immersion needed for this interaction. The alternative to video conferencing is AR and holograms. The possible applications of this technology can significantly reduce the need for a physical branch. As the technology like the Microsoft Hololens achieves mass market appeal, a headset which can project a wide variety of holograms onto the physical space of the user will offer a far greater immersive experience than a branch ever could. Customer can discuss their problems, receive detailed product information and services from a representative through Hololens.

VR has a very similar application. Using VR, a virtual bank can be created with the avatar of a bank representative who can discuss concerns and explain product benefits to the customer. VR is arguably a more viable successor to the branch than AR since it used regularly on smartphone devices for gaming and many customers already possessing the medium to consume VR.

According to Goldman Sachs, VR and AR will create a market worth $80 billion by 2025, and for banking to ignore the opportunities would be a grave mistake.

It is undeniable that traditionally a branch has been at the core of banking. However, with digital banking continuing to grow, the very existence of the branch has been questioned many times. Banks have to think furiously on their distribution strategy in the bold new digital world. Ironically, branches will also play the role of educating customers about the greater convenience of digital channels.

Branch banking does not lack in innovation, but lags behind in the pace of change. Every day the ground is shifting under the bank's feet. The future will not belong to those with the best layouts but to those that find distinct solutions around all the 5 pillars.

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References

• Future of the branch - Where do we go from here?
• Bricks and clicks - Mapping the future of the branches
• The future of customer-led retail banking distribution

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In case you missed

Branch Of The Future - Where Is It Now? (Part 1)

Using AI For Enhanced Customer Experience

I invite you to browse all my LinkedIn articles archived here.

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About the author

Anindya Karmakar has led multiple initiatives at the cutting edge of digital connectivity, IoT, robotics, AI, analytics, paperless branch and remote advisory. He is passionate about the digital revolution which is underway. He simplifies and de-clutters digital jargons and concepts and presents them in layman's language.

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The views and opinions expressed or implied herein are my own and do not reflect those of my employer, who shall not be liable for any action that may result as a consequence of my views and opinions. The pictures used have been taken from the open internet and I don't claim any credit for them. If you would like them to be removed, contact me.