The global banking industry is pretty much at an all time low in terms of reputation.
Nowhere is this so true as in the UK, where it might have been thought that public opinion of the banks could hardly have sunk any lower in the aftermath of the financial crisis that has enveloped the global economy since 2008. But in the past few weeks a processing malfunction at RBS seriously affected millions of customer accounts, while the Libor rate-fixing scandal that has claimed the jobs of Barclays Chairman, Marcus Agius and Chief Executive, Bob Diamond.
With more than 20 banks worldwide under scrutiny, the Libor scandal will inevitably envelop banks elsewhere and the banking industry’s status as most-despised sector is assured for the foreseeable future.
But the banking industry is not unaware of its position and has been working for the past few years to redeem itself through an accelerated commitment to corporate social responsibility and other PR manoeuvers.
In the wake of the catastrophic investment banking misadventures of the universal banks, those same banks have looked to recast themselves as contributors to the real economy. This change of approach (if not of heart) has been “encouraged” by admonitions from politicians who have now threatened to break up the universal banks and separate the retail deposit-taking business from trading activities.
The effect of this has been to delineate more clearly different forms of banking and this has reinforced perception of socially useful banking (retail banking) as opposed to socially useless banking (investment banking).
The argument over the usefulness or otherwise of investment banking is a somewhat more complex than to designate it as unconditionally useless but the onus is now on banks to promote their socially useful activities. In this regard, the positioning of the bank branch has come to the rescue.
There is strong evidence that in spite of the rise of the mobile device and a parallel substantial decrease in transactions originated through the branch, the branch remains central to the retail banking experience in the minds of the public. While branch numbers may be diminishing, in other important respects its status is being enhanced relative to other delivery channels.
The opportunity to reconnect with the public through the branch by way of superior, personal service is clear: the business case for the branch in the face of rapid take-up of remote and in particular smartphone-based apps for transactional banking is more complex.
But if the evidence of recent initiatives in branch banking is anything to go by, a wide range of banks and financial institutions – from global behemoths to local credit union – are innovating at branch level like never before.
Our new report, The Bank Branch of the Future takes a global look at best practice in bank branch design and finds conclusively that the branch will remain central to the retail banking experience for the foreseeable future for three core reasons.
First, the branch remains the single most important expression of a bank’s brand. This is something that cannot be replicated by the extensive range of new, non-bank organisations that – enabled by facilitating regulation and technology – have made major strides in taking a share of banks’ traditional business, particularly in the realm of payments. This is most marked in the developing world; here the implications of mobile money are that bank branch networks will not develop as in the developed world, but instead will be emulated by retail outlets offering cash-in/cash-out facilities in support of mobile money schemes.
Second, while transactions may be decreasing, the branch remains the location where by far the greatest number of higher value-added product sales takes place – with estimates as high as 80 percent over some product lines.
Last, the branch – when best practice design is observed – is reinventing itself as the location where all retail banking channels converge. The branch is increasingly seen as the place where technology truly integrates with the brand and where the silos in which these channels often exist are dismantled.
So, while there are plenty of examples of luxurious new branch designs aimed at the high net worth individual, perhaps the key motivator behind the new branch experience is to educate the regular retail customer on all that can be achieved through use of existing technology without human intervention, while confining the branch visit in the main for high-value advisory sessions.
The branch is now the place where customers learn about the bank’s latest mobile app or enhanced money management software, possibly on a massive Microsoft Surface touchscreen interface or guided by a personal assistant wielding an iPad, as in Standard Chartered.
The report shows that in their efforts to redefine the bank branch experience for their customers, banks have looked outside to the wider retail and hospitality industries. Citibank Asia hired design company 8 Inc., designers of the Apple stores, to help with their Asian flagship branches. One small credit union, in the U.S., North Shore, sent their staff for training to Ritz-Carlton as it successfully changed its business model and customer profile towards the high net worth segment.
This may well be the route many banks choose to take because branch design innovation and associated technology are relatively easy to copy and, ultimately, the key long-term differentiator for the bank may be the quality and training of the people who man them.
The Bank Branch of the Future is available from Lafferty Group.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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