Mark twain was once asked to comment on the rumor about his death. An American newspaper had published his obituary while he was actually in London. He responded in his characteristic humor – “Reports of my death are greatly exaggerated.” To me, this quote aptly summarizes the perception about the role of branches in the banking world today.
Branches have traditionally been the cornerstone of banking evolution over many decades. However, the emergence of digital channels and changing consumer preferences over the last few years have impacted its importance in a bank’s channel mix.
To understand the future of branch banking, I had the privilege to moderate a virtual panel discussion titled “Branch Banking Post COVID19 – What banks need to do.” with an eminent group of banking technology leaders across regions. Here, I have summarized some of the insights shared during the discussion.
Siew Choo Soh, MD Group Head of Consumer Banking and Big Data at DBS Bank spoke about how a combination of digital and physical is the way to go in the post pandemic world. The new buzzword is ‘phygital’. Accordingly, DBS bank has redesigned the branch experience for different personas to strengthen the existing network. DBS is also seeing an accelerated adoption of their digital banking services app, ‘digibank’, and their payment app, ‘PayLah!’ as well.
Dennis D Omila, EVP and CIO at UnionBank of Philippines (UBP) believes that the purpose and role of the branches will have some changes going forward. He believes that, along with a focus on transactions, branches would increasingly drive digital conversion and advisory services. Accordingly, UPB has created distinct sales and transaction teams in their branches, and created a unique lounge-like experience for their customers. Dennis also believes that while some branches will adopt the self-service model, UBP would like to experiment on futuristic branch models like ‘ARK’, their fully digital bank branch, and ‘Branch-on-wheel’.
“Even during the current lockdown we have kept our branches open because we believe our customers need our services even more in the current situation. We have a unique concept called ‘Branch-on-wheels’ that can take the banking facilities to the neighborhood. This has been particularly helpful in the current situation. We have ‘high-tech and high touch’ strategy where customer care is the prime objective,” Dennis explained.
Peter Neufeld, Head of Customer Digital Experience, Financial Services – EMEA at EY, says it will be hard to argue that we will not see a reduction in number of branches across most markets. However, Peter also observed that some banks are leveraging branches to play a proactive role in engaging the local community during current crisis. He believes that people will continue to depend on branches for complex decisions like buying a home or arranging business loans.
Biswabrata Chakravorty, CIO at IndusInd Bank, observed that today with customers preferring digital banking that is available 24X7, IndusInd bank has focused on digitizing the branch processes. An example he quoted was the successful launch of video KYC that can enable digital onboarding of customers for credit cards, personal loans and savings account.
The bank has also enabled branch staff to work-from-home effectively during the pandemic. In a country like India, this not only reduces the dependency on a good branch location, it also helps serve a significant proportion of the population that needs assistance for transactions. The bank continues to welcome customers to the branch keeping the norms of the pandemic protocol, as the bank has prioritized financial inclusion.
Barid Neogi, SVP and Head of Group Operations at Emirates NBD, spoke about the bank’s successful digital-only offerings, called “Liv.” targeting millennials and “E20” for SMEs. “But everyone may not move to the digital channels,” Barid observed. He stressed that the branch network will continue to be very important for incumbent banks but there is a need to focus on innovation to increase its relevance.
Emirates NBD has conducted some interesting experiments in the ‘branch of the future’ space in Dubai – one such was launch of Pepper, the humanoid, which provided a fun experience to customers at the branch. He believes that in the near future, humanoids can perform services like giving a token to maintain the queue system responding to basic queries or processing simple service requests.
Adrian Vermooten, Group Head Digital Innovation at Standard bank, commented that their initial focus on the digitization journey was on mobile and internet banking channels. But soon they realized that the branch also plays a critical role in creating a unified omnichannel customer experience. He calls it focusing on “2Cs” – Convenience & Complexity.
The focus on convenience for everyday banking is move to digital. But, it is critical to provide customers a consistent cross channel journey when they choose to shift from digital channels to physical branches. Hence, Standard Bank embarked on a branch digitization program to match the experience on digital apps leading to significant improvement in customer satisfaction. Complexity on the other hand is about focusing branches for high value transactions that will continue to require a human touch. Adrian believes that, especially in a market like Africa, the role of a branch in financial inclusion and literacy is critical.
Consider this recent survey by Simon-Kutcher & Partners in in Canada, which studied the impact of COVID lockdown on branch banking. Their finding was that 57% of the respondents said they would open accounts with banks having physical branches compared to 3% who were fine with digital only banks. 62% of the respondents said that they would move their account to some other banks if their bank closed all physical branches.
While it is true that the number of branches may be being optimized in many countries, they are far from disappearing and are in fact being strengthened with digital upgrades to deliver new services and experiences. I, for one, believe that branches of the future may very well be like Apple stores, and will play an integral role in creating trust, providing high value advice and explaining complex products, while also aiding financial inclusion.