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Bank, Customer Experience, Credit Union, Engagement, Financial Instutition

Branch Transformation: How to Plan for Your Financial Institution’s Future

Marc Healy, executive director of sales and marketing
6 min read
modern touch screen bank ATM
Reading Time: 6 minutes

Branch transformation is more than a cosmetic “facelift.” In fact, true branch transformation reaches far beyond a bank or credit union’s physical appearance. And it’s certainly not a new fad; retail banking spaces have been evolving and transforming since the introduction of the ATM and the pneumatic deposit tube.

Evolution is a function of normal change, and can be sparked by industry updates, customer demands, or new technologies. That being said, there are some elements of branch transformation that are very much of our time — here, we offer some tips to follow when planning for your financial institution’s future.

How Are Banks & Credit Unions Evolving?

It’s difficult to ignore the frequent reports of branch closures across the U.S. in recent years. While the numbers may be accurate, what the reports don’t mention are the new branch openings. Even amid mass branch closures brought on by the COVID-19 pandemic (3,324 in 2020 alone), U.S. banks still opened 1,040 new branches in one year, according to S&P Global Market Intelligence data.

As we’ve discussed elsewhere on our blog, the function of the physical branch is changing from simply transactional to providing more complex, personalized, advisory services. With so many standard banking tools available via app or website, the branch is where customers and members will go specifically for expert guidance and a personal touch. Therefore, it’s critical that banks and credit unions integrate their physical presence with new technologies, optimize their spaces, and empower their staff to deliver a wider range of services.

The evolution of the physical bank or credit union branch is not without its challenges:

  • There will always be customers and members who prefer digital-only banking and may never set foot in a branch.
  • Improvements in remote banking capabilities will continue to affect in-person branch traffic.
  • Rising staffing and facility costs may affect brick-and-mortar branch closures within smaller FI networks.
  • Direct banking platforms like Venmo or Zelle pose competition to traditional banks and credit unions, especially among younger consumers.

In order to remain a necessity for consumers, bank and credit union branches must evolve into hubs of financial expertise and education that build loyalty through excellent customer service.

Your Path to Branch Transformation

It may sound trite, but transformation is a journey, not a destination — and you likely can’t use someone else’s map for yours! The first step in any branch transformation is identifying areas for opportunity and the kinds of changes (physical or otherwise) that will help your FI achieve its strategic objectives.

“You will often hear us say that our process is not just about remodeling a branch. A transformation is not a renovation,” says Element co-founder Nate Baldasaro. “We need to remember: A transformation is the combination of experienced human capital with the physical renovation of the space.”

As retail institutions, banks and credit unions must prioritize the customer experience first and foremost — along with optimizing their footprint and streamlining costs. Here are our suggestions to help guide your own transformation:

Improve your customers’ experience

With the ubiquity of mobile apps and omnichannel customer service, consumers have come to expect accessible, on-demand, personalized interactions with their favorite brands. Likewise, the act of shopping has become a multidimensional retail experience. It stands to reason that retail banking should be no exception.

Social media has done a lot to break down barriers between brands and their customers, who can now interact directly with large retailers. Partly because of this access, the transactional retail relationship has become something much more personal, with customers expecting their favorite brands to anticipate their every need and brands delivering in kind with the help of feedback surveys and CRM software.

In the bank or credit union branch, intuitive layouts, dedicated service “pods,” and unique promotional marketing initiatives can address customers’ needs before they even become aware of them. Staying one step ahead of customers’ expectations can turn a routine banking errand into a memorable retail experience.

Create more efficient systems

By utilizing real-time digital tools like mobile apps, self-serve kiosks, and optimized websites, banks and credit unions can reduce wait times in-branch and free up employees to deliver more personalized services.

A side effect of retail digital connectivity is that consumers expect a seamless experience between an app or website interface and a brick-and-mortar store. It’s essential that banks and credit unions don’t fall into the silo trap: maintaining virtual and physical spaces that are drastically different from one another (and worse yet, don’t communicate with each other).

Choose tech tools that promote self-service and can integrate easily with your FI’s existing infrastructure, including (but not limited to):

  • Mobile apps
  • ATM cash recyclers
  • Automated solutions for small business cash pickup
  • Interactive teller machines with two-way video
  • Self-service coin counters

Empower your employees

Employees who feel valued and trusted by their employer become avid brand champions. With fewer customers visiting branches for routine transactions, the one-note teller is morphing into a more advisory role equipped to handle business loan applications, HELOCs, and other, more complex financial services.

Technology aside, the branch of the future will thrive on great customer relationships. According to Deloitte, roughly four out of five customers prefer visiting a brick-and-mortar branch to open accounts or apply for a loan; on the other hand, customers blame poor customer service as the number one reason they change banks or credit unions.

In addition to practical skills, customer service best practices should be a primary unit of employee training. Take this one step further: If your FI has a distinct type of clientele (e.g. lawyers, small business owners, sole contractors, etc.), staff should be trained to address their specific financial needs.

Employees with specialized skill sets may require higher compensation, but more empowered, knowledgeable tellers and satisfied customers will likely net significant returns.

Avoid These Branch Transformation Pitfalls

Since there is no one-size-fits-all process for branch transformation, speed bumps are always a risk. Partnering with an experienced team who knows your industry can help you avoid the following pitfalls.

Creating a fragmented experience with siloed interactions

When banks and credit unions take the mobile plunge, aligning their physical spaces with their digital presence sometimes becomes an afterthought. As we noted in the previous section, consumers have come to expect a seamless transition between a brand’s eCommerce and brick-and-mortar experiences, with all customer service agents having access to the same customer data at every touchpoint.

Likewise, bank and credit union employees should have all customer information at their fingertips, whether they’re at the physical teller counter or the virtual help desk. The same goes for branding — cohesive visual elements let customers know they’re in the right place every time.

Leaving your employees out of the loop

In order to deliver an excellent customer experience, bank and credit union employees need to feel confident and up-to-date on all developments. Even if they’re not primary stakeholders, employees should feel empowered to weigh in on any major changes to their branch — or, at the very least, fully briefed on the transformation.

Set your employees (and customers) up for success in their new space with the right training, feedback channels, and a shared sense of ownership.

Focusing solely on self-service

The option to help ourselves is incredibly attractive to us as consumers, and self-service banking is often more efficient than waiting in line at a branch. However, branch transformations that forgo the in-person experience entirely risk losing customers’ trust. Customers are much more likely to seek face-to-face service for large transactions, loan applications, or other major banking needs.

Off-site banking kiosks with tiny footprints should still have real-time video banking capabilities, so customers can receive expert counsel from a human who can direct them to a physical branch if necessary.

Renovating for the sake of it

Large-scale branch transformations take significant capital, and many smaller institutions simply don’t have the ability to transform all at once. Therefore, it’s essential to understand exactly why transformation is necessary.

Are your community’s demographics changing? Do your customers have new expectations? Are your employees limited by your existing space and capabilities? Market research can help identify the right areas for change — even small modifications can go a long way in improving the customer experience.

Only listening to the “bad news” about the industry

As we said in our introduction, the news about branch closures tends to sound alarmist. Yes, branch numbers have declined overall, but new branches are opening all the time. Plus, fewer branches does not equate to poor customer service; if anything, a network with a small number of brick-and-mortar locations can focus more capital on improving employee training, offering financial literacy programs, and updating their physical spaces to better serve their unique communities.

Plan Your Next Steps

As the tangible front line for customer engagement, branches are vital to your bank or credit union’s brand image and reputation. Any transformation, whether physical or digital, should serve to grow and reinforce that image in the customers’ eyes. Besides modernizing your space, your branch update should enable better customer service, greater efficiency, and personalized expert guidance.

According to Deloitte, customers cite proximity as the biggest reason they choose a bank or credit union — so let’s make your branch worth a visit. Contact the Element team today to start your consultation.

Author
Marc Healy
executive director of sales and marketing
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