In an Omnichannel World, Don’t Forget the Throwback Channels. Why Bank Branches Still Matter.

In an Omnichannel World, Don’t Forget the Throwback Channels. Why Bank Branches Still Matter.

In an Omnichannel World, Don't Forget the Throwback Channels. Why Bank Branches Still Matter.

Charles Keenan

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people's living rooms thanks to the relaxation of surcharging rules.

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For all the excitement about mobile banking, financial institutions still need to carefully tend to their branches and call centers. These delivery channels might seem like throwbacks to 20th century banking, yet in reality, they still stand as pillars of financial services, proving vital in terms of customer acquisition and retention.

It boils down to a need for human contact now and then. With branches, about 86 percent of consumers said they are "essential" or "important," according to a recent survey of 1,500 consumers by Phoenix Synergistics. Even 82 percent of millennials said they view branches as essential or important, despite their higher propensity to use mobile technology.

"Even though they are going to do everything using other channels, they still want the branch," says Genie Driskill, chief operating officer at the consulting firm, based in Norcross, Ga. "It makes for a more satisfied customer."

Bottoming out for branches

It's clear that people have relied less on branches over the years, but the downtrend might have hit a floor of sorts. Consumers averaged 2.5 branch visits per month in 2018, according to Phoenix Synergistics. That's down from 2.8 in 2013 and 3.9 in 2006, but about the same as an average of 2.4 registered two years ago.

The upshot: people still want a place to go when they can't solve a problem online. With payment card issues, 19 percent of consumers said they would walk into a branch, according to the TSYS 2017 U.S. Consumer Payment Study.

For millennials, roughly aged 18 to 35, branches serve as a way to get not only essential products such as student loans, auto loans and mortgages, but also to receive needed financial advice on saving for children’s education and buying a house, adds Tery Spataro, executive vice president and director of innovation at CCG Catalyst Consulting Group, a Phoenix-based bank strategy firm.

"They don't just want to be left hanging with the channels they have access to anytime, anywhere," she says. "They want help determining how to manage life's financial events, and they want their banker to be able to help them."

Branch closures overblown

No doubt large institutions have focused on closing branches in recent years, especially in rural areas. Regional banks have followed suit. Among commercial banks, the number of "offices" — institution and branch locations — slipped to 84,081 at the end of 2017, down 1.3 percent, according to the Federal Deposit and Insurance Corp.

Yet banks still view branches as a pipeline for deposits, which serve as a critical funding source for the loans they make. Large banks such as Chase have been even opening branches in affluent areas.

"They want help determining how to manage life's financial events, and they want their banker to be able to help them." -Tery Spataro

Magic of mobile overstated

Meanwhile, branches still have place since mobile banking has a ways to go in terms of market penetration. Mobile banking is offered to 89 percent of U.S. consumers, according to Celent, a consulting group for the financial services industry. Yet only 54 percent of financial institutions have more than 20 percent of retail customers enrolled, and just 44 percent have more than 20 percent actively using mobile banking, Celent notes.

In fact, without a branch presence, it's hard to make it as a financial institution. Pure mobile and internet banks have opted to work with big banks. Banking start-up Simple was bought by BBVA in 2014. Mobile banking firm Moven has opted to partner with banks to roll out its mobile interface, such as with TD Bank in Canada. It’s also looking to buy a United States bank to establish branch presence here, a requirement of the Community Reinvestment Act.

Yet at the same time, call centers become critical backstops for mobile services. The increasing use of mobile banking has led to a spike in call center demand, leaving institutions having to staff up on the technology side to be able to handle troubleshooting calls.

Remaking the branch

While call centers allow for more specialization, branches must focus on making their employees the jacks-of-all-trades, from offering financial solutions to taking deposits to offering technology help. "The first thing the financial institution has to do is get their own staff using their own solutions so that they're comfortable with both problem resolution and adoption," says John Smith, chief executive officer of DBSI Inc., a branch design firm based in Chandler, Ariz.

For more issues outside of the expertise of branch employee, such as a mortgage or commercial lender, DBSI has been installing video conference rooms at financial institutions, where customers can get immediate advice, rather than wait for a roving specialist to show up at the branch. "Now the lenders don't have to drive all over," Smith says. "They are more available, when the consumer wants them."

So for financial institutions, embrace technology, but don't forget the throwback channels. "The velocity of technological change is so overwhelming at times. I think the backlash is, people want to see a human," Spataro says.

The statements and opinions of the writer do not necessarily reflect those of TSYS.

Other Articles by Charles

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people’s living rooms thanks to the relaxation of surcharging rules.

His work at the American Banker included writing about credit and debit cards, merchant processing, and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health care, and is based in Los Angeles.

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