Bank branch transformation is becoming increasingly important as financial institutions respond to the rapid growth of online and mobile banking. With customers conducting more routine transactions through digital channels, banks are reassessing the size, location, design, and purpose of their traditional branch networks.
However, declining branch transactions do not necessarily mean customers no longer value physical locations. Instead, branches are evolving from transaction-focused facilities into places where customers can receive advice and assistance with more complex financial needs. The challenge for banks is determining how physical locations should complement increasingly popular digital channels.
Fifth Third Bank’s planned closure of three branches in West Michigan, part of a far broader plan to jettison 100 of its more than 1,300 offices in 12 states, illustrates the situation banks face in adapting to the digital age.
Retail and commercial customers these days are doing more transactions electronically, either online or via an app on their smartphones or tablets, forcing banks to take a hard look at and possibly redefine their physical footprint
Banks Rethink the Purpose of Physical Branches
Some banks, such as PNC Bank, have invested heavily to renovate and redesign offices to accommodate customers still coming into the branches, often for reasons beyond simply cashing a check or making a deposit or withdrawal.
Even in one instance where a bank is expanding its branch network with a new office, the growth of mobile banking technologies will guide its design.
“How we’re going to do things on the inside is an open question yet,” said Art Johnson, CEO of United Bank of Michigan, a Grand Rapids-based company that plans to renovate an existing optometrist office in Jenison for its 12th branch, which will open in 2016.
Branches Remain Important in an Omnichannel Strategy
Even with the consumer switch to digital banking, ongoing Mercator Advisory Group Banking Channels research shows a continuing desire for branch availability by most banking customers, even if most of their transactions occur digitally. This research confirms the importance of branches, particularly as an advice channel. And while digital banking is important – and growing – it’s the combination and coordination of the self-, assisted-, and full-service channels that is opening up new opportunities to expand customer relationships as part of an omnichannel banking strategy.
The growth of digital banking is forcing financial institutions to rethink their branch networks, but it does not necessarily eliminate the need for physical locations. Customers may increasingly use mobile and online banking for everyday transactions while continuing to value branches for advice, problem resolution, and more complicated financial decisions.
Successful bank branch transformation will therefore depend on more than simply reducing the number of locations. By coordinating branches with mobile, online, self-service, and assisted-service channels, financial institutions can create an omnichannel banking experience that gives customers flexibility while preserving the personal assistance they still value.
Overview by Ed O’Brien, Director Banking Channels Advisory Service at Mercator Advisory Group
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