Is this the end of branch banking?


Most pre-pandemic foot traffic will likely stay online


Bank tellers might never be busy again.

“When you look at a bank’s walk-in traffic that was also using digital channels before the pandemic – I believe that at least three-quarters of that traffic won’t go back to using a branch again,” said Grant Thornton Strategy Managing Director Tony Hill. “Because over the last several months, they’ve really been forced to use digital channels exclusively, and now that’s where they’ll stay.”

The shift to digital banking was already underway. The Financial Brand reported that “the need to move to a more digital banking model has been talked about for almost a decade, but COVID-19 has made the need for reduced operational costs and improved digital experiences more important than ever.” Hill explained, “What COVID-19 has done is really just accelerated what was going to happen – banks will need to engage, communicate and work with their customers digitally.”

“And ultimately, branches will no longer exist in the same format and quantity that they did before,” Hill said.



Headshot of Tony Hill

“The fact that some banks are not prioritizing digital transformation is astonishing to me. Because what we are already seeing is that people just aren’t coming back into the branch.”

Tony Hill

Strategy Managing Director

Grant Thornton


The cost of delayed digitization

In spite of all the forces driving the move to digital banking, some banks still haven’t made it a priority. As a result, they will fall farther behind their competitors.

“The fact that some banks are not prioritizing digital transformation is astonishing to me,” Hill said. “Because what we are already seeing is that people just aren’t coming back into the branch.”

The reduction in branch traffic will reduce the number of branches needed – and reduce costs – but it raises two challenges:

  1. Reduced branch traffic means fewer face-to-face opportunities to build customer trust. Now, banks need to find a digital answer to the question:
    • “How do we engage customers and build their trust in the bank?”
  2. Reduced branch traffic means the loss of traditional ways to acquire new customers and new business. Now, banks need to find a digital answer to the question:
    • “How do we acquire customers, sell new products to them and ultimately retain them?”

If banks have depended on tellers to acquire and learn about their customers, what can they do in a digital environment? How can they see customers’ needs, when they can’t see their customers?

The answer comes down to the bank’s digital customer experience, and whether that experience meets customer needs in an omnichannel way that is easy, simple and seamless. “That, at the end of the day, is really going to be how you differentiate,” Hill said.




How to keep the customers you can’t see


Hill said that a bank’s digital customer experience is a relatively cheap differentiator, compared to competing on price or the sheer number of products. But, how do banks develop a differentiating digital experience that acquires, engages and retains customers?



Know your customer segmentation

Digital banking can be highly competitive, since the online marketplace includes providers from around the world. That means you need to target the customers that are the best fit for you, and you need to offer them clear benefits.

Headshot of Tony Hill

“The tough part is that you can’t be everything to everyone. You need to truly be disciplined about how you identify your target audience and how you go after that target audience.”

Tony Hill

Strategy Managing Director

Grant Thornton


“The tough part is that you can’t be everything to everyone,” Hill said. “You need to truly be disciplined about how you identify your target audience and how you go after that target audience.” Customer segmentation can help you identify your best target audience, so you can see how best to customize your products.

In fact, leading businesses are developing customer segmentation that goes beyond demographics and product interest. These businesses often look at common beliefs, goals, behaviors and purchase drivers for each segment. Such factors can evolve over time, so active segmentation is essential as banks develop unique targeting strategies and services that will resonate.



Apply modern marketing tactics beyond customer acquisition


Marketing is traditionally focused on acquiring new customers or cross-selling to existing customers. But future-ready banks are using marketing tactics with a broader scope and generating impressive outcomes. At its core, marketing helps businesses understand customers, generate awareness, and drive business. Digital marketing offers an “always on” approach to these functions, constantly measuring individual customer engagement, interests, preferences and feature use.

With such a detailed view of each customer, you can present the most attractive solutions using the best channels. You can target customers with personalized offers and nurture interest through value-add activity even when customers aren’t in a direct buying situation. By demonstrating value and relationship-driven activity on a frequent basis, you can be at the front of the line when they are ready to buy.

Modern marketing drives real product differentiation and customer acquisition, but it can be even more effective at getting maximum value from a bank’s existing customer portfolio.



Build trust through digital excellence

How can a bank build trust? In some respects, that answer doesn’t change with the move to digital banking – a bank must consistently deliver excellent service. That means your digital options need to be more than functional – they need to deliver a level of excellence that defines your reputation. To a growing number of customers, your digital experience defines your bank.

“Many banks will say banking is all about personal relationships, and some banks do truly focus on that,” Hill said. “But I believe that banking is often a utility, whether it’s consumer or commercial. People do trust face-to-face contact, but we’re seeing that you can still build that same level of trust, both on the consumer and business side, through seamless and efficient interactions with a great customer experience.”



Use branches to educate


While bank branches will likely serve a smaller role in the future, they are still an important part of the overall customer experience. Once a bank has developed an excellent digital experience, branches can provide a point of personal connection that helps to transition customers into that digital experience or provide a deeper, local-friendly experience as a complementary channel.

Rather than standing behind a desk, tellers can come out with a tablet and help address customer needs while showing the customers how to use digital options on their own. That’s one way to help customers feel comfortable going into a branch, but also help them see that there are quick and intuitive ways to meet their needs online.

“There’s value in using a branch more as an education facility, as opposed to a true transaction facility, because you have a segment of customers that either don’t know how to use digital channels or haven’t taken the time to learn,” Hill said. Some banks might feel that their customers will never ask for digital options. But online retail draws new users of all ages every year – and raises their expectations – while recent months have seen people who never thought they’d make a video call quickly adopt that technology and other online interactions.




A future-ready approach


Every bank needs to find its own strategy to balance its branches with its digital capabilities. The key is to understand the changing market factors and intentionally identify how your bank can still acquire, engage and retain customers who have evolving expectations.

To find the right balance, and the right strategy for your bank, you need a future-ready approach that helps you intentionally define where you are now, which customers you want to target and what you need to change.





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