Countless banking publications have recently published studies and reports on the status of branch banking. Some claim it is alive and thriving, while others say it is only a few short years until it is obsolete. I prefer to subscribe to the first school of thought.
Just as other industries have been changed by the introduction of additional products (e.g. online subscriptions to newspapers), banking has seen the rise of more channels of interaction beyond the branch. Customers can now literally access their bank account(s) from anywhere they have cell phone or internet service. This enabling technology has the potential to radically change the kind of relationships that customers have with their bank (imagine a customer never going into a physical branch).
Even though new banking channels have emerged beyond the branch, the branch is not dead. To start with an analogy, since the late 1600s, people have used pencils to record ideas, preserve stories, and transfer information. More recently, the same can be done with a pen or Sharpie marker, both of which are longer lasting (and smudge less for all you lefties). Today, words, ideas, and stories can be captured on an iPad, computer, or even recorded in an audio format. All of these methods are more advanced, convenient and lasting than the pencil, yet 100 million pencils are still manufactured each year in the U.S. alone. Some people still value the simplicity of being able to write, figure out math problems, or even doodle, all with the convenience of knowing an eraser is available if they make a mistake.
What does this have to do with branch banking?
Just as the pencil may never become extinct, the same holds true for branch banking. Consumers, including some of Gen Y, prefer to use branches to meet with CSRs to open new accounts and discuss existing accounts. These tasks can be resolved through self-service channels, but some consumers still prefer to tackle more complex or critical interactions in the branch. While electronic channels are more convenient, banks offer the psychological impression of permanence and stability, which are two important factors in banking. Additionally, in a branch consumers are free to ask complicated questions and receive answers specifically tailored to their situation. While some consumers may choose to interact with their bank solely through mobile or online channels, branches still exist for a reason. Even with the improvements in technology, customers still find value in the personal interaction with a teller or CSR. CSRs are able to get to know the consumer rather than just accessing records through an electronic database. This builds a solid foundation for a long term relationship.
In some ways, the benefits of branch banking are even more important today. The lack of trust in the financial sector was punctuated by the addition (and subsequent redaction) of new bank fees due to regulatory changes impacting bank profits. The personal interaction of the branch experience adds loyalty and builds confidence where other channels may not have as high of an impact. More significantly, giving customers the option to bank when and where they most want to is vital to customer satisfaction. For some customers that will be the branch.
Banking is similar to many other industries–traditional methods are still used while new channels offer other ways for customers to interact with the institution. While the new channels in banking, namely mobile and online, do provide value, branches still provide a unique benefit these two channels never can offer–personal interaction.
- Kelty Wallace