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How Digital Technology Is Remaking the Bank Branch

Tectonic shifts in the industry, triggered by digital technology, are forcing banks to reconsider how they think about branches.

글 Elizabeth Spaulding

First published on 3월 29, 2016
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This blog post originally appeared on BainDigital.com. If you've been to Singapore recently, you've probably seen a store called Frank and wondered, "What is Frank?" When you walk in, it feels like your typical high-end retail store. Warholian pop art and Lichtenstein-esque comic strip-style illustrations (complete with speech bubbles) cover entire walls. Pendant lights and an exposed ceiling lend the space a modern, polished industrial aesthetic. And you definitely won't find anyone wearing a suit and tie. If this was the '90s, you might think that Frank was a good place to buy a CD or a poster of your favorite band or performer. But Frank isn't a music store or a high-end boutique or really anything its appearance might lead you to expect. It's a bank branch. And you'll soon notice more banks doing the same. Think of Capital One Cafés, which invite customers to stop by for coffee and enjoy some free Wi-Fi while they do their banking. On a wider scale, many community banks now offer meeting spaces for local groups. According to a recent report by my colleagues at Bain, tectonic shifts in the industry, triggered by digital technology, are forcing banks to reconsider how they think about branches. The report, based on a survey of bank customers, finds that the majority of routine bank transactions, such as payments and deposits, takes place on digital channels. More than half of global consumers say they would be more upset about losing their mobile phones than their wallets. Bank branches, as most of them exist today, aren't designed to compete in that landscape for two big reasons. First, today's digital technology means that services that once had to take place in person can now be handled remotely. Instead of making an appointment to meet a banking specialist about a complex financial product, a small but growing number of customers now have the option of chatting with an adviser online at any hour of the day or night. Customers of the Dutch bank ABN Amro can meet with mortgage advisers over webcam and even process mortgages without having to physically hand over documents at a branch. Second, branch interactions are much more likely to annoy rather than delight customers in general. You can thank long lines, limited hours and bland, impersonal customer experiences for that. In fact, customers who frequently use branch services are almost three times more likely to switch banks. So why keep the branch at all? In China, some 600 million users on Tencent Holdings' WeChat messaging app have already used it to move 11 billion yuan ($1.7 billion). In fact, more than half of China's consumers use mobile tools to research banking products online vs. 29% in the US and less than 20% in Canada, Germany and France. But it's only a matter of time before the tide turns in those laggard countries. Despite the dire forecast, there is value to having physical branch locations. According to Bain's research, bank customers who use both digital and physical bank services tend to be more loyal to their banks than customers who only use digital channels. And in an increasingly crowded banking industry, loyalty is hard to come by. Banks now have the unenviable job of transforming their branches into something their customers look forward to using. Conventional banking wisdom dictates that banks should move routine transactions into digital channels and refocus the branch on high-value or complex transactions, such as loans and investments. As comfortable as you might feel about paying back a friend via iPhone, you might think twice before agreeing to mortgage terms on the same device you use to play Angry Birds. Frank represents a more radical approach—replacing traditional branches with flagship retail experiences. Deutsche Bank took a similar approach in 2005, when it launched a lounge-inspired branch prototype. The branch–lounge hybrid featured a small library of books, several seating areas, an espresso bar, a foosball table and a Trendshop, where customers could buy items for their homes, families or offices. To inquire about the bank's services, customers could pick specially designed tin boxes off the branch's shelves and bring them to a staff member. It's likely other reimagined bank branches are just around the corner. Far from shuttering overnight, most bank branches aren't going away anytime soon. But if they want to find a home in today's market, they'll need to change—fast.

This blog post originally appeared on BainDigital.com.

If you've been to Singapore recently, you've probably seen a store called Frank and wondered, "What is Frank?"

When you walk in, it feels like your typical high-end retail store. Warholian pop art and Lichtenstein-esque comic strip-style illustrations (complete with speech bubbles) cover entire walls. Pendant lights and an exposed ceiling lend the space a modern, polished industrial aesthetic. And you definitely won't find anyone wearing a suit and tie. If this was the '90s, you might think that Frank was a good place to buy a CD or a poster of your favorite band or performer. But Frank isn't a music store or a high-end boutique or really anything its appearance might lead you to expect.

It's a bank branch. And you'll soon notice more banks doing the same. Think of Capital One Cafés, which invite customers to stop by for coffee and enjoy some free Wi-Fi while they do their banking. On a wider scale, many community banks now offer meeting spaces for local groups.

According to a recent report by my colleagues at Bain, tectonic shifts in the industry, triggered by digital technology, are forcing banks to reconsider how they think about branches. The report, based on a survey of bank customers, finds that the majority of routine bank transactions, such as payments and deposits, takes place on digital channels. More than half of global consumers say they would be more upset about losing their mobile phones than their wallets. Bank branches, as most of them exist today, aren't designed to compete in that landscape for two big reasons.

First, today's digital technology means that services that once had to take place in person can now be handled remotely. Instead of making an appointment to meet a banking specialist about a complex financial product, a small but growing number of customers now have the option of chatting with an adviser online at any hour of the day or night. Customers of the Dutch bank ABN Amro can meet with mortgage advisers over webcam and even process mortgages without having to physically hand over documents at a branch.

Second, branch interactions are much more likely to annoy rather than delight customers in general. You can thank long lines, limited hours and bland, impersonal customer experiences for that. In fact, customers who frequently use branch services are almost three times more likely to switch banks.

So why keep the branch at all? In China, some 600 million users on Tencent Holdings' WeChat messaging app have already used it to move 11 billion yuan ($1.7 billion). In fact, more than half of China's consumers use mobile tools to research banking products online vs. 29% in the US and less than 20% in Canada, Germany and France. But it's only a matter of time before the tide turns in those laggard countries.

Despite the dire forecast, there is value to having physical branch locations. According to Bain's research, bank customers who use both digital and physical bank services tend to be more loyal to their banks than customers who only use digital channels. And in an increasingly crowded banking industry, loyalty is hard to come by. Banks now have the unenviable job of transforming their branches into something their customers look forward to using.

Conventional banking wisdom dictates that banks should move routine transactions into digital channels and refocus the branch on high-value or complex transactions, such as loans and investments. As comfortable as you might feel about paying back a friend via iPhone, you might think twice before agreeing to mortgage terms on the same device you use to play Angry Birds.

Frank represents a more radical approach—replacing traditional branches with flagship retail experiences. Deutsche Bank took a similar approach in 2005, when it launched a lounge-inspired branch prototype. The branch–lounge hybrid featured a small library of books, several seating areas, an espresso bar, a foosball table and a Trendshop, where customers could buy items for their homes, families or offices. To inquire about the bank's services, customers could pick specially designed tin boxes off the branch's shelves and bring them to a staff member.

It's likely other reimagined bank branches are just around the corner.

Far from shuttering overnight, most bank branches aren't going away anytime soon. But if they want to find a home in today's market, they'll need to change—fast.