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See the Future of Bank Branches - and What It Means for You [Infographic]

See the Future of Bank Branches - and What It Means for You [Infographic]

Posted by Dave Patnaik on Mar 7, 2018 10:25:14 AM
Dave Patnaik
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Your bank or credit union's growth plans in 2018 and beyond absolutely depend on your branch strategy. That said, the future of branch banking is more complex and the function of branches is changing. In this post, you'll see into the future of bank branches, and learn what it means for your financial institution's growth strategy.


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Taking care to build a strong branch and ATM network is one of the most beneficial things you can do to increase profitability and reduce risk at your bank or credit union. That said, the future of bank branches is changing.

Driven by changing consumer behavior and expectations, branches seem to be less important in the daily lives of many of your customers. That said, the branch remains one of the most important touchpoints in how your customers - and potential customers - perceive and interact with your bank or credit union's brand.

Your branch strategy has the potential to be the key to success for your financial institution in 2018 and beyond.

In this post, you'll learn the future of bank branches, and what it means for your financial institution's future growth.

Related: What Is A Compliance Management System And Why Your FI Needs One

 
Changing consumer behavior has driven a transformation in banks' and credit unions' branch and ATM strategies. These changes can be summarized as a customer demand for “convenience and the ability to do business anytime and anywhere." 

Today, 46% of consumers use only digital channels to interact with their bank. This is a huge jump from the reported 27% of digital channel-only users in 2013. On top of this, 60% of smartphone users report using mobile banking in some way, which is up from 36% five years ago. In this context, "mobile banking" might mean visiting the website or accessing their account through the website on their phone, or using an app. Sixty-two percent of Americans report using a mobile banking app in 2017.

If your bank hasn't crafted a strong digital presence that is functional and helpful on mobile devices, you may struggle to attract and keep new consumers whose expectation is that they will be able to bank on-the-go.

In 2012, only 1% of consumers were mobile dominant. This has since grown to 7%. The percentage of people who switch between laptop and smartphone has also grown from 4% to 16% during the same time period.

Studies show that some consumers are switching from being omni-channel (that is, using a combination of all of a bank's physical and digital channels) to being omni-digital (banking primarily or exclusively with their bank's digital channels). In 2012, more than half of all customers were considered omni-channel, and only 27% were considered omni-digital. Now, about 45% of consumers are considered omni-channel, and 46% are considered omni-digital. At the same time use of human interaction-based channels has decreased from 15% in 2012 to 10% in 2017. 

How Has Changing Consumer Behavior Impacted Branch Banking?

There are three key aspects that are required when putting the impact of consumer behavior on bank branches into perspective especially when trying to suss out why some banks have been profitable while others haven’t.

Branch Consolidation

In 2017, the number of bank branches in the US declined from 91,900 to 89,900 representing a 2.2% decline. This signals that in today’s market more branches does not necessarily mean more customers and more profit.

In Charlotte, NC, Ncontracts' home city, and surrounding areas, a total of 45 branches were closed between 2010 and 2017. 

Less Branches, More Business

According to a report by JLL, total branch deposits increased to $11.9 trillion in 2017 signaling an increase of 5.3%. This is on par with annual deposit growth since 2015. In other words, the decline in number of branches hasn’t hindered the growth of deposits.

Optimizing Foot Traffic

Only 2 of the top 25 banks saw a noticeable increase in branches last year, and these were mainly due to older acquisitions. If all of the top branches has stopped increasing the number of branches that they have, it shows that a great change is underway.

A key takeaway from all of these numbers is that new branches that are being built are smaller and more space optimized. Smaller institutions often can adapt faster to these shifts and new branches can sometimes build in co-tenancy strategies to create a more inviting multi-use branch.

What Does this Mean for Your Bank's Branches?

At this point, it’s no secret that the banks with the best bank strategy are going to win today and tomorrow. But what does that strategy look like? What elements does that strategy consist of? The researchers at Deloitte have boiled it down to these 3 key points:

Customer Experience is Key

Your customer is the key to your branch strategy. How do they use your channels? Where are they banking? Why did they choose your financial institution to work with? What products do they need?

When you truly understand your customer, you can build a branch that is perfectly tailored to fit their needs. 

This should be true all the way down to the individual branch. The location, design, and services offered should all map closely to customer needs and expectations. Here are some ideas for new and innovative types of branches to consider.

Don't forget to focus on creating a positive and consistent customer experience across deliver channels! You want them to feel as good about banking with you no matter how they are interacting with your brand.

While 61% of bank executives say that customer-centricity is “very important,” only 17% feel “very prepared.” A better branch strategy can help you get (and stay) ahead of the curve.

Empower Branch Staff

When technology fails, human interactions can help ensure a positive and consistent customer experience. Empower branch staff through training and guidance to deliver high-value solutions. You can also employ new technologies to improve your employees efficiency and digital tools to provide them the knowledge they need to speak well and clearly to customers on-the-go.

Just because there are less bank branches, don’t think that people don’t need the bank branch at all. It’s just that they need it in a different way. Take a look at your market and your local customers. What is it that they really need?

New Approach to Customer Engagement

Investing in new data applications and technologies, or using new solutions over existing legacy systems could build a winning strategy. This could give your bank the ability to deliver more desired solutions to your customers.

Craft a strategy that includes a high quality of both technology and service. Consider how to create an engaging digital experience in the branch, and leverage technology to anticipate your customers’ needs so you can serve them better and faster.

In fact, 89% of banks said that they are increasing investment in their channels' innovation.

As you consider a stronger branch strategy, it's important to think of how and why you want to engage more with your customers. With a strong understanding of their goals, and a clear approach to achieving your own, you can better design branches and the overall branch, ATM, and digital channel network to achieve success.

Ncontracts Viewpoint: Banks must adapt to the reality that customers are moving to digital but still value the branch. In response, leading banks will craft a seamless customer experience across physical and digital channels. This is the future of bank branch strategy.

When you’re ready for a better approach to branch stategy and growth, Ncontracts is here to help. Learn how to build a branch and ATM network designed to reduce risk and improve profitability today! Download our Branch Strategy solutions guide and see how we can help you.

 

Topics: Banks, Lending Compliance, Risk, Regulatory Compliance Management,

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