Branches prepare for the end of the pandemic
Customers are returning to branches as the pandemic subsides. But it won’t be like it used to be.
Customers, some of whom got their first glimpse of online banking when branches closed during the lockdown, want a combination of face-to-face and digital experiences that work hand-in-hand. First digital, but with a human touch.
Financial services organizations tuned in to the new standard will easily meet the wishes of their customers by improving both human and digital channels.
In our recent BAI Banking Outlook on Digital Acceleration, we asked 200 bankers what digital assets they plan to invest in their branches. The main response has been digital advocates, cited by 42% of financial services leaders. Appointing branches with digitally savvy staff makes perfect sense when consumer sentiment clearly leans towards the best of human and digital.
But digital advocates, in most cases regular employees with a digital touch or those who have received specialized training, won’t get away with sharing advice with customers on the latest electronic tools. While 84% of the 600 consumers we surveyed for the same research project said they plan to maintain the same level of digital usage once in-person banking is restored, they still want the branch.
Their branch may have a new look. Interactive banking machines, video ATMs and interactive digital home screens will enhance some branches in the post-pandemic era. Basic transactions will increasingly pass through digital channels; more complex issues like mortgages or solving problems with an account will go to the branch.
But not necessarily. When we asked consumers why they go to a branch, the # 1 answer for each generation was to make a deposit or withdrawal, and the # 2 answer was to cash a check. For Gen X and Baby Boomers, # 3 was working with a human; For Gen Z and Millennials, # 3 was solving an issue with an account.
Banks and credit unions must not only decide on the strategic way to staff and digitally equip their branches, but also where to place them in their communities. The pandemic has shown that, thanks to video communications, people no longer have to live where they work. People are on the move and financial services organizations need to determine where customers are going to seek branch office services.
According to BAI research, consumers are less inclined to outsource all of their accounts and activities to a single institution, preferring a hybrid approach instead. For example, 31% of millennials said they would keep a checking account at a bank to gain access to branches, but would consider keeping some accounts at a direct bank for better rates. This represents an increase from 21% in the BAI 2020 survey.
The preferences of the other three generations also reflect the trend towards hybrid banking. Banking with a traditional institution with branches remained the most popular model for all generations, ranging in 2021 from 44% of Gen Z to 64% of Baby Boomers.
Traditional organizations, while losing ground to the hybrid model, are still seen as better than direct competition from banks or fintech in key areas, according to BAI research. Almost two-thirds of consumers said traditional banks offer the best security and safety, compared to 26% for direct banks and 9% for fintechs. Fraud remains the biggest barrier to digital adoption – according to ID Insight, fraud is 11 times higher online than in person.
Fifty-five percent of consumers said traditional banks had the most useful contact centers, which were put to the test during the height of the pandemic when branches were closed. In many cases, customers have called to ask how to use digital banking services. Call center staff were the front lines of digital advocacy during the pandemic. More than 70% of banks and credit unions said their contact center staff needed additional training on digital products to handle calls during the pandemic.
By far, consumers have rated their primary financial services organization as the most reliable for managing their financial products and services. Fifty-four percent of consumers, up slightly from 52% in 2020, rated their primary financial services organization as the most trustworthy compared to non-traditional players. PayPal ranked second at 12%, a sharp drop from 19% the year before, likely reflecting a perceived security flight from traditional banks amid uncertainties over the pandemic.
The pandemic has helped to clarify the future of the bank. The pent-up demand for in-person banking undermines the prophecy that financial services organizations need only invest in the digital channel while allowing human channels to wither away. In essence, the pandemic is the crystal ball that predicts a robust omnichannel future that combines the best of human and digital services.
Karl Dahlgren is general manager of BAI.
Watch âThe Impact of Digital Acceleration,â a webinar that reviews the latest BAI Banking Outlook research.