March 19, 2020 is known as curve-ball day. A day where the world stopped spinning, businesses closed their doors, and people sheltered in fear of COVID-19. It was also a brilliant catalyst for financial institutions to take a hard look at their service delivery and branch strategy.
More than 83% of employers sharing a success rate of the workforce moving to a remote or online work environment according to PwC. Banks and credit unions are discovering a few key concepts:
1. Technology is Key
Being able to transition to an online or remote platform and find success cannot be achieved overnight. The right mixture of training and technology must be deployed with careful articulation. The balance between the employee’s confidence with the new work environment and tools must be equal to the adoption of the technology and processes by clients.
Financial Institutions who were early adopters of ITM technology found themselves on the forefront of “business as normal” and were cleverly able to social distance their employees while meeting the needs of their clients without incident. Other financial institutions struggled to find the right balance of set appointments, Zoom calls, and online banking enhancements as well as loss of revenue and potential leads for loans, mortgages, and investment offerings.
2. Relationships Still Matter
We all know that consumers bank with individuals they know and trust. According to Deloitte’s 2019 Global Millennial Survey, the under 40 demographic comprised by Millennials and Gen Zers have lost trust and value transparency and authenticity from companies they choose to engage with. How, then, does a financial institution maintain rapport with clients during a pandemic when social distancing sets the standards?
The key is to have and maintain a presence where clients frequent. Supermarkets were one of the first essential businesses. While curbside or home delivery profits have skyrocketed, consumers still crave a sense of normalcy. They have continued to frequent their favorite grocery store.
Financial institutions with in-store branches were slow to re-open. However, they found that their transaction totals and new customers/member counts returned to equal or near equal numbers once they re-opened for business. Shoppers embraced their in-store branch team excited to re-engage business. On the other hand, Traditional and in-line/storefront branched remain empty either due to fear or institution policy.
3. Service and Experience Still Reign
In a recent article entitled, Is A ‘Hub & Spoke’ Retail Branch Network The Right Strategy?, by The Financial Brand, we learn that “consumers will travel longer distances to do things that are needed infrequently. In other words, the more frequent the need for a specific transaction, the closer consumers want to be to a site that can deliver it.” Sure, mobile and online banking as well as exterior ATM transactions occur with frequency. However, a majority of financial product offerings and transactions still exist within an environment which delivers quality face-to-face service and an experience of gratitude for the customer and their business.
The more frequent the need for a specific transaction, the closer consumers want to be to a site that can deliver it.
How does a financial institution navigate the current climate to deliver service and experience? In short, paying careful attention to social distancing, sanitized branches, and face masks. Broadly, however, the immediate goal should be to deliver a safe and inviting atmosphere where relationships continue and customers/members are appreciated and provided with solutions to help them solve their financial struggles to emerge from the pandemic with stability. Simply knowing that their financial representative is still in their corner is key.
4. New Social Norms Dictate Future Branch Expansion Plans
If remote working and closed branches have taught us anything, it has created a future where branch expansion is seen through a new and innovative lens. Smaller branches and more strategically located branch placements are critical. The future is currently being set with many large financial institutions closing duplicative branches and opening smaller branches in more populated or heavily frequented locations.
Credit Unions, in particular, are looking at underserved communities where they can offer opportunities to build community and become a beacon for revival in small towns and isolated cities. This sentiment is even reflected in the NCUA’s Field of Membership Expansion Guidance placing importance on “initiatives to facilitate credit unions more effectively serving their memberships, especially those in underserved areas.” Charters seem to be expanding with a renewed purpose; less about growing membership and more about providing a lifeline.
Banks are looking at downsizing their branch square footage opting for more curated spaces operated with smaller staff. In-store branching is no longer a novelty. These types of placements have transitioned beyond full-service retail delivery locations and now viewed by management and clients as ‘flagship’ branches offering boutique services such as small business bankers, mortgage representatives, commercial loan officers, and investment advisors. Financial institutions are quickly learning that a full-service in-store branch is the key to moving past a mere transaction facility.
Privacy concerns are mitigated through clever and innovative branch design. The smaller retail branches in grocery stores or storefronts also help with FTE concerns enabling the branch to be staffed by a smaller number of universally-trained employees who focus on business development. The real point is why not take advantage of the multitude of shoppers in the retail store – the in-store branch’s lobby?
…branch traditionalists continue to favor [physical branches] even though they’ve been exposed to the digital world by necessity.
5. Transforming Existing Branches is Wise Preparation for the Pandemic Exodus
According to another article by The Financial Brand entitled, Rethinking Branch Networks Without Killing Sales or Jeopardizing Growth, “…branch traditionalists continue to favor [physical branches] even though they’ve been exposed to the digital world by necessity.” Therefore, financial institutions are jumping on the transformation wave using the downtime during the pandemic to craft a new experience for how clients physically interact with them. Just as e-business suites transformed via the digital wave, the removal of traditional teller lines, manned drive-through services, and confined private office designs of 2019 are making way for the adoption of open teller pods, concierge stations across a vibrant lounge-inspired vestibules, and interior/exterior ITM technology offerings sourced by call centers within network or employees working remotely from home.
Cleverly designed smaller footprints also offer financial institutions the opportunity to earn extra revenue by sharing their space with other service-related partners. In fact, construction of large bank and credit union branches are making a definite shift to smaller facilities and fixed assets. Will this trend become permanent? The jury is still out. However, the cost savings is a much welcome change in the current economic climate. Preparing current architecture to connect with clients in-person and digitally remains at the center of strategic planning initiatives.
One thing is clear, the impact of the pandemic has awakened the financial industry and challenged them to look at how they deliver financial products and services. It is a challenge that has been warmly embraced as banks and credit unions understand that their livelihood relies on the relationship and patronage of their clients.
Contact us to learn how FSI can help your financial institution with your next branch expansion and transformation projects.
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