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Retail branches: a relic of the past, or an opportunity to reimagine a new future?

Banks are re-configuring the in-branch experience by bridging digital and traditional channels to enhance service delivery and stay relevant to their customers.

As more clients continue to adopt digital banking capabilities, the physical branch space is changing in form and utility. Disruption has become a new normal in the banking industry, spurred on by Fintech companies and retail e-commerce giants driving the financial services industry to reconfigure their traditional and digital channels as connected entities, rather than separate business formats. Digital channels have key advantages over traditional branches, notably, that they are more efficient to operate due to its self-serve feature and low error rate. Consequently, they have a lower cost-to-serve ratio.

To optimise performance, meet consumer demand and continue to remain profitable, branches must become more efficient and employ staff who are service oriented and highly adaptable to changing customer needs and orientation. To achieve this, banks are fusing digital functionalities with human interaction to remain relevant to customers’ digitally connected lives. In addition, organisations are finding alternative usage of branch space by collaborating with companies like WeWork, Regus and the like.

Boston Consulting Group’s 2017 Global Retail Banking report highlights that customers want choice in how they engage with their bank and that they expect service to be consistent, streamlined, and engaging no matter what channel they use. Nearly half of those surveyed reported that they want a hybrid banking experience in which digital capabilities can be complemented with in-person advice when required.

As customers demand more convenient solutions to their banking needs and adaptation of self-serve digital model, we will see more banks re-shaping their physical footprint to address this demand. This in turn will lead to more collaboration with work space share companies mentioned above. Depending on the location of some of these legacy physical footprints allows for interesting options which in turn can be monetised via partnership. Repurposing of bank branches has become more common in the recent past with the changing client behaviour than ever before. Banks have traditionally been built on street corners in busy retail districts. Proximity to these locations almost certainly has made re-purpose possible.

On the digitisation front, we will likely see a greater movement towards digitising simple, daily transactions such as account opening, account updates and service requests. However, more sophisticated advisory based transactions like investment products and mortgages is likely to remain face to face interactions which require engagement with relationship managers in a physical location. In short, banks will continue to need branches to interact with customers, even as the size shape and format of the participation evolve.

Is the shift towards a hybrid branch model the answer to engaging with customers who are becoming more digitally savvy or simply an attempt by banks to hold onto a relic of their past? Banks which successfully develop an omni-channel distribution network integrating digital with human touchpoints and repurpose usage where applicable could see up to double-digit cost reductions, and a significant improvement in customer satisfaction metrics.

Ae jaydeep gupta

Author is Jaydeep Gupta,
Regional Head of Retail Banking, Africa & Middle East
Standard Chartered Bank