There’s still life in the branch network
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.
Welcome to the "experience store"
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.
Eight vital attributes
The branch networks that embrace this concept will share eight vital attributes. Experience stores will:
- Showcase products and provide complex advice – providing a space where customers can experience products and services.
- Operate as an integrated component of the overall channel strategy – bringing "humanity" to the digital-led experience.
- Lead with experience – including offering community spaces, digital tools, and blended retail areas combining banking and retail services.
- Manage the territory, not the branch – using a locally-tailored blend of stores including highly visible flagship "Experience Hubs," smaller "Complement" stores, and pop-up or mobile "Satellites."
- Deploy a mix of formats across local "micro-markets" – including flagship, digital self-service, pop-up, and neighborhood advice store stores, plus customer lounges with additional amenities.
- Empower the front-line with simple mobile technology – enabling in-store customer interactions shaped by four trends: citizen AI, extended reality, data veracity and the internet of thinking.
- Emphasize the human touch – with the front-line complementing technology with empathy.
- Utilize other networks with new formats – through convergence and cross-fertilization with other retail environments.
The route to success: Getting it right
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.