Banking pundits have been predicting the demise of brick-and-mortar banking for some time now. The new generation of Millennial customers live in the digital world, and all transactions can be handled by smart handheld devices, right? A number of financial institutions such as Bank of America have started offering inline-only;y banking that actually charges fees for in-branch deposits and other transactions. However, don’t count branch banking as a loss-leader just yet. It seems that branches have just as much value as they always have although the role of branch banking is changing.
According to a new study from Wells Fargo, younger customers are using their handheld devices more than ever, but they are still relying extensively on brick-and-mortar banks. The latest information from Wells Fargo shows that 72 percent of millennials aged 18 to 34 are using mobile banking apps, compared to 50 percent for Generation X (35 to 50 years old), and 19 percent of Baby Boomers (aged 50 and older). However, 63 percent of millennials also use branch banks as opposed to 68 percent of Gen Xers and 69 percent of Boomers.
Like other customers, millennials need in-branch banking products such as loan processing, mortgages, money transfers, and other value-added services. The same study shows that millennials visit branches less frequently – on average, six times each quarter as opposed to seven times per quarter for older customer segments – but they still use bank branches.
To cut overhead, Wells Fargo and other banks are reducing their geographic footprint, closing some bank branches but assessing markets to make sure they “right size” their brick-and-mortar presence. At the same time, banks are getting smarter about adopting new omnichannel marketing strategies to bring the right kind of new business into branch banks. Banks are creating a mash-up of the in-branch and digital experience to improve customer service.
Bank products can be complex, and most customers are uncomfortable working through complex transactions online. Electronic bill pay and mobile bank deposits is one thing; negotiating a used car loan or line of credit is another matter. More banks are initiating online interaction or video-enabled chat so customers can talk to a bank representative over a digital link. It’s still not the same experience as sitting across the desk from your banker and closing the deal with a handshake.
To promote more of an omnichannel customer experience that brings together digital and physical banking, banks and credit unions are adopting new strategies:
New marketing centers – Some banks are changing the look and feel of their branch banks, turning them into retail showrooms to highlight banking products. These hubs offer banking services with video links to financial specialists. There also are “pop up” branches and video tellers to provide a new kind of branch banking experience blending technology and personal service.
A converged banking experience – Banks and credit unions also are combining online and in-branch transactions. For example, a customer can start a loan application online and then make an appointment with a banker to review and sign the paperwork. A number of credit unions are partnering with other companies to offer custom shopping services for new and used cars; the credit union handles the car loan and the partner finds the perfect car. Customers are able to manage their money through any channel, e.g. by making loan payments online, by check, or in person.
So the hype about the demise of the brick-and-mortar bank is just that, hype. It seems that brick-and-mortar banking will be with us for some time to come, but how those branches operate and how they serve customers is going to change to optimize the new digital banking experience.