I’ve been working in financial services on and off over a period of more than 20 years and the debate over how many branches a bank needs has been going on for at least that long. So it was good to see the Financial Services Club keeping the debate going this week. Despite money becoming increasingly virtual and the growth of online banking I think the industry has a long way to go before we see a significant change in the number and style of bank branches. Banks that invest in their people as well as new technology will maintain both a distribution network and the valuable customer relationships that go with it.
It’s a branch, Jim, but not as we know it…
Too often the debate about the branch of the future gets sidetracked into physical design and construction issues. These are important parts of the customer experience but not central. It doesn’t matter how many counters you have with or without glass screens or whether you go for bright primary colours, play areas or free coffee machines, if you can’t fulfil my ‘banking needs’ quickly and easily I’m not going to be very pleased.
So what are these banking needs that we might have and do we still need a branch to fulfil them? Like many people most of the money I move around is electronic not physical so the role of the bank as a secure repository of my physical wealth is less relevant.
But we still use cheques – and will continue to do so after plans to do without from 2018 were shelved – and we still use cash so will need somewhere to deposit these (for a great post on this and other issues relating to this topic see here). I don’t see why this function can’t be outsourced but banks are still wedded to the idea of a full service outlet on the grounds that if you have to have an expensive property for no or low-revenue transactions you might as well try to maximise the value of the channel by selling other products. And if you’re really bold you can try to make the branch look a bit more friendly and provide coffee on tap as well…
Relationships not coffee!
This has been the approach that most of the large UK banks have taken for many years but it – overtly in my view – treats the customer as a source of additional revenue, not as a human being with some ‘banking needs’. A few years back I helped one high street bank develop a pilot branch aimed at business customers and the one take-away I had from this was that what customers valued was that they knew the people behind the glass (we kept the glass, but we did add a coffee machine). The cashiers, all of whom worked mostly at that branch, had the same view and, as a consequence, the branch had high satisfaction scores by business customers. We added some process and staffing changes to enhance the presence of business relationship managers so that when the customers did need something in addition to their regular deposits and withdrawals it was easy to get help.
That to me is key and my own experience of my local HSBC branch bears this out. When I left my permanent job to go freelance a few years ago, I needed to get a short term loan together to buy my company car. The manager of my tiny branch spent time with me working out the best way to do this without incurring large fees or interest charges and the fact that she showed she cared was almost certainly instrumental in me opening my business account there a few weeks later, even though the bank over the road was offering a better deal at the time.
However as some very smart people were debating yesterday at Next Bank Europe (follow #nbe12 if like me you missed it) we will move to a largely cashless society in the next few years with virtualised money being able to behave in much more interesting and intelligent ways than it does today. As that happens we will increasingly need someone to help us navigate this new and complex world and I’d vote for a smart local banker who could do that rather than a voice on the end of phone (sorry First Direct – love your service but are you there for more complex needs?) or a chat with a virtual advisor.
Banks who invest in front-line people with the right combination of banking know-how and emotional intelligence backed up by simplified processes will be the ones whose branches – and businesses – survive.