Is the traditional branch concept dead? How do banks respond?

Popular press has argued that the high street bank is obsolete and that consumers are shunning these branch offices. As we emerge from the last global recession, the key challenges that banks face are that non-interest expenses (NIE) are proving difficult to manage in the face of changing consumer demands, and that new entrants into the banking sector are gaining momentum, notably the growth of pay day lending companies and virtual / online banks.

Popular press has argued that the high street bank is obsolete and that consumers are shunning these branch offices.

As we emerge from the last global recession, the key challenges that banks face are that non-interest expenses (NIE) are proving difficult to manage in the face of changing consumer demands, and that new entrants into the banking sector are gaining momentum, notably the growth of pay day lending companies and virtual / online banks writes Gopal Kutwaroo.

Branches are expensive to operate, yet they are the most effective channel for sales and customer retention. Indeed, it is hard to imagine a better environment for meeting face to face with consumers to provide advice, deepen the relationship, and sell high margin products. The key to success is reinventing the branch experience to meet the needs of the increasingly tech-savvy consumer who has grown sceptical of traditional banks. This requires a fundamental shift of the stereotypical UK bank experience, with its long queues, poorly staffed counters and shabby entrance ways.

Working closely with our customers and partners, we have witnessed – and developed – some fascinating designs and concepts for the branch of the future. We have found that a branch is just one aspect of a greater network distribution strategy, not a standalone pillar as it once was. Banks need to make changes which better align physical locations and technology with their brand.

Technology as an enabler is an important aspect of this new distribution network, but it is just one part of the puzzle. Banks must use this opportunity to investigate their brand, audit the consumer journey, validate their staffing and workforce models, and optimise their overall approach for a long-term, sustainable consumer experience.

Customers are more likely to use their smartphones, tablet computers and laptops for their banking needs. Whilst this does impact on customer contact at the branch, it the face to face experience is far from extinct. In a similar way that many envisaged cash being replaced long ago, high street bank branches are still very much part of our daily lives. The same is true for the branch office on our high streets. The opportunity is for banks to adapt the branch experience for customers who are both better educated and more enabled by their own devices. Banks need to explore and invest in new channels, as the digital world becomes a more integrated aspect the of the branch experience. However, they must also maintain the legacy channels which provide the face to face engagement that many customers still demand. At NCR, we have found that a consistent, cross-channel integration strategy is the key to success.

In summary, branches must add value to customers through an improved experience. It is an opportunity to improve how financial organisations interact with their customers. The branch is a place where many things are possible, but fundamentally it is a place that allows banks to deepen relationships with consumers by providing advice on all of the big decisions in life. To achieve this banks must re-think and re-shape their branch experience.