In 2019, banks worldwide spent more than $650 billion maintaining their branch network. In the markets that account for roughly three-quarters of global GDP, this translated to about 84 basis points of the average deposit held in 2019 by banks in these markets. Reducing the geographic footprint and encouraging customers to use only the bank’s digital channels had obvious cost benefits.
However, it came at the expense of personal relationships and a deeper understanding of the customer’s needs and intent. In an environment where deposits have value to the bank and where some customers still believe their money resides in their local branch, these relationships matter. Treating customers holistically, individually and intimately can make a huge difference—we believe the value, in terms of creating loyalty and easing the need to compete on price, is significantly greater than the cost.
The pandemic showed us that without face-to-face interaction, most banks struggle to maintain close, loyal relationships. Digitalization made customers more self-reliant, but at the same time it eroded banks’ differentiation, facilitated switching and generally made banking a lot less personal—the opposite of what is needed to succeed today.
The year ahead will see a renewed focus on branches. Many banks will follow the lead of JPMorgan Chase, which 18 months ago reported it was more than halfway through its 2018 plan to open 400 branches in new markets across the US by the end of 2022. Banks will be inviting customers back and welcoming them home. More importantly, they will be shifting their emphasis from meeting specific needs and selling individual products to talking about improving customers’ general financial wellbeing. Banks will use their branches to learn more about their customers, show interest and empathy, offer advice and build loyalty. This will not be a pivot away from digitalization; rather, a horses-for-courses approach that recognizes the strengths of each channel. Customers today do most of their banking on their mobile devices, with only 3% of interactions happening face-to-face.
However, an in-person meeting remains the preferred option when opening new products 27% of consumers said it was their first choice, ahead of mobile apps (22%) and websites (21%).
The opportunity is to move beyond a marketplace where the value of a customer is equal to the sum of the products they use, to one where a multiplier effect is at work. This is where the branch comes into its own, but it will take a retrained and re-oriented workforce that is motivated, engaged and feels appreciated. It will also take a more tailored and purposeful customer journey than we saw before the pandemic. This journey will, in many cases, include non-financial products that help customers deal with challenges in areas like housing, mobility, e-commerce and more.