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

A whole new industry involving books, seminars, podcasts, experts has spawned on the premise that the bank branch has no future. It’s a compelling argument. Personally, I don’t have a recollection of visiting a branch in the last one year, and that’s a long time. But, I also don’t think that the end of the branch is near or will happen at all.

There is no denying the fact that the current branch model will be disrupted. Many banks in India have tried to get their feet wet with changing the branch layout and have thrown in some technology believing that customers will lap it up. But largely, it hasn’t worked. And that poses the question: In the wake of digital banking, does it mean that customers are not looking at a more digital bank branch? The answer is both yes and no.

This is a two-part series on the future of a bank branch. Before we can delve into what a branch of the future will be like, we need to understand some bit of history of branch banking. This part is dedicated to that. In the second and the concluding part, I will provide a prognosis of what the branch may turn into in the next 3-5 years. 

Although banknotes were first used in China way back in the 11th century, the first European banknotes were issued in the mid-17th century and the first “clearing houses” were established in the late 19th century to process cheques between banks. However, its only in the last 5 or 6 decades that banking has undergone a dramatic change driven by the emergence of new technology and data management.

Banks were predicated to open new branches since that’s how they could serve the maximum number of people in the neighbourhood. This tradition continued to live till the early parts of the 21st century. However, the products being offered to customers continued to evolve and get more complex with innovations in the financial domain. Since branch was the only means of banking, all these products were sold from the branch. But with the rapid evolution of technology, banks realized that a lot of the functions can be centralized to drive standardization and reduce costs. Functions like clearing, common backend processes, resolutions for standard customer queries were centralized. 

As banks continued to grow, the centralized functions evolved as product siloes. Banks continued to accumulate customer data through systems which were designed in a product-centric fashion. And due to this, banks have evolved in a manner which does not take a customer-centric view. Meanwhile technology had moved faster. Mainframes gave way to cloud. APIs quickly became the norm. Challenger banks appeared on the horizon with the knowledge of legacy issues and eager to correct the situation. They had lower opex with the benefit of not investing in physical branches and they were created around providing superior customer experience. Incumbent banks were caught off-guard. It was always difficult to compete with agile and nimble competition. It takes a mammoth effort and an even greater determination from management to turn a ‘tanker’. Many banks took the challenge.

But they knew little about how to compete in the bold new digital world. Boards were full of old men who only knew traditional ways of banking. They were heavily invested in physical branches and it was impossible to close them down and start afresh – it was financially unviable. But, where should they go from here? 

It can be best understood by looking at what some of the incumbent banks have done so far. Here’s how some of them are re-inventing branch banking. You will see that there are as many models as there are banks. The common thread are a contemporary looking layout and decor with the latest branch technology. You will also notice the differences in positioning. It tells me that banks are still figuring this out. And that's the main reason for not scaling up these models.

Bank of America

Bank of America has opened employee-less branches and calls them virtual centres. They feature ATMs and videoconference rooms where customers can consult with specialists. 

mBank

mBank has opened Light Branches in high footfall areas like shopping malls. They take advantage of mBank’s mobile and online banking products and use innovative digital engagement techniques to open a new account, apply for a loan or handle cash. Video cameras identify genders and offer targeted discounts.

Timo

Timo, which stands for Time is Money, has a sole branch in Ho Chi Minh city called the Timo Hangout. It showcases different app options and the ease of doing online banking. It has a relaxed setting and is targeted towards the millennials. It aims to sell lifestyle rather than only a product.

Capital One

Capital One is opening Capital One Cafes which are designed for the customers of its online bank – Capital One 360. Walk-ins can use free WiFi, order a coffee, speak with a banker for advice or just use the ATM.

Tangerine

Tangerine has created alternative branches with its café approach with self-service kiosks, a coffee bar and children’s play area. Its Café Associates aren’t bank tellers with no client files. The branches do not accept or carry cash. Tangerine also has pop-up locations and mall kiosks offering a fast and easy way to open accounts.

PNC Bank

PNC Bank started a portable pop-up branch which costs about one-tenth of a normal branch. Employees use iPads for opening new accounts and cross-sell personal loans.

Umpqua Bank

Umpqua Bank has hosted yoga classes, homeowner association meetings, Oktoberfest style parties. 

CheBanca

CheBanca despite starting as a digital only bank, now operates 50 branches. But, they are far from traditional. The branches offer video stations with biometric authentication, essentially advice stations which need no prior appointments, self-service machines and appointment-only stations. The staff think of themselves not as bankers but retail workers focused on customer satisfaction.

Eastern Bank

Eastern Bank started a branch in a student union and shares the space with a book store and a restaurant. It has a cell phone charging station, wall mounted touch screens which are used for financial literacy initiatives and video conferencing rooms which can be used to consult with specialists.

Citizens Bank

Citizens Bank is shrinking its branches and converting them to places for advice from places for transactions.

The Bank of East Asia

BEA is creating digital branches with a comprehensive omni-channel experience and is targeting the young millennials. The paperless branch has a touch screens, interactive service stations, facility to connect on a video call and uses OCR and digital signatures. These are smaller branches and are usually located in a mall or a high-footfall area.

State Bank of India

Closer home, SBI, the largest bank in India, went all digital, creating SBI Intouch branches with a host of digital facilities like kiosks for opening accounts, printing debit cards, depositing cash and cheques, printing passbook and ATM facility. SBI has plans to increase the Intouch footprint but with smaller sized branches.

Given the variety in the branch models, what does the future hold? Read about it in second part of this series.

----------

Enjoyed this article? Share it with your network.

----------

In case you missed

Using AI For Enhanced Customer Experience

Facebook And Its Honey Pot

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

----------

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.

----------

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.