Reimagining banks: From branches to experience stores
December 5, 2018
December 5, 2018
In markets worldwide, banks’ physical branch networks are facing intensifying pressure. Several trends—from the shift to digital transactions to customers’ rising expectations and continuing demand for a "human touch" at key moments—are seeing traditional in-branch activities continue to decline.
What’s more, our research suggests 35 percent of bank revenues are at risk from FinTechs by 2020. In response to such threats, many banks are cutting back their branch networks. But the optimal solution for banks isn’t zero branches. Instead, it lies in transforming the branches themselves to take out significant cost while improving revenue through the network.
To do this, banks need to reinvent their traditional branches as "experience stores": an integrated and highly agile network of physical spaces that operate in multiple formats, are closely tailored to their local geography, and combine digital enablement with human empathy.
Banks that get this right can turn their branch network into a positive asset, and gain a powerful competitive advantage over their digital-only challengers. Customers like using digital for routine transactions, but want human contact when they need it—and having it readily available in physical branches reassures them about the bank’s brand.
The result: Banks that create experience stores not only generate higher revenues through the network, but also gain a "halo effect" of higher sales in nearby full-service branches. For one bank this increase was over 200 percent.
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European consumers choose physical stores over online for the ability to speak to a sales associate
11%
Increase in revenue through the branch network following transformation to experience stores
The branch networks that embrace this concept will share eight vital attributes. Experience stores will:
Shifting to experience stores on a large bank’s branch network, we revealed an opportunity to take out 13 percent of cost while improving revenue by 11 percent.
To compete and win in the era of the "experience store," banks will need to harness several success factors. These include using a dedicated global and local function to optimize the stores across territories and using a standard "kit of parts" to develop each store. They’ll also need to be very clear on the hand-offs between channels, while setting targets for a three-year horizon but remaining agile in terms of the end-state. And they’ll need to drive the employee behaviour change starting from the experience mindset, not from a procedural or regulatory standpoint.
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