Technology is changing the relationship between consumers and their banking providers, and the uncertainty is creating a lot of confusion about how to adapt and take advantage of this change, or at least survive it. But we see a fundamental shift in the way customers are choosing to interact with their financial institutions, a shift that is moving the industry away from a simple transactional focus to a future of more personal, consultative customer relationships.
Five years used to be a relatively short time in the financial industry, but today rapid technological advancements are accelerating changes in the way we interact with banks. In 2012, more than half of Americans didn’t own a smartphone, but now more customers are using mobile banking than visiting branches. And five years from now, we’ll be looking at a much different picture of customer interaction.
Let’s dive in to the future of three areas where we’re seeing the biggest changes:
The Intersection of Digital and Brick and Mortar
The shift to mobile and an accelerating branch closure rate points to the downfall of the branch, right? It’s the “retailpocalypse” as one publication puts it. But don’t start planning the funeral just yet! Let me explain why this is a good thing and why branches are actually gaining relevance:
The average in-branch transaction costs a staggering $4 while a mobile transaction is only about ten cents. When most of the transactions are low-value activities such as deposits and balance checks, the ROI on a branch isn’t great. At the same time, customers still overwhelmingly prefer to have access to in person services at branches.
The key here is to strike a balance and shift as many lower-value transactions to automated platforms while creating branch environments that facilitate higher-value transactions, such as mortgages, whi. As a higher and higher portion of transactions are mortgages, opening investment accounts, etc., the cost per transaction becomes much more justifiable.
Financial institutions that embrace technology are pursuing this goal through mobile and online investments, as well as interactive teller machines (ITMs) in the branch can bridge the gap between the faceless ATM transactions and the personal interaction of a teller. Technology bars, spaces in a branch with mobile devices that members and staff can use together, can boost mobile banking adoption rates by giving members an opportunity to try out mobile apps with help from staff and get in-person answers to their questions. And revolutionary new mobile video branching is actually bringing full branch services to wherever the customer happens to be, from rural towns to the other side of the world.
Successfully pursuing this new type of customer relationship will require not only an effective technology strategy and thorough digital integration, but also a branching strategy that cultivates more personal and conversational interactions in the branches.
From Transaction Spaces to Conversation Spaces
FinTech firms may be gaining the upper hand when it comes to taking over more basic services, such as sending money to friends or mobile wallets. But in an ironic twist, the lack of branches that makes them effective at delivering these services is preventing them from gaining a foothold with the higher value transactions.
When it comes to more complex services like taking out a home loan, it turns out that personal interaction beats convenience. Even millennials overwhelmingly prefer to come into the branch for these transactions. If many of your customers are coming in to talk about a loan, suddenly that $4 per transaction cost doesn’t seem so bad!
This trend is leading to a fundamental shift in the purpose of branches from transaction spaces to conversation spaces, and recent branch designs are shifting to more efficiently facilitate these interactions. Teller lines are disappearing in favor of more open layouts featuring teller pods, and, in areas where mobile adoption is highest, financial institutions are forgoing teller areas all together in favor of more casual meeting spaces with features like counters and tables supported by untethered technology.
Verity, a Seattle credit union, has fully embraced technology. Their new branches don’t have teller line, or even pods, but rather a tool bench and open conversation spaces where universal associates can meet with members on their own terms, and where they feel comfortable. This is made possible by tablets that have a full range of banking service integrations, from checking account balances to loan applications. Cash handling machines allow easy and secure access to money for withdrawals.
A Seamless Transition Between Delivery Channels
People want to use new technology such as mobile banking, but they don’t necessarily want that to be the only way that they interact with their financial institutions. The same customer might use multiple channels, sometimes even for the same transaction, making it vital that banks and credit unions provide a seamless transition between delivery channels.
A customer may pre-fill part of a mortgage application on mobile after clicking a Facebook ad, and if they come into the branch that information should be available so the staff are able to smoothly pick up where the customer left off. Marketing emails must be customized to the customers’ unique needs, drawing detailed insights from the CRM system. A transaction begun on a universal associate’s tablet should be able to be completed online.
This seamless and effortless journey is where we see the relationships between consumers and their financial institutions headed.
Digital integration shouldn’t be limited to your internal platforms, either. A customer’s favorite FinTech service can be integrated into their retail and mobile experience via an open banking API. Many consumers prefer third party fintech apps, and for good reason. These companies, like Mint or Acorns, have total focus on the services and experience they deliver through their app. By providing an open banking API, financial institutions can ensure that app developers have fast, secure, and controlled access to data the customer chooses to share and can deliver a seamless customer experience.
Consumer expectations are growing as fast as technology evolves, and the financial institutions that embrace this change by providing high quality, relevant, and integrated experiences will thrive in an uncertain future.
To learn more about how technology is driving the evolution of the financial industry, check out our other blogs and branch project case studies!