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Michael Lowenstein, Ph.D., CMC Thought Leadership Principal, Beyond Philosophy

Baseball great Yogi Berra has been quoted as saying “When you come to a fork in the road, take it.”  He also said “If you don’t know where you are going, you might wind up someplace else.”  Both quotes seem to apply to what is currently transpiring with retail branch banking, and where it seems to be trending.

Banks can’t quite make up their minds about what branches are supposed to be.  Are they technology centers, with increased reliance on self-service devices, speed, and with minimal customer interface? Are they central, and primary, points of contact and interaction, where well-trained branch staff can build relationships and long-term value?  Are they both?  Are they neither?

At a time when banks are closing branch locations at a record pace (over 1,400 in 2014, with Bank of America, alone, closing more than 140) that is likely to continue, the need for the services they offer remains pretty much the same.  The largest banks appear to be all about building branch relationships through technology.  And, we’re seeing a new term for the branch experience:  ‘shadow banking’.  One industry consultant said that the new, high-tech branches are aimed at three customer personas:  busy, gadget-centric millennials, Gen X soccer moms, and baby boomers who own small businesses.

Not many actual “bankers” are involved in this new concept; and, going forward, customers are more likely to be dealing with a self-service electronic avatar than with a teller or a financial service representative, and they’ll have ATMs with access through smart phones and palm scan or thumbprint identification. And, if the branch avatar isn’t functioning properly, sophisticated software will identify the issue and switch the customer to a live professional. Reflecting this sea change, another industry expert was quoted as saying:  “The majority of transactions are now processed electronically, reducing the need for physical branches.  This does not mean that bank branches will go the way of video stores or carriage shops, however.  Branches allow for direct contact with individuals and businesses important for the sales of financial services.  However, legacy branch networks are unlikely to be changing as quickly as their clients’ use of electronic versus paper financial transactions.”

The big banks are claiming that saving the money historically allocated to managing a chain of local retail financial units, and investing more in marketing through electronic media and high-tech service will offset the truncation of branch networks.  They are looking to improve their branch models as customer behaviors, and needs, change.

Smaller regional banks, like Umpqua, Republic, and Metro (in the United Kingdom) have increased the focus on generating relationships through memorable, emotional branch experiences: http://customerthink.com/bring-your-kids-bring-your-pets-how-metro-bank-u-k-and-republic-bank-u-s-win-hearts-and-minds-of-customers-and-their-families-and-friends/

Portland, Oregon-based Umpqua Bank has created a branch banking experience that is more like the local Starbucks. Or, like staying at a Ritz-Carlton, shopping at an Apple store, or flying Southwest Airlines.  It is a concept that they began several decades ago, and it is built on a successful recipe of community service and employee-empowered customer service.  The concept even has a name:  the Neighborhood Store.

Umpqua understands that the employee, knowledge, and technology go hand-in-hand in hand.  Branch staff are both well-trained and equipped with high tech devices (they have “mobile concierges”, with iPads and headsets) for making customer inquiries and transactions go smoothly and efficiently.  What really sets Umpqua apart, though, is that they really put ‘community’ in community banking.  Branches are purposely designed to serve as gathering and event spaces, hosting things like movie nights, yoga classes, small business expositions, and art exhibits.

As an Umpqua SVP was quoted stating in a recent magazine article:  “Finances are challenging enough  –  why are bank branches formal and intimidating? Why does banking have to be a chore?  Why can’t banking be an enjoyable experience?”  Umpqua has created that enjoyable experience, making customers comfortable in attractive spaces, and interacting with empowered staff looking to build a meaningful relationship. And, beyond design and comfort, relationship-building and being trusted advisors to their customers is mostly about culture. That’s where Umpqua excels.

Some of the larger institutions, like TD Bank for example, are not directly following the shadow banking, local branch-closing mantra seen with many of the other bigs: but they are also reframing the customer’s branch experience to be more like Umpqua Bank, that is they’re making visits about personal, individualized, “human” interactions:  http://customerthink.com/td-banks-human-initiatives-marketing-strategy-or-marketing-tactic-powerful-marketing-success-or-expensive-marketing-radar-blip/

Like Metro and Republic have recognized, another emerging branch banking trend is that they are also beginning to think about how the next generation of customers, who are even more tech-savvy and less institutionally-oriented than millennials, will use their branches.  Teens and pre-teens have grown up with digital, mobile social connections and apps.  They are, as a consequence, early adopters of new tech devices, and their life priorities are different from those of their parents, and unique to this age group. As quoted by Tyler Sherman, a 16 year-old high school student from Belair, MD (and newly minted driver): “The future is technology, and you can take that to the bank”

So, which vision of the branch will win out going forward?  Once again, Yogi Berra has the best predictions and perspectives to offer:  “The future ain’t what it used to be.” and “If you ask me anything I don’t know, I’m not going to answer.”

Republished with permission from CustomerThink.com