Digital banking is the future. It has already transformed our relationships with financial institutions and made banking easy and convenient. But while many influencers and digital banking leaders are doing the final count before physical branches tap out, we believe that branches are here to stay because they provide human connections that take the anxiety out of financial milestones in customers’ lives.
From the little things like opening a checking account or starting a college fund, to big, life-changing milestones like buying their first home, these decisions are unfamiliar to many people and with that unfamiliarity comes a level of anxiety. Online information can help, but it can also be overwhelming to parse out what’s important and relevant to one’s situation. While it’s good to educate ourselves, many people, especially those under 35 who are balancing young families and the stress of early careers, simply don’t have the time to put into learning the ins and out of getting a mortgage from an app or website.
Staff in a branch are able to instantly cut through customer anxiety with a conversation.
Self-service digital platforms make the transactions themselves fast and convenient, but staff in a branch are able to instantly cut through this customer anxiety with a conversation. Instead of having to search for terms a customer may or may not know, the staff member will quickly catch on to which topics are confusing and lead the customer to the knowledge needed to make an informed decision. By being walked through the process, the anxiety that comes from the unknown or fear of making the wrong decision is greatly reduced.
Harvard Business School is currently doing extensive research into customer anxiety, and the results published in their working paper Mitigating the Negative Effects of Customer Anxiety through Access to Human Contact demonstrate that the deployment of self-service technology in the financial industry exacerbates the already stressful nature of buying financial products. The study found that when members of one credit union began the loan process with a self-service platform, they have a 16% higher chance of finishing the process and taking out that loan when they have access to human contact.
Looking purely at the cost and convenience of a transaction, it can seem like branches have difficulty competing with digital channels. But as financial institutions like Verity Credit Union have discovered, human connections are a vital part of the banking relationship. Studies show that even millennials prefer to take out loans in person versus on websites and in apps. So while a branch based around cashing checks and withdrawing money might not make sense in many areas, evolving to branches based on conversational rather than transactional environments can give you a competitive advantage and help you develop better relationships with your members or customers.
So next time you read about the death of the branch and the rise of all-digital banks and fintechs, imagine a young couple getting ready to take out their first mortgage. When they get anxious about the process and want to reach out with questions, do you think they’ll turn to an online-only bank or their neighborhood branch?