The Future of Branch Banking: How Bank and Credit Union
Branches Must Evolve into a Customer Experience
A White Paper by MagniFI, LLC
November 2015
www.magnifi.com
Banks and credit unions have nearly identical products; the main differentiator is their customers.
In order to stand out from other financial institutions and the commoditized web-based banking
services, it’s critical that banks and credit unions learn more about their customers, including
demographics, financial service interests and consumer behavior.
This knowledge is key to offering personalized products and services that add real value to
customers’ lives. A prime opportunity to add tremendous value is in the customer experience at
branches.
Many studies and surveys show that branches are and will remain extremely important to the
customer.
According to Protiviti’s 2015 Consumer Banking & Payments Survey, 84 percent of consumers are
still visiting a branch at least once a month. A survey by the American Bankers Association shows
that physical branches remain the second most popular method for banking customers to manage
their accounts.
The Federal Deposit Insurance Corporation (FDIC) states that the total number of bank branches in
the U.S. at the end of 2014 was 82,613. That’s down only 1/10th of a percent from a peak of 83,663
in 2012.
Only 29 percent of consumers say they will use the branch less in 2020, while 66 percent plan to
use the branch in the future as often as they do today or more, according to the Protiviti report.
The Financial Brand’s State of Marketing in Retail Banking report released in February 2015
showed that one in three financial institutions planned to open branches this year. Only 8.76
percent of banks and credit unions said they anticipated a net reduction in the size of their branch
networks in 2015.
According to a new survey by Market Force Information, the majority of customers still have retail
bank accounts and visit branches. Sixty-three percent said they use a traditional retail bank for
primary banking, while 29 use a credit union, community bank or microfinance bank. Only 3
percent primarily use an e-bank, the survey stated.
From Transactional to Relational
In the Protiviti report, 79 percent of respondents characterized their banking relationship as
transactional—a statistic that rose 8 percent in just one year. This reflects a fundamental problem
facing financial institutions.
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Luckily, it’s fixable. Banking as a commodity has become how
consumers perceive financial institutions, rather than
considering how banks and credit unions are valuable to their
overall financial world.
To combat this perception, branches must do several things.
One is to invest in digital opportunities that make them
interactive, multi-channel hubs where bank and credit union staff become part of the total customer
experience.
While technology may be of primary importance, it’s not the whole picture. Bank branches must be
customer focused and community oriented. Branches must create value in order to survive.
Many consumers still want and need help opening an account or applying for loans. These are
opportunities to offer personalized service that build relationships and creates loyalty.
A new study by The Medallia Institute finds that overall customer experience has the single greatest
influence on how consumers decide where to bank. Of 2,000 U.S. Millennials (ages 18-34) and Baby
Boomers surveyed (ages 50-69), 63 percent of Millennials and 54 percent of Baby Boomers cited
personal experience, reviews or recommendations as being the most influential when choosing
where to open a checking account. Eighty percent of Millennials also cite these factors as the top
reason for switching banks. The study found that experience is considered even more important
than branch location.
Physical Transformation of Branches
Over the past several years, financial institutions have been rethinking their approaches to branch
design.
Branches used to look about the same, with a lobby, line to a
row of tellers behind counters and cubicles and offices with
banking representatives. Now, many banks and credit unions
are moving into a retail environment, where customers may
be greeted upon entrance and guided to teller pods,
interactive digital displays, wireless internet, kids’ areas, selfservice machines or a comfortable, mobile-friendly waiting
area.
These branches tend to have open floor plans with inviting
furniture and décor.
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Reaching the Younger Population
Millennials rely on the digital realm for their banking more than other populations and visit bank
branches less than older adults.
This year, Millennials have become the largest living generation in the United States, surpassing
Baby Boomers.
This generation is transforming financial services.
The Accenture 2015 North American Consumer Banking Survey
shows that Millennials choose their banks for online banking
services, reasonable fees, branch convenience and loyalty
rewards programs.
It’s no small challenge to attract and keep this audience.
Millennials switch from their primary bank at a pace nearly
double the average of other age groups. The Accenture survey
showed that 18 percent switched their primary bank within
the past 12 months—compared to 10 percent of customers 35 to 54 and just 3 percent of people 55
and older.
The Accenture survey showed that local/community banks are doing the best job in attracting
Millennials (a 5 percent increase in that age group last year) while large regional and national banks
are doing the worst (16 percent decrease). Credit unions experienced a 3 percent growth in
Millennial customers.
About MagniFI
We understand that branches are not just about transactions. Because of that, we begin with the big
picture to determine the in-branch experience you want for your customers. We help financial
institutions determine everything from the best location for new branches to the design of physical
space, implementation of technology, hiring of staff, marketing and more. Contact us today for a
consultation.
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Sources:
PWC, “2015 Retail Banking Trends.” December 9, 2014.
Forbes.com, “Do Bank Branches Still Matter?” May 15, 2014.
Capco.com, “Pruning Bank Branches: Good Business or Bad?” March 16, 2015.
Accenture, “2015 North America Consumer Banking Survey.”
Protiviti, “2015 Consumer Banking Online Payments Survey.”
Federal Deposit Insurance Corporation (FDIC.) “Number of Institutions, Branches and Total
Offices.”
The Financial Brand, “The State of Bank and Credit Union Marketing.” February 3, 2015.
Bloomberg Business, “Millennials Ditch Big Banks and Go Local with their Money.”
November 10, 2015.
Memphis Business Journal, “While Mobile Banking Grows, Branches Drive Business.” November 10,
2015.
BankNews.com, “Experience Factors Have Biggest Impact on Millennials Banking Choices.”
November 9, 2015.
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