The demise of the bank branch has been predicted for years. Today that death knell seems to be ringing louder than ever as branch visits continue to decline. Customers are increasingly migrating toward new digital technology options allowing them to conduct banking from their phones. At the same time, more mobile-only challenger banks are launching and rapidly attracting customers and accounts.
But the traditional branch network is far from dead. In fact, with new open banking technologies, it’s potentially a major structural advantage over banks that have no ability to meet their customers in person. Of course, bank branches must adapt to the changing times. But adapting to new customer preferences and technologies is quite different from disappearing.
EY has identified three ways open banking technologies will help regenerate bank branches and transform them into unique selling propositions (USPs):
1. Manage complex customer needs
There is a faulty assumption that customers in the future — particularly digitally native millennials — will never need human interaction. In fact, EY proprietary research has found just the opposite. At some point, most customers will face an issue with enough complexity that they will need to speak to someone and the branch provides a perfect channel. They might be applying for a mortgage, or they might need to remove someone recently deceased from an account. Exactly how much complexity each customer can handle on their own will vary, but even millennials may find occasions to visit a bank branch.
Interestingly, as transactional visits to banks decline, these complex and personal interactions will take on greater meaning. Each interaction will stand out and be an opportunity for the bank to distinguish itself and deepen its relationship with the customer. By reducing the administrative burden on branch employees in areas, such as income and expenditure collection, open application programming interfaces (APIs) allow them to focus more on each customer interaction.
2. Demonstrate increasing customer-centricity
In response to open banking, traditional banks will need to redesign the physical branch, the skills within the branch, and the products themselves — all with an eye toward putting the customer at the center. Today’s branch design, characterized by teller counters and queues, is hundreds of years old and its days are numbered. Indeed, some new branches are almost unrecognizable: coffee and pastry counters have replaced teller counters, and comfortable chairs and privacy screens have replaced teller queues. Some banks have reimagined themselves more as a community hub where local entrepreneurs can work and network.
Also changing will be the mix of skills of branch employees. Instead of needing people behind the counter who can count money quickly, banks will need employees with strong interpersonal skills for complex and sometimes emotional tasks, and for some tasks that are only just emerging, such as teaching customers to use mobile apps, or managing vulnerable customers with the help of open APIs, such as those designed to help people with gambling addictions.
Finally, traditional banks will need to redesign their products and services to achieve more seamless customer journeys enabled by open banking. Today it’s impossible for many bank customers to begin a mortgage application online, save it, and continue in person at the branch. Meanwhile, microservices that leverage an array of partnerships will reshape the product and service line-up. For example, generic savings accounts could be replaced by a service that uses open APIs to connect to airlines or holiday destinations so the customer can save for a specific vacation.
3. Lower operating model costs
Today’s branch networks are expensive to operate and unless these costs are brought under control, bank executives will continue to see these networks as cost centres and not as a strategic advantage.
New technologies in the branches will also lower costs on several fronts. Open APIs will eliminate the need for certain expensive labour and hardware. Instead of desktops, employees will use tablets. Instead of a server in each branch, the branches will leverage the cloud. Instead of large-scale labour-intensive system upgrades, software updates will be pushed out to the technology. And since microservices reduce integration layers, products and services can be swapped in and out with ease.
With the adoption of open banking, it’s clear that the bank branch is far from dead. But, for it to survive, banks must reimagine its design, staffing, technology infrastructure and operating model within the context of an open banking world. That might not be easy, but it will be worth the effort. By leveraging open banking to put the customer at the centre, the branch network can become a strategic weapon and potent answer to mobile-only bank.
This article was previously published in the March/April 2019 edition of Open Banking Expo magazine (openbankingexpo.com).