Banking: why closing branches isn’t the solution

John Berry at Qorus explains why closing branches isn’t the solution to innovating the banking landscape

Too many bankers think of innovation as synonymous with technology. Without doubt technology has driven remarkable change and improvement across the banking sector, but it is not always welcome – how many “improved” apps turn out to be far worse than their predecessors? -  and it is not the only way to innovate.

Today’s bankers face myriad problems requiring innovative solutions, not least of which is what to do with their branches. It’s not a new problem. We faced it 25 years ago when I was Managing Director Retail at Abbey National. We tried to address it by introducing one of the first in-branch brand collaborations, pairing Abbey National and Costa Coffee.

That innovation led to a sales rise of more than 25%, and it is a story with many lessons for the bankers of today.

Reframing branches

Simply seeing branches as a costly overhead that should be removed as swiftly as possible is a short-sighted approach. Many of our customers rely on branches. Even among young, digitally native customers, there remains strong enthusiasm for in-person banking.

Apps are convenient, but, just as when we’re ill we want to see a doctor in person, so very few people want to make major financial decisions over a webchat. They want to sit down with a banker, to get detailed advice from someone they know and trust.

The problem is that, while people want to spend time in person with bankers, they don’t want to visit their branches. They’re simply not pleasant places to spend time. Compare the experience of a visiting an Apple store with that of going into your bank branch. 

This is more than an issue of customer experience; it’s also one of financial missed opportunity. The traditional method for banks to make money – borrow cheaply, lend expensively – has been severely eroded in recent years. It needs to find alternative ways to deliver revenue, and its real estate can offer that.

Inspiration for innovation

It would be easy to draw the simple conclusion from the Abbey National and Costa experiment: put coffee shops in branches. That was the solution 25 years ago, and the world has moved on. The lessons are broader than that.

Firstly, you do not find innovative solutions by looking only at what you currently do. You need to raise their perspective. Go abroad and see what they do there. Look beyond their own sector for fresh perspectives and ideas.

The idea for the Costa partnership first occurred to me on a trip to the West Coast of the US. It was a wet Sunday afternoon when I dropped into the local Wells Fargo. With a coffee shop, deli, print station, and banking machines, it was a space for the community. I’d also spent time at Disney in Florida, and at the Ritz-Carlton chain of hotels. Their attention to detail in the customer experience really opened my eyes to what is possible.

Design for customers

Ideas are never enough alone. Successful innovation is the implementation of ideas, and to do that you need to gain a detailed and clear view of what those customers want. On the Abbey board we were fortunate to have a senior Boots executive. He was rarely available when you contacted him. Why? He was always out talking to customers.

We also worked with an organisation called I-AM that specialises in bank branch design, creating environments that people want to be in. This was central to the success of our project. People typically feel tense when they are banking, and I-AM know how to design spaces that people feel comfortable in.

We removed screens separating staff from customers, we thought about layout, colours, the journey through the space, even the background music. The result was that people stayed longer, they were happy to be there, and that encouraged them to spend more with us.

Culture and people

Alongside customers, the other vital group of people who you need to think about when introducing any innovation is your staff. Retail banking is all about staff interacting with customers, and you need to bring your team with you on any innovation.

To some extent this was about picking a partner with a good cultural fit. We talked with all of the major coffee chains, and while Starbucks and Costa were interested, we had a much better fit with the

flexible pragmatic approach of Costa.

It’s also about thinking through the effects of the change. In our case we had to account for the difference between banking and retail cultures. One is about selling products, the other focuses more on understanding and delivering customer needs. We thought through how to make it work together, and it’s important to never under-estimate how innovation can affect people.

Look to the long term

The final lesson is to play the long game. Innovation rarely happens overnight. In our case, not long after our hugely successful trial, Abbey National was bought by Santander who had no time for coffee shops in banks, and closed it all down. However, they have recently trialled it in Chile, it’s been successful and there are plans to bring it back to the UK.

Two decades is a long time to wait for an innovation to come to fruition, but be prepared to wait. Look beyond the obvious places for your ideas, design them with customers in mind, and bring your people with you on the journey, and you may well hit upon the innovation that helps our industry solve the question of what to do about branches, and in so doing transforms the customer experience and delivers vital revenue.

John Berry is CEO of Qorus

Main image courtesy of iStockPhoto.com and Philip Silverman