Successful Retail Banking Needs to Blend Digital and Physical for an Engaging Customer Experience

Retail banking customers — even Millennials — still require physical branches as part of their experience.

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For at least the last 20 years, banks have been doing their best to dissuade customers from visiting branches to transact and to turn them to digital services instead. The rapidly broadening horizons of custom enterprise software has helped them achieve much of their goal, and today there are many bank customers who rarely, if ever, visit a branch. Instead, they use the internet or their mobile phones to pay bills and transfer funds. Deposits of cash and cheques still require some physical interaction, but today the queue is at ATMs, not at bank tellers. This mass migration was achieved by making over-the-counter fees prohibitive, hitting the customer in the pocket.

With the benefit of 20/20 hindsight, this might have been a short-sighted strategy. First, the focus was on cost reduction, not on customer experience. Traditionally, in all global markets, the ability to migrate from one’s current bank to a competitor was so onerous that customers stayed with the devil they knew, despite being dissatisfied with service issues and pricing. Now, all that has changed: companies that do not keep their customers happy will see them take their business elsewhere, and the bank’s sustainability will be severely compromised.

In order to improve customer experience, banks are focusing on digital transformation and often excluding branch presence completely. The steady erection of barriers for customers to interact directly with bank staff, forcing them to communicate via IVR (interactive voice recordings) and call centers, has generally eroded trust. How to regain that trust should be one of the key drivers for any bank’s strategy.

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Customers — Do They Trust Their Banks?

Trust in banking is layered; there is basic trust in the stability of the bank and its ability to perform banking transactions, but there is also trust in the advice offered by the bank on products and services.

Accenture’s report shows that in 2018 banking customers’ trust and satisfaction was the highest since 2012. Digital services might be driving these figures, but for many human touch is still very important. Among the respondents, 70% need the option to voice a complaint to a human support rep, 63% want to be able to open an account at a physical branch, and for nearly half of the surveyed personal guidance on using online and mobile services is essential.

Another study by Accenture from this year points out that trust doesn’t always equal loyalty — although showing high trust in banking institutions, certain customer personas will have no problem switching to non-conventional financial services providers.

To be fair, the global slump in 2008, combined with the subprime mortgage scandal, has had a lasting effect on banks’ reputations, which has helped to fuel the shaky relationships between banks and their customers. The reason we are harping on it is that, without trust, building superior customer experiences is just not going to happen.

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The Relevance of the Branch

Human trust is still built on personal interactions. One may have a useful conversation with a chatbot, but there is no meaningful relationship there. In the good old days, you could approach your bank manager for advice and help on new personal requirements. Now there is only a generic bunch of people called “front-line staff” who have differing amounts of knowledge and advice depending on how adept your bank is at training them. Half of the bank sits in back offices, and “do not speak to customers.” Really? Are the customers not good enough?

In order to build some solid relationships, bank staff need to be out there meeting and greeting customers, getting to know them by name and gradually rebuilding trust. This can be challenging when the bank has done everything in its power to chase customers away from branches. Some banks have got the point, and implemented innovative design and tried to create more of a retail experience than a financial one. A Dutch banking giant started the trend 15 years ago with its ING Direct brand based in Orange coffee shops. Though not a full-service bank (no account openings, for instance), customers could enjoy coffee and get financial advice at the same time. When Cap One acquired ING Direct, they decided to keep the concept, while rebranding the cafes in a partnership with Peet’s Cafes.

This is one strategy to get customers back in branches; at least it rebuilds some of the personal relationship. By the way, Millennials are not as allergic to bank branches as everyone believes them to be. According to BAI, Millennials still cite convenient branches as the number-one factor in evaluating financial services.

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Branches Aren’t Enough — Add Digital to the Blend

The fact that all banks are doing their best to transform is not a bad thing, the problem is that many of them are tacking bright shiny apps, websites and social presences on to siloed old legacy back-office systems. This is not a recipe for success.

Customers want a consistent experience, not conflicting views of the same product depending on whether they are transacting via a mobile app, telephone or computer. Instead of building a facade, banks should ensure that they move to omnichannel as soon as possible. The silos between systems are often mirrored in the business units; each one has their own business rules, forms and processes. A wise digital strategy would be to team up with a fintech company with new and consistent technology and let them be responsible for the online presence, while the old bank will try to catch up with what is going on in today’s world.

The digital strategy should also be revisited. For so long, banks have pushed customers away to interact with machines rather than humans. But customers still want a face-to-face encounter when sorting out a complex problem — they do not want to be sent down a digital pathway. It all goes back to digital strategy again, which shouldn’t be based on these false premises:

· That their customers want more digital experiences (again, focusing on Millennials)

· That catering to digitally sophisticated customers will increase loyalty and decrease service costs

While digital services must be provided, they shouldn’t push away the most valuable customers because their customer journeys have not been taken into account.

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Understanding the Customer in Front of You

There is a great deal of focus on BI and how big data can be used to gather keen insights on your customer and build them a personal digital experience.

The truth is, most banks still have such basic customer segmentation that it would be pointless for them to focus on the volumes of social data clogging up their systems. With the move away from branch banking, most of them have lost touch with their customers altogether and can only identify them by some identity or account number.

There has to be a move to reclaiming the human relationship, and this can’t be done via a phone or a website. Front-line staff also need to be coached in how to build relationships (the long-serving members will still remember how to do it, but it could be a novel experience for younger employees).

Where Will Banks Be in 20 Years?

It is quite possible that we will see the behemoths of the banking sector atrophying, as disruptors in the fintech space and smaller agile banks absorb their customers. While the traditional banks could transform and re-emerge as new and distinctive banks, the lack of trust will be the biggest hurdle to overcome.

Newer banks are also not trusted that much, but they do not carry the odor of the sub-prime debacle around with them. For traditional banks, these emerging contenders may come as a threat but also an opportunity in the form of synergies and partnerships with the disruptors.

The common thread in how all banks will stay relevant is centered around the customer while complying with local and global regulation. In order to get there, the current cumbersome processes need to be simplified and channels must be optimized, with no silos of data and business units. While the banks have reams of customer data, it is currently not used very effectively and is of variable quality. All the banks know where they are going; they are just very far from a target.


The rise of the connected customer is finally creating a disruption to the banking market, which has been able to promise customer-centricity for years with little pressure to deliver. Today’s customers don’t have to place all their business with one bank and can move to another bank much more easily than before. The customers and their needs are driving bank innovation.

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