Branches reimagined: Digital and in-branch innovations
The landscape of financial institutions has been undergoing a significant transformation, driven by the dual forces of digital innovation and the reinvention of the physical branch experience. The insights we have extracted from the 2024 Future Branches conference shed light on these exciting developments, and we are happy to share what we learned while attending. Before diving into some of the specific new trends we found, here are the most significant issues facing the financial industry:
Buzz words: Digital-first hybrid models
Digital-first strategies are reshaping the traditional model of financial institutions. For most organizations, this digital-first strategy focuses initially on users’ digital experience but then revitalizes key branches with experienced personnel and a new, engaging branch layout. Most organizations have developed and streamlined an app for users during COVID-19 and have been working through what that means at the branch level. Financial institutions are blending the efficiency and convenience of digital platforms with the personal touch of physical branches.
Digital natives begin to impact business
The digital-first strategy is critical in the fintech era, which is reported at over 10,000 companies strong at the time of writing. These apps offer financial planning, financial advice, paycheck advances, payment plans, and more. Young and new customers increasingly expect the flexibility and accessibility of digital services. This often means a seamless digital experience, plus the ability to go into their local branch and resolve issues as they crop up. Contrary to the digital-only trends during the pandemic, 80% of millennials surveyed admit having visited their local branch within the last year.
Innovations in banking apps like digital scheduling and enhanced digital engagement make it easier for customers to interact with financial institutions on their terms, signaling a shift towards more customer-centric operations. “Digital Tellers” are emerging – an app that allowed voice and video walkthroughs of loan applications was a runner-up during Innovation Awards at the Future Branch Conference (36% of customers want to connect via video).
What digital is doing to the branch
Alongside digital advancements, the physical branch of financial institutions is being reimagined as a community hub and advisory center. This transformation recognizes the branch role beyond transactions as a center for community engagement, advice, and personalized financial services. Innovative concepts, such as incorporating communal spaces and repurposing retail locations as branches, are redefining the traditional boundaries of financial services, making them more integrated into customers’ daily lives.
Though there has been some fear of the “cashless” future that may eliminate the branch, research indicates that “rightsizing” locations may be the sweet spot, allowing branches to retain a footprint in the region along with a robust digital presence. The best rightsizing methodology involves a hub and spoke model—the hub is your staple branch, and small footprint stores and well-situated Intelligent Teller Machines (ITMs) are the spokes. Closing several large branches and subsequently getting creative re-envisioning retail storefronts to keep a smaller store footprint has been successful in larger banks.
Address the stress: Audit your compliance and safety before the auditors
Expand the branch definition of digital-first strategies: Financial institutions are advancing branch safety and compliance through a novel digital app. This app, central to managing safety checklists for essential operations like opening and closing, doubles as an emergency alert system. It notifies local law enforcement and security firm 3SI if there’s a deviation from standard procedures. This innovative approach not only simplifies processes but also fortifies branch security, tackling vulnerabilities while maintaining compliance, signifying a vital stride in the sector’s digital evolution with a focus on both efficiency and safety.
Supplementing labor costs while investing in brands with ITMs
Incorporating technology within physical branches is also a vital aspect of this transformation. ITMs and advanced analytics for branch location planning are just a few examples of technology enhancing the in-branch experience. These innovations improve operational efficiency and customer experience, offering modern conveniences within the traditional branch setting. More expensive than ATMs will require better security: consider GPS tracking of cash, ATMs and ITMs as well as smart surveillance that can automatically escalate threats.
Branches are eliminating the teller line in drive-thru with ITMs, and new branches being built are increasingly making space for ITMs to take over all basic transactional needs of branch customers. During conversations at the conference with a few financial institutions, the newly built branches had two ITMs outside in a drive-thru and two inside the branch. Several organizations are utilizing video tellers who can help anyone at the ITM with their basic transactions and, increasingly, with their loans and other applications. Branch customers should be directed to ATMs or ITMs to complete routine transactions, freeing tellers to sell services and deepen relationships with members. It also allows for better training of branch employees – creating space for the universal teller to flourish.
The universal teller and the shift to sell in-branch
Increasing reliance on technology will allow branches to create a smaller, higher-trained, more flexible staff. Most branches are leaning toward traveling tellers – and allocating work to branches that need the extra set of hands when they are busier. Mentorship programs are allowing new tellers to expand into new fields like fraud protection or customer service. Upwards mobility in their position remains a big attractor to new employees entering the workforce.
Moreover, the physical design of branches is evolving to foster more meaningful customer relationships. The focus is shifting from transactional layouts to more open, flexible designs that encourage engaging conversations and personalized service. This shift in branch design reflects a broader change in the philosophy of financial institutions, emphasizing deeper customer relationships and customized services. Case studies at the conference pointed to several branches tearing down most of their more extensive teller lines and creating “teller pods” – smaller, more casual sitting areas – sometimes couches or counters to replicate the feel of getting financial advice at home in your living room or kitchen.
Financial institutions are at a pivotal moment, marked by significant digital innovation and transformative changes in their physical presence. By embracing these trends, they are maintaining relevance in a competitive landscape and redefining the essence of modern financial services. The future of financial institutions looks dynamic, customer-focused, and seamlessly integrated into the fabric of everyday life.
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