The Road to Bank Branch Transformation

Commercial banks are at the heart of the cash cycle and their branches have been their key customer touchpoint. If you read the news section on bank branches, you might think they are to become a side show for commercial banks. RBR held an online conference on branch transformation at the end of November. The move by customers online, using apps and telephone banking is accelerating a trend to slim down branch networks, and so this event was a useful insight into the future branch.

Alongside a number of technical sessions talking about the Cloud, Artificial Intelligence, the power of software and the use of machinery for automated self-service and ATMs as a service, the main themes were around the need for fast change. For example, session titles included ‘Letting the customer drive change’, ‘Transformation to a trusted ecosystem’, ‘The role of a branch in an omnichannel environment’, ‘A digital solution that keeps the personal touch’ etc.

The presenters were from Brazil, the Philippines, Indonesia, South Africa, Canada, the US and every part of Europe. From this conference, it appears that the three roles of a bank branch are, and will be, transactions, education and advice. These roles were mentioned remarkably consistently across the speakers, although the level of cash usage in their economies dictated differences of emphasis.

It was clear that the actual issuing and depositing of banknotes and coins will be automated and self-service in the future. The tone was that this is a ‘necessary evil’. In some countries which are already at a ‘less cash’ level, the transactional role was not part of the vision for the future. This applied to very few of the speakers.

The ‘education’ function appeared to be largely helping customers to live with the digital world. This was spoken of as educating customers to be able to use the online and app based tools and products offered by the bank. Clearly some of the more complicated or seldom done, but mundane, banking tasks were included in this, for example opening a bank account or moving money overseas.

What the banks really wanted to get to was ‘advice’. Whether for business or normal account holders, advice relates to the value-adding fee earning activities of making loans and investments that are highly regulated and need personalised inputs.

An analogy was made to Apple stores. An Apple store is a showcase for all of Apple’s products and services. People come to them to wonder at the latest technology and solutions, to ask their technical questions about how those products and services will make their lives better and, occasionally, actually to buy the product there and then rather than later on online. Apple does not need a shop on every high street, people will travel to have the experience.

And this appears to be the vision for most of the banks who spoke. Fewer bank branches but amazing show cases for the banks products and services with staff who are expert in their every element. As Nationwide said, hassle free money, ‘moments that matter’ and ‘homes and dreams’. Waste down, service up, cost out.

The focus was, understandably, on serving the largest segment of the population, those who are digitally capable. ‘Inclusion’ was talked about but in the context of bringing banking to people who were digitally capable but without bank accounts.

One of the more innovative and ambitious visions for the future was that of the SNS bank in the Netherlands, part of the de volksbank group which also includes the 500 branch Regiobank (insurance with some banking activities), BLG wonen (mortgages) and asnbank (online banking).

Ronald Pieters described the programme they have embarked on to move the bank to giving its customers a personal adviser and a tailored service constantly available to them. The innovations already in place are cashless shops which are in and for the community, a franchise concept, offering 3rd party mortgages and the ability to choose your own personal adviser.

Technology is at the heart of all this but with a focus on personal service. There is an app, Eén-Tweetje, which links the customer to their chosen adviser making them always available, but also access through the adviser to appropriate experts to join the conversation. The ‘conversation’ can be on the app, email, online, video or in person. These conversations are analysed to coach the adviser to be focused on the relationship, as well as the ‘transaction’ and general attributes.

SNS believe it will take until 2026 to move all of its 200 stores to the full vision of being a trusted adviser with a long term, continuous relationship. It will offer the right solution, whoever supplies it, and be proactive in supporting the customer with advice and insight based on really knowing the person.

It has a concept of having different ‘spaces’ appropriate for the area and requirements. In addition to ‘standard’ stores, perhaps stores where those who partner with SNS meet customers or ‘small space’ stores that either pop us or give a local meeting point. It has opened two laboratory community stores in Maastricht and Groningen. These are intended to be as much about being places for the community to meet as places to do business. Finally, SNS wants to move from earning its money from fees rather than being dependent on interest margins. It will be interesting to see if this vision can be delivered at scale profitably.

Maurice Lisi of Intesa Sanpaolo in Brazil spoke about the change from focusing on the branch to the customer. He described the historic situation as banks organising themselves to serve the processes required to make branches successful rather than focusing on the customer. The pandemic has accelerated thinking about how branches, websites, apps, call centres etc. can all work to deliver what customers want. 45%-55% of his customers were not digitally comfortable, and so the bank has had to be realistic about the scale and speed of changes it can make.

Technology has played a key role in responding to the early challenges of the pandemic. The bank deployed bots at the start to answer customer concern about branches and their cash. 75% of concerns were satisfied by these bots, freeing up staff to do more complex work.

Based on the bank’s experience this year, Maurice was clear that technology with human expertise is the future of banking and that branch banking will change hugely as a result. A message heard repeatedly throughout the conference.