A massive investment swing from digital transformation to retail networks is happening among financial institutions. Bank of America, JPMorgan Chase, and PNC Bank recently made headlines with their billiondollar investments in branch refresh and transformation programs, which impact thousands of locations across the U.S.
At the same time, many financial institutions are consolidating their networks, following major acquisitions such as Union Bank by U.S. Bank and HSBC Bank Canada by RBC. As mergers and acquisitions accelerate, the number of bank brands is expected to further decrease in future.
According to the FDIC, by the end of 2022, the number of commercial banks was down to 4,135, while these banks operated almost 70,000 branches (see Statista’s chart on the right). Interestingly, the number of branches was just about 40,000 in 1983. These changes are driven by geographic market expansion. It places community and regional banks in the crosshairs of industry giants. In this white paper, we will share strategies on how institutions can survive and thrive without succumbing to competitive threats.
Methodology & Respondent Profile
This research consisted of an online survey with 1,600 customers and a separate online survey with 300 financial executives to explore:
- Customers’ channel preferences for different financial products and services
- Branch visit behaviors
- The role of advice in growth and loyalty
- How customers define “credible advice”
- Customers’ expectations of branch renovations
- Sales performance of renovated branches
- Branch renovations projection
key insights
Digital Transformation
Combined with research from our “Overcoming Stealth Attrition In Banking” and “How Branch-focused Customer Experiences Can Increase Advice Driven Services”, it’s clear that many financial institutions that have undergone a digital transformation with heavy investments that struggled to create sustainable brand differentiation. While it’s still incredibly important to cater to customers who want to make transactions at any time of day, the competitive advantage gained from digital transformation has significantly decreased.
Digital-only customers are much less loyal than those that use all bank channels. Loyalty is the highest among customers who frequent the physical branches of institutions and use fewer banking apps. Yet, despite their preference for mobile as the primary banking channel, most customers visit a physical branch at least once a month, with 32% visiting once a week.
Advice-Driven Branch Experience
With banks realizing that digital transformation has become table stakes, they are turning to an advice-driven branch experience to drive growth. This has shifted investments toward retooling retail networks and supporting human resources.
The re-emphasis on bank branches, once predicted to be eliminated due to digital banking, echoes the insights from the survey with over 300 bankers conducted as part of this paper. The data confirmed that branch renovations do increase sales. Institutions investing more in their customers’ branch experience witnessed sales growth of 11-25% and higher.
Moreover, our study “What is the Ideal Future of a Seamless Banking Experience?” found that 52% of respondents in the customer survey are considering switching banks in the next year — however, those who visit the branch more often are less likely to say so.
Advice Is The New Differentiator For Loyalty And Growth
If not effectively managed or supported by the shift in focus to quality advice, investing in branch networks can hinder growth.
However, regardless of the channels, customers seek advice with human support. They are aware of the current fragmented omni-channel experience, with the biggest gap between digital banking and physical branches. To meet the customer needs, filling this gap is critical. Ultimately, to increase loyalty, the customer experience must shift from omnichannel to seamless, with easy access to all banking channels and experts.
Financial institutions that offer personalized, advice-driven services to help customers save money and improve well-being will benefit from an increase in deposits, investments, and loyalty.
Instead of AI chatbots, customers seek advice from staff in a physical branch. Offering these services will drive branch visits. Having access to experts is especially important for those aged 16-34. When it comes to financial advice, customers are looking for straightforward, credible, and customized information.
5 Strategies For Banks To Consider
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