The time has come for banks to lodge their service outlets within more attractive consumer offerings.
Bank branches are already an expensive anachronism; small wonder that over 10,000 have been closed since 1982. Every bank offering could be delivered more efficiently and cheaply via other channels. Even face to face contact would be better provided by a mobile sales force.
Whilst sloth and fear of the unknown will keep branches on our streets for some time yet, banks should follow the same path as they have with cheques i.e. first move to a utility service (cf iPSL) then make branch use increasingly inconvenient, whilst upping the attractiveness of alternatives. Consider the following two points:
1. Market positioning and cost efficiency
Branches are by far the most expensive channel, becoming more so as value-adding footfall decreases. Carving out segments such as “Private" exacerbates this. So, too, does the delocalisation of managers, who move around as their careers progress. Banks cannot afford the cost, or the cost:income hit of separating them from key revenue streams.
there are plenty of pointers from history. Railroad barons continued to build better trains years after the Wright brothers had delivered, because they thought they were in the railroad business instead of the transport business. Blacksmith apprenticeships actually went up for 15 years after the arrival of the motor car. The Evening Standard continued to seek the "right price" even as the free Metro proved to be its pacman.
2. Connecting with the new customer
Branches don’t fit many visible and valuable customer segments' preferences e.g. economic rationalists, technophiles, "fear of finance" etc. “Make it quick, make it painless” is what drives their choices and behaviours. More attractive consumer offerings are particularly needed for:
Since 2008, a whole generation has entered the workforce convinced that banks are evil and untrustworthy. Many other age groups have had their faith dented. The journey to restore trust, and thereby the historic relationship/respect, is just too tough. I don't willingly go into a shop or restaurant, or travel with an airline that has let me down. Why should banks expect different treatment when there are other options?
The digital dependent
Similar to the generation convinced that banks are evil, they not only embrace social media and digital channels, but consider them part of the fabric of their lives. They use malls over high streets (clubbing excepted!) and expect vendors and service providers to both be like them and love them actively. This is not in a bank branch's DNA - security and regulation alone mitigate against it. Similarly, to the extent it is possible to get key banking services from specialist providers more cheaply and satisfactorily (eg payments and transfers from my phone, mortgage from a broker, investments from a IFA), people are effectively creating their own, portable bank.
The time starved
Numerous surveys tell us that each year people get busier and have less personal time than desirable. Spending time in a bank branch is not on the list of good uses of that scarce down-time. Metro Bank in UK has created arguably the most customer- centric branches ever, open 7 days and long hours, conveniently located, dog biscuits for the dogs and children.........but after 3+ years still have fewer customers than the number of bank complaints.
Why do existing branches need to be branded (and why do we need more than one in an area?) Why not a single branch utility close to the users, e.g. in a mall, where all staff handled all commodity-type transactions (after all, this was the essence of the giro system they all embraced in the '60s) and referred more competitive activity to a call centre, screen or mobile banker?
All this said, there is of course a risk of winning the intellectual battle and losing the customer one. The last blacksmith in the county will likely enjoy good patronage and pricing, because people have made choices based on other factors and he is simply a necessary dependency. So withdrawal has to be carefully managed and complemented by strong promotions of the alternatives.
But regardless, the time has come for banks to recognise that they are the ball bearing, not the engine. They need to seek other means of distribution and customer reach. Free iPhones may be an impractical step, but delivering banking through a manufacturer, retail outlet, telco or product may not.
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