The fate of bank branches has been hanging in the balance. Pre-COVID-19 statistics from the European Banking Federation show the number of branches had already fallen to about 163,000 by the end of 2019, down 6% from 2018, reflecting the increasing use of digital banking by consumers. But this has created problems for many communities who now find they no longer have access to banking services locally.
So what’s the solution? One emerging concept is the lean bank branch.
It is a physical location providing optimized banking services at lower operating costs while still providing high levels of service. This model can actually generate additional revenue streams and thus add to overall profitability. It can also be open to repurposing or sharing of the space within the branch.
“Lean branches provide a safe, secure and private space for people to use. And it is very deliverable because the technology in terms of both hardware and software already exists,” Mark Aldred, head of international sales at Auriga, said.
A lean branch leverages digital technology. Old legacy systems are replaced by modern, customer-centric, and cloud-based technology that allows banks to deliver outstanding omnichannel experiences.
A smooth customer experience is appealing in an age where customer retention and loyalty is a pressing issue. Retaining a branch network is a key part of this. New research from EY highlights that COVID-19 has underscored this; with 44% saying purchasing decisions would be negatively impacted if they were to see banks focusing on maximizing profits, i.e. closing branches, during this time.
A lean branch is more than just about technology. It’s about how a branch can be a shared space that serves customers and their community, while also creating opportunities for new revenue streams.
This might be a financial services provider, a café, travel agent, soft play center and office space or community hub. This would encourage an increase in footfall and dwell time as it becomes more of a destination and place people want to visit and spend time at.
Post-pandemic bank branches could also be sited within community information hubs, libraries, post offices, leisure centers and more. Not only would this make branches more profitable with new fresh streams of revenue, it could also increase visitor numbers to the branch – driving satisfaction, loyalty, and long-term revenue for the bank.
A good example of this is Millennium BCP in Portugal. It has trimmed its branch network; some branches have closed, but others have been reimagined to provide remote branches, which are located in shopping centers and places where people need access to banking services. Its Millennium Teller Machine, for example, gives access to the bank’s full-service set. It has video banking integration so that customers have access to human assistance when they need it out of hours. A co-browsing function also lets a human advisor inside the branch guide a customer on screen.
Italian bank, ISP, meanwhile, has adopted a community approach with the idea of supporting a bank’s social purpose in the community. It has installed lounge areas so that customers can use technology while they wait; including laptops, tablets and free Wi-Fi. There are also dedicated work spaces as well as business banking advisers on hand. Its branches also showcase local businesses and help to connect employers with young job seekers and promote local arts and culture.
Repurposing space has worked well for banks. They have been able to rebrand their sites to be attractive to a broader section of the community and as a result, footfall has increased.
Another strategy at the disposal of banks is to harness technology in a lean branch so that once people are within the bank, their experience is smoother and more satisfying – making them more likely to return.
Modern digital technology can make branches more efficient than ever, and turn the advanced, customer-operated technology in them from a cost to a revenue driver. We already see how banks in other European countries are investing in their branch networks to provide digital in-branch banking experiences and a reconfiguration of branch spaces to offer more, not less, local services.
Technology can also enable access to subject specialists. Banks find it uneconomical to provide all things to all people in all branches. Placing many experts in a single place and installing assisted-service terminals that offer remote video banking technology circumvents this issue. Customers can still access experts and even benefit from better advice as experts grouped together can share their experience with each other and pass that onto customers remotely.
In addition, video banking is useful in helping boost financial inclusion and extending banking services to remote areas that are ill-served by traditional banking. And of course, in the short term it is a model which is consistent with the need for social distancing.
Auriga’s new advanced remote banking solution, Bank4Me, is designed with this in mind. It responds to the need for more sophisticated customer care using audio and video banking channels via digital video terminals within private areas of branches. It fully complies with Auriga’s goal of helping banks achieve fully digital, lean, multi-functional and customer-oriented branches.
Technology can also bring benefits in terms of automation and efficiency gains by taking on mundane, repetitive activities. This frees up advisers to upskill and make best use of AI and machine learning driven insights that allow for a more targeted and personal approach to clients.
Indeed, powered by technology, the lean-branch model will see almost all branch employees become multi-skilled sales and service bankers, spending most of their time on targeted, analytics-driven activities.
Better experience and better loyalty
By honing and improving service levels to meet what customers actually want and need, as opposed to trying to provide all things to all people at all branches, banks not only save money, but they also benefit from stickiness. Where customers value the relationship, they have with their banks and are less likely to change providers.
Indeed, customer expectations have arguably never been higher, yet still there are so many banks who use the same, decades-old systems. Moving towards a lean bank branch doesn’t just mean bringing the space into the 21st century, it means bringing the experience into the 21st century too.
Central to this is an omnichannel capability; delivering what people want and need in a way, or channel, that is convenient to them and allowing them to move seamlessly between channels. The customer is free to start their conversation with the bank over one channel and then continue it on another. The concept is that the customer has the convenience of switching between channels without having to start afresh each time they use a new one.
To achieve this software that allows banks to streamline all channels together is required. Information about each customer is therefore shared between channels and the bank can track the entire customer journey and ensure a single copy of customer data that can be shared over the various channels.
A cloud native ‘n-tier’ architecture like Auriga’s WinWebServer (WWS) allows not just easier integration of customers’ own devices (COD) with ATMs and other digital channels, but also for customer information to be shared across every channel. This makes it easy for banks to track customer journeys and engage with customers at the right time, with the right information, and provide that all important omnichannel experience.
This means that when a customer walks into the lean branch, the bank can quickly pull up the customer’s previous interactions on a tablet. From there carry on the interaction, for say the case of a mortgage application, or infer what additional information, products and services they might value.
Finally keeping branches open promotes financial inclusion and ensures access to cash, while helping support local businesses and communities retain their identity. By making branches lean and efficient, it means they can stay open and essential banking services can be provided to many groups – including the elderly or unbanked, who typically rely more on cash, and those who simply prefer to bank in person. According to the latest Ofcom Access and Inclusion report, just under half of over 75-year-olds do not have home broadband, and internet users with a disability are less likely than non-disabled internet users to bank online (45% vs. 61%).
Maintaining touchpoints, like bank branches and ATMs, is key to maintaining choice of channel for consumers so they can access financial services however they choose. Indeed, banks have a responsibility to people, to provide support and assurance on service availability, and to maintain a consistent presence in communities – connecting consumers with their money.
A solution like Auriga’s Bank4Me allows banks to support customers anytime, day or night
In addition, banks can ensure the person they assign to customers is best placed to help them with their query. Examples include those with specific expertise in mortgage applications, or those trained in sign language to support customers with hearing loss. Measures like this boost satisfaction and make for speedier service and query resolution too.
“Branches within the community have a positive reputational impact and that leads to customer loyalty,” Aldred said.
Thus, moving towards the lean branch model is not just sensible for the bank, it is vital for protecting access to financial services overall. By trimming their branches of excess expenditure, sharing services between channels, and improving efficiency with technologies like AI and automation – banks can make sure their networks stay profitable and, crucially, open.
The omnichannel play meanwhile ensures the delivery of services meets customer needs and that they can come into branches for advice, to complete a transaction but are not obliged to carry out an entire process within the branch.
Technology enables all of this. By interrogating data, banks can find out what services are needed – where and when and seek to provide it. The provision within a branch is lean in an efficiency sense, but robust in the sense that customers are able to access the whole gambit of banking products and services. Be that in-person or remotely, as well as value added partnerships with other services providers, such as coffee shops or office space.
“This is all about technological empowerment of the next generation of bank branches,” Aldred said. “Banks need to use technology to support whatever the demand is and keep that under constant review so as to continue to provide a valuable service to clients and communities.”