By Josh Linder, Director, NCR Business Consulting
Popular press has argued that the branch is obsolete and that consumers are shunning the branch. Traditional financial products are being replaced with prepaid cards as cited in the Wall Street Journal.
Coming out of the great global recession, the key challenge facing banks is that non-interest expenses (NIE) are difficult to contain in the face of a changing consumer, and the emergence of new entrants into the banking sector (notably the growth of credit unions and virtual/online banks).
Branches are expensive to operate, yet they have been proven to be the best channel for sales and customer retention. There is no better place for meeting face to face with clients to provide advice, deepen the relationship, and sell high margin products. The key to success is reinvention of the branch to meet the needs of the new tech savvy consumer who has grown skeptical of traditional banks.
At NCR, we have witnessed – and developed – some fascinating designs and concepts for the branch of the future. My team is engaged with leading financial institutions, retailers, and travel organizations on every continent, at the forefront of this change.
We have found that a branch should be one aspect of a greater network distribution strategy, not just a standalone pillar as it once was. You need to make changes which align your physical locations and technology with your brand.
Technology as an enabler is one aspect of this new distribution network, but it starts much earlier. Banks must use this opportunity to investigate their brand, audit the consumer journey, validate their staffing and workforce models, and optimize for a long-term, sustainable consumer experience.
So while we think that the branch is changing, it is far from extinct. We heard that cash would be replaced a long time ago. Now, the branch is under the same watch. But in this case, it’s about adapting the branch and your organization to customers who are both better educated and more enabled than ever before. Your organization needs to explore and invest in new channels, while also maintaining and supporting the channels which support your highest value – and greatest engaged – customers. We have found that a consistent, cross-channel integration strategy is the key to success.
In summary, branches must add value to customers through an improved experience. It is an opportunity to improve how you interact with your customers. The branch can be a socialization tool, as witnessed by ING Direct (now owned by Capital One), an education tool (as evidenced by leading credit unions and private banks such as First Republic Bank), and a place to deepen the relationships with clients by providing advice on all of the big decisions in life that have a huge impact. But these require re-thinking – and re-shaping – your branch.