Written by David Adams
Online and mobile banking are of increasing importance. But the bank’s High Street branch still has a significant role to play, notes David Adams
For 25 years Britain’s High Street banks have been trying to look more friendly, with every advertising campaign an attempt to escape a stuffy, wood-lined-office-and-grumpy-Captain-Mainwearing-sat-behind-the-desk image. But today, following some well-publicised mis-selling or over-charging scandals and the 2008 bailouts, contempt for bankers is at an all-time high. So the banks are trying harder than ever to look friendly. They need to: this market is changing fast, as new entrants make tentative inroads, regulatory conditions tighten and the banks struggle to create multi-channel service infrastructures. One consequence is a renewed focus on the branch.
In 2010, Accenture research into customers’ use of different service channels confirmed that consumers like to deal with bank staff face to face when considering using more complex products. “Branches remain pivotal to success and the key customer acquisition channel,” says Jonathan Gray, partner in the financial services practice at Accenture. “The branch has a very important role to play in a multi-channel offering.”
But Accenture also compared UK consumer attitudes to those held by other European consumers. Six out of ten (61 per cent) still use the branch for transactions or to check account balances, compared to just 19 per cent in Sweden and 15 per cent in Denmark. “In the UK we are still very branch-dependent,” says Gray.
Banks are trying to change that, slowly, as branches evolve into customer service centres, with more use of sophisticated, user-friendly, self-service ATMs to speed up services; and counter staff transformed, as the phrase goes, from tellers to sellers. As Ed Brindley, director of marketing at Wincor Nixdorf, points out, it is technology which makes this possible, with improved cash security hardware allowing banks to remove security screens, for example.
Retail banks in other countries are leading the way. In Spain, La Caixa and Santander have each developed supermarket/pop-up-type branches, where self-service technology means staff in the branch can spend more time focusing on higher value transactions and interactions. In the Netherlands SNS is replacing its network of 150 branches with 300 smaller banking ‘shops’, just 80 square metres in size, with two members of staff to help customers apply for new products via the bank’s website, or schedule appointments with advisors to discuss more complex products. In Italy, Mediobanca’s CheBanca! multi-channel brand, launched in 2008, has 110 small-scale branches designed to remove barriers between staff and customers: they sit side by side while browsing online. Staff are also often recruited from the retail sector.
Wherever banks are investing in new branch technology the shiny surfaces depend on powerful computing behind the scenes. That’s easier for new entrants, because they don’t have legacy systems to adapt. But the big players are working on it too. Lloyds Banking Group has just about completed integration of its LloydsTSB, Halifax and Bank of Scotland brands onto a common platform. This will form a foundation upon which it can construct a branch revitalisation strategy and enhance online and mobile channels, says David Nicholson, managing director of the Halifax network.
Barclays has been overhauling its 1,634 branches since 2008. Like the Halifax, which has been running an advertising campaign highlighting extended branch opening hours on Saturdays, Barclays is realigning opening hours in some branches. About a quarter are now open on Saturday.
At Barclays’ flagship Piccadilly branch in London, many of the technologies the bank hopes to use more widely across its network are already visible: deposit machines that allow mixed deposits of up to 10 cheques and 50 notes and print receipts; receipt-issuing, coin counting deposit points; foreign currency ATMs dispensing Euros and US dollars at counter rates; and self-service kiosks offering an online banking-sort of functionality range.
Customers inside the ‘Premier Lounge’ zones at the Piccadilly and High Street Kensington branches can also use a Microsoft Surface interactive table to explore the Premier banking offering. “Reaction from customers and staff has been phenomenal - staff now have an engaging tool to help talk through the proposition; and customers like to play around with content delivered in an innovative way,” says a Barclays spokesperson.
Accenture’s Gray predicts that a growing number of retail banks will also soon be making more use of tablets to serve customers in the branch, just as is happening inside a growing number of retail outlets. But the key to all this, he emphasises, will be the extent to which these technologies enable staff in the branch to tie service to the multi-channel model.
Amit Dua, head of sales, EMEA for Finacle at Infosys, stresses the important role that the branch can play in bringing personalisation into banking, suggesting Finacle’s Customer eXPerience as one tool that could prove useful here. Similarly, its Advizor solution allows customers to access advice from an expert when in the branch, communicating directly via an online link. Dua says Finacle will be working with its largest UK retail bank customer on implementing this type of technology as part of an overhaul of its front and back office taking place over the next two years. The company is also teaming with retail banks in Belgium and Spain on solutions that will allow product configuration and bundling at the branch, meaning staff can build up product bundles on the fly, based on the customer’s preferences and the profitability of this customer relationship.
Meanwhile, still barely visible to most UK consumers, new entrants are also using some of these ideas and technologies. Metro Bank launched in July 2010 and opened its ninth ‘store’, in Uxbridge, on the edge of London, in October. At the time of writing the bank is preparing to open a tenth in Hounslow on 16 December. So far all have been inside the M25, but the network will move onto the outer reaches of the London commuter belt, to High Wycombe and Reading, in the first half of 2012, among 10 new stores opening during the year. Metro Bank wants 200 by the end of 2020.
CEO Craig Donaldson tells FStech that 1,000 new accounts are opening each week, meaning the total was close to 40,000 at the end of October, up from 25,000 in July. The bank has placed a great deal of emphasis on delivering good service through the branch, but now also has internet and telephone services in place, with mobile banking to launch in early 2012.
Donaldson believes one of the most important attributes of the Metro Bank service in the store is that customers can sign up then leave with everything they need to start using their accounts: chequebook, bank card, PIN (which they choose); and with internet and telephone banking arrangements set up and ready to use. All documents relating to the customer, such as application forms, are barcoded, scanned once filled in and so linked into the customer’s profile immediately. He also highlights the fact that the bank is doing about 40 per cent of its business outside core banking hours. “I want to keep products simple and differentiate on great service and convenience,” he says. “Our people don’t have sales targets, they have service and customer satisfaction targets.”
But new entrants will struggle to make an impact without an extensive High Street presence. That could change, either if a brand like Tesco puts more resources into developing mini-branches within its store network, or if a new entrant purchases the 650 Lloyds TSB and Cheltenham & Gloucester branches that the Lloyds Banking Group is being compelled to sell to meet EU competition rules. Whoever buys them also gets the existing technology, staff and five million customers - 4.6 per cent of Britain’s current accounts and 19 per cent of the Group’s mortgage book.
At the time of writing there are three potential bidders: Co-operative Financial Services (not a new entrant), US investment firm Sun Capital and NBNK investments (co-founded by Lloyds of London chairman Lord Levene). There is also persistent speculation over possible bids from Virgin and also NAB, which owns the Clydesdale and Yorkshire bank brands.
Would Metro Bank want those branches? “No,” says Donaldson. “We have great technology and great premises and great people. When you put them together we create the right culture. You don’t create a culture by going and buying 600 stores and bolting it on top.”
So if Metro Bank maintains its current strategy where will it be in 20 years’ time? “I would hope we would have 400 to 500 stores and we should have - we will have - a culture focused on meeting customer needs through whatever channel the customer wants,” says Donaldson. “All the other banks will have talked about doing some of the things we’re doing and struggled, because of their legacy systems, to do it.”
Even so, Halifax’s Nicholson believes the other retail banks are driving change at the right sort of pace today, considering the context of what is practically possible and what customers actually want. He recalls how Halifax saw a big uplift in usage of self-service deposit machines when they started issuing photocopies of cheques that had been deposited. “It’s about being close to what the barriers are for customers and working through them,” he says. “But the branch is still the place customers go for the things that are most important in their lives.”
Once it was thought technology could wipe out the branch network; now it’s giving it a new lease of life.