Building the Branch of the Future

Time to Branch Out

With increased competition and the rise of the digital economy, banks today are finding it increasingly difficult to acquire new customers, retain existing ones and deliver innovative products and services.

The millennial generation, for example, wants faster, more convenient access to banking services using the mobile devices that they love. Many traditional banks just aren’t serving this growing need, while their new competitors - the so-called ‘challenger banks’ - are using the latest applications and technologies to capture an increasing market share.

These new market entrants are different from their predecessors because they have been built from the ground up with digital engagement in mind. Forgoing expensive brick and mortar locations, these banking institutions leverage technology to on board customers faster and keep them engaged.

Looking Back

Until recently, conducting any type of banking business required visit to a bricks-and-mortar location. One channel, one approach, replete with wet ink and stacks of paper documents, is how traditional banking business was done.

With the proliferation of the internet, PCs, tablets and smartphones, branch banking is facing competition like never before. The customers’ need for convenience drives technology and influencing the banking industry.

According to recent research by UK-based pollster YouGov, there’s been a significant move to online transactions, with 78 per cent of people now using online banking at least once a month. In addition, more than half of respondents bank either by phone or online and use of these channels will continue to grow.

With so many similar banking products and services available in the market, banks need to ask themselves what they can do to differentiate their offerings and stay ahead of the competition. Besides competing with their bricks-and-mortar rivals, new entrants like Apple Pay and others quickly entered the market with minimal fiduciary compliance accountability.

Banking on the Future

Many banks mistakenly invest significant capital in modernising their branch network, thinking that customer foot traffic will rebound due to a new exterior look, new sign-age or even a change in furniture. But to obtain a competitive edge, financial organisations must be more strategic, innovative and execute rapidly. And if they can’t deliver value, speed and an outstanding customer engagement experience, then their customers will go elsewhere.

Although the future of branch banking may be uncertain for some, there are financial institutions who are forward thinking and are strategically planning - and acting - on how best to serve their existing and future customers. Some are even asking if they should be even be focusing on branches in a world where mobile access is increasingly universal and where customers expect a superior digital experience.

In fact in a recent report, PwC suggests that by 2025 New Zealand may not need any high-street bank presence at all. The report, called The Future Shape of Banking, explains barriers to entry for new financial services players continue to decline, the traditional business models of today’s banks will continue to be challenged.

Until now only around 2% of customers per year have changed their banks, primarily because there hasn’t been a real reason to change – their current bank is just like the rest.  However, with new entrants and their innovative ways of working, this rate is set to rise dramatically.

So the future of branch banking is heavily reliant on adopting innovative strategies that combine an understanding of customer behaviour, changing market demographics, financial product relevance and the capabilities of technology. It is predicted that by 2020 more people will be banking on their mobile phones than have ever banked before - and that’s just four years away.

Enhancing the Customer Experience

Clever ad campaigns, better interest rates and more branch locations are no longer as valuable to the connected consumer. The key differentiator will be how banks and other retail financial institutions anticipate, innovate and serve the needs of their existing and future customers, wherever they may be and however they choose to communicate.

Customers are bringing expectations to their banking activities, cultivated by their engagement with the wider digital world, and particularly with online retailers. They expect to interact with their bank on their own terms, whether using their PC, tablet, or mobile phone, and using web, email, apps, SMS, and social media channels. They expect the bank's marketing and customer service offerings to be tailored to these modes of interaction, and by interacting successfully with them via all of these channels in a consistent manner, enhanced customer satisfaction will have a profitable effect on customer acquisition and retention.

Forging the Road Ahead

As consumers become more comfortable conducting their lives on their mobile device, they will expect their bank’s service offerings to adapt to meet those changing expectations. But it’s not just about rolling out new mobile services; mobile affects the ways bank employees do their jobs, and presents challenges for IT departments who need, for example, to secure sensitive customer data on unmanaged personal devices.

Meeting the complex needs of their customers, banks will need to make large-scale changes in how they run their organisation and interact with their customers. In order to achieve this goal they will need to invest heavily in customer service, seek out greater operational innovation and adopt new technology, while at the same time dealing with a variety of legacy and regulatory challenges.

To stay ahead of the competition, banks should be looking for ways to achieve all of these objectives at low cost, with rapid time to market and be able to modify their underlying systems to react to ever-changing market trends. It may sound like a tall order, but for those who embrace this new era of change and fight to stay relevant, the rewards will be substantial.

Hear about the game-changing technology banks are implementing to maximise value to customers, join our exclusive Cheque Imaging and Beyond dinner on the 17th September at the Gherkin in London.

Presenters Include:

Eric Crabtree, Managing Director, Omni-Channel Banking at RBS will discuss how cheque imaging is changing the way they interact with customers, including how RBS' created the digital customer journey.

Fiona Gledhill, Communications and Stakeholder Manager at the Cheque & Credit Clearing Company will introduce the future clearing model and provide insight into new legislation that will revolutionise cheque deposits.

For more information and to register, click here.