To Branch or not to Branch....is that the right question?



The quest to justify banking's oldest distribution channel continues despite the wonders of self-service automated kiosks and the growing adoption of mobile banking. The arguments for and against branch banking are well publicized these days, and yet we continue to debate the subject year after year.


"Ditch them....they are expensive and nobody is using them anymore!"

On one hand we have the argument that the branch is an expensive operating expenditure that does little to meet the expectations of the millennial customer, and has been made redundant by superior and contextual advice through mobile apps. Teller per transaction costs are increasing, and people are using more convenient ways to conduct their everyday banking needs. Remote cheque deposit, self-service kiosks, smart ATMs, digital channel migration and video chat bankers are all gunning the traditional branch model down. All the logic, statistics and key performance indicators about branch banking suggest that it's days should be numbered.


"It doesn't matter...customers like nearby branches and will choose a bank that has lots of branches over one that doesn't"

On the other hand, there are those that say it doesn't matter how good your mobile solution is, when you REALLY REALLY need to do something of importance that concerns your financial wellbeing, you want to do it in person, and in a branch - period! Whilst the digitization of banking is creating disruption in the industry, it is still not executed to a level needed to displace the branch value proposition. Customers with complaints, or in need of specialist advice like retirement planning, or their first mortgage, still want to visit the branch and speak with a trusted advisor. Some customers, particularly small business owners, still want to establish a relationship with the branch manager because there is more to their financial situation and needs, than what an automated decisioning solution can compute. Others want to just open a basic current or checking account in a single branch visit and walk away with a debit card, cheque book and active account number in a few minutes. Oh and what about the brand?.....the branch still represents something tangible, something real, and when you are talking about an industry that sells 'trust' people want a place they know their money is safe. All the logics, statistics and key indicators about branch banking suggest it is here to stay.


It is difficult to argue with either view point, but perhaps the question should not be whether we should have branches or not, but rather what should be happening in the branch. Let's for one minute consider what Branch 2.0 could be.


For someone who has done a considerable amount of digital branch transformations for several banks across the globe, I am often questioning what could and should be done differently in the branch. It is obvious that the role of the traditional teller must change, and there are many new technologies from beacons, to touch screen tablets and walls, and natural language Artificial Intelligence that can transform the engagement and interaction levels with customers, but this is still not enough. There are even great solutions for addressing the cost of running a branch these days, like partnering with another retail business like a coffee shop, health bar, post office or supermarket chain. Making the branch a 'destination of choice', is gradually becoming a reality for many evolving banks, and the days of the Barista Relationship Manager could soon be upon us. That said, even that is not enough of a compelling reason to ensure branch survival. For me, I have come to the same conclusion every time....it's about people. It's about relationships, local knowledge, body language, smiling, being polite and generally trying to help customers that makes all the difference. No amount of technology transformation and digital alternatives can compete with empowered and motivated branch staff.


My benchmark has been, and continues to be Handelsbanken in the UK. Not only is their slogan "The Bank is the Branch"....but they literally mean it. Don't get me wrong, this is a bank that continues to invest in digitization and equipping their branches with usable technology, but more importantly they are doing something fundamentally different. The branch staff have a say in decisions about their customers. Can you imagine such a thing? The problem with most banks these days is that in their quest to become cost efficient, they have centralized operations, KYC and the risk assessment process, and that means the decision makers sit nowhere near the customer. They are most likely sitting in the Head Office, Back office or offshore office, and they are not incentivized to keep customers happy, or increase revenue. The centralized team's performance (and ultimately their bonus) is measured with KPIs like compliance, cost savings, and not approving a customer who defaults. The sad fact of the matter is that Risk in most banks these days is often measured when it goes wrong, and very rarely when it goes right. That means that it is much easier to say no to a credit application, and devise a myriad of risk policies to support your decision. I am willing to bet that in most banks where this is the case, they will have a revenue growth curve that correlates directly to the amount of risk exceptions or policy revisions for that year.


This is where Handelsbanken does things a little differently. When customers discuss financing or account opening with the branch manager, that manager has a substantial say in what decision gets taken. It is no surprise that the bank continues to win customer service awards year after year, and has enviable numbers when it comes to the quality of its credit decisions.


There it is....the answer to what Branch 2.0 should be, is not what services and advice can be served through paperless solutions and digital channels, but rather that customer delight is best achieved when you hand the power to serve the customer back to those sitting in front of the customer. Now there is a branch transformation objective that should get bankers thinking, and one that could be more disruptive than any Fintech unicorn if executed flawlessly.

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