Banking today is almost unrecognizable from what it once was - in some ways, that is.
In this article you will learn about the future of the bank branch, and the role digital banking and video banking technology will play.
While our parents and grandparents most likely walked into their local branch for every transaction, today - as consumers seek a bank branch for the digital age - we have the option of carrying our bank in our pocket, via mobile video banking, using video banking apps and self-service tools to manage our own accounts from anywhere, at any time.
But many customers still rely on human interaction with bank representatives when it comes to managing, planning, and handling their finances. Banking is, after all, a service that involves personal and sensitive information and important decision-making. For high-stakes transactions and financial advising, it takes a person, not a button, to offer customers the personalized service and peace of mind they need.
So, when should banks focus on digital services, and when are face-to-face interactions still needed? Do customers still even want physical bank branches? And, as consumer banking evolves and video banking technology advances, how can video meetings help to create a modern customer experience?
For years, large financial institutions have been engaged in a digital arms race, which has only been accelerated by innovation from new Fintech companies, and the Covid-19 pandemic, which pushed more established industry players to quickly adopt more digital services. These changes have transformed customer interactions in the financial sector, especially within consumer banking. And it’s no wonder why: digital banking is fast, convenient, and can often keep business costs low for the bank, while speeding up services and response times for the customer.
When it comes to simple tasks like checking an account balance or transaction history, for many customers there’s no need to ever step foot in a bank branch. Direct deposits and automatic bill payments, along with mobile payment apps, means that it’s often easier for consumers to handle their own transactions than spend the time it takes to travel to a bank branch or call to speak with a representative. In these situations, web and mobile banking, chatbots, telebanking, and even social media will often win out for both your organization and the customer, in terms of both time and money saved.
This question is not a new one, and for years, banks have been re-examining the role of the branch as more digital services have become available. In 2016, McKinsey & Company conducted an online Consumer Insights survey of 36,000 consumers across 11 European countries, Canada, South Africa and the United States, to analyze customers’ behavior across channels, their satisfaction with their main bank, interest in innovative services, and willingness to switch to digital and remote channels for advice and sales.
In the United States, 38% of respondents still preferred the branch as the dominant channel for their banking needs. McKinsey called this subset “security seekers”—consumers who sought their local branch or at best an ATM for all banking needs, because they had low trust in remote and automated channels.
Once you added a second category—the “personal bankers” as McKinsey called them, typically senior-aged customers with low tech adoption—the lead was transferred to Germany. Indeed, in most geographies, the percentage of consumers preferring the “bank in my pocket” convenience of remote banking for most transactions and advice was lagging significantly, compared to those preferring direct human interaction at a branch.
While numbers above showed that in 2016, a surprisingly high percentage of consumers still preferred in-person interactions at branches, in 2020, everything changed due to the global Covid-19 pandemic. According to a Forbes article, branch transactions fell 30-40% between March and November 2020.
“Banks have planned for years for disaster recovery if their technology failed but have never planned for disaster recovery if their buildings closed,” says Chris Skinner, leading influencer and champion of digitalization in finance, in an article from The Economist. “This is the big lesson of the crisis.”
As Covid-19 has made painfully clear, reliance on brick-and-mortar businesses creates immense vulnerability to unexpected disruptions in the ability to operate. Throughout the pandemic, financial organizations were forced to adopt new collaboration tools for both customer-facing and internal communication. Consumer banks, like so many other businesses, discovered that more could be done remotely than ever imagined.
As a result of this, large banks around the world recently began announcing that they will close a large number of their branches permanently, and it’s no wonder why: maintaining a branch—in terms of staff, technology, and overhead costs—accounts for half the operating costs of some banks according to the McKinsey survey. Turnover for branch staff is high, and it’s harder to track customer engagement than when working with automated channels, yet branches often work with the most complex aspects of the customer relationship.
Despite the possibilities provided by new digital adoption, the pandemic has also shown us what we lose when in-person meetings aren’t possible, revealing the limitations of digital banking. For many customers, whether it be due to age, personality, social situation, or access to technology devices, digital banking just isn’t enough without the element of human interaction.
And even for the most tech-savvy customers, there will be times in their life and financial situation where the nuances of individual decisions and transactions require customized guidance from bankers, advisors, and sales representatives.
For example:
No matter how advanced automated services become, they will never replace the person-to-person connection that is often critical to providing a quality customer experience, ultimately leading to long-term trust and loyalty. What recent times have shown us, however, is that these interactions don’t need a physical meeting to be successful. In fact, they can be both successful and convenient through the use of video banking.
A number of the challenges described above, both for digital services and in-branch banking, can be solved by video banking. Here are some reasons why:
So, what does the video banking experience actually look like? It’s up to you, your organization, and the unique needs of your customers. Pexip’s customization features allow you to design your consumer journey through your products and services, which can be called the solution workflow.
Creating this workflow requires mapping out every touchpoint as you assess how you want to enable video meetings with customers. The simpler the flow you set up, the better your success rate is likely to be. Here’s an example of how Pexip video conferencing can look when integrated with your organization’s customer workflow:
Of course, one of the main motivators for banks going digital is the immense cost savings when compared with the expense of running a branch. Video can alleviate some of the costs of holding in-person meetings, but quality video conferencing technology and hardware is also an investment that should be weighed within the overall goals of the organization.
The figure below shows how the Modern Banking Value Steps increase costs in tandem with personal contact. Video banking, which is a digital form of personal contact, is on the higher end of the spectrum when it comes to cost, but considering its potential for boosting customer retention and revenue streams that rely on customer loyalty, it's an investment that has the potential to provide long-term value.
For video banking to be a valuable element of your customer-facing services, it needs to be implemented in a way that allows the solution to make your customer interactions and internal communications easier, not more complicated. When choosing a video banking solution that ready to do the work for you and scale as you need it to, consider the following:
Virtual face-to-face meetings can help your bank bridge the gap between digital and in-person consumer banking services to provide the best of both worlds. To learn more about Pexip's flexible solutions for video banking, visit pexip.com/finance.