As the digital fever continues to invade retail banking, there remains a collection of bank execs that regularly blast virtual channels for being poor domains to build customer relationships and generate high-value sales of financial products. And despite being a huge proponent of FS innovation, I will be the first to resonate with the notion that a bank’s physical presence still offers value. However, the bank branch cannot be a place where the consumer goes only out of pure necessity anymore. Instead, it must provide some grounds for consumer enjoyment and/or productivity.
Bank branches have the potential to mimic the ‘coffee shop model’, whereby a large portion of foot traffic frequents the shop for more than just a cup of coffee. Many guests are drawn to the relaxed, warm feel that the venue provides, choosing to stick around for an hour or two to converse with a friend or study for an exam. Compare this carefree environment to the straight-laced and cold nature of your current local bank branch.
This futuristic branch (let’s called it a bank ‘nest’, for reference purposes) is not as hypothetical as described, with ING Direct having introduced a similar concept in the U.S. a few years back and RBS Citizens currently operating out of several Dunkin Donuts shops. Such an establishment can be viewed as a cross between a coffee shop and traditional bank branch, doused with the ultra-modern feel of an Apple store. Upon entry into the nest, a customer is greeted with a layout akin to that of a café: a single coffee bar surrounded by tables and furniture – quite the lunge from your traditional brick-and-mortar bank branch.
Baristas manning the small coffee bar double as educators of bank products and mobile apps. Tables are branded with print on financial wellness and the coffee bar is outfitted with several tablets for exploring bank products or logging into accounts. And of course, free wireless is available to patrons, with a customer’s online banking credentials serving as the login gateway (which helps weed out some of the Wi-Fi free riders found at Starbucks).
A small, enclosed section of the main floor is reserved for self-service transactions, with a debit card or QR code enabling access into the zone. The kitchen-sized area features one or two full-service ATMs with access to video-based tellers. The area also includes a wireless printer for those who wish to print personal material or bank statements. Finally, the nest includes an upstairs or back room for sensitive financial activity and individual consultation, operated by one or two personal bankers with the standard skill sets for processing loan applications and guiding customers on varying checking accounts.
There are several important points that banks must keep in mind when investing in these nests. First, there must be differentiation in service and atmosphere across the varying sub-sections of the outlet. The consumer visiting the nest to take out a loan is expecting a substantially different experience than the consumer casually reading up on the market over coffee. Secondly, the layout must be intuitive to the consumer so that he knows exactly where to go in depositing cash or seeking quick advice on the mobile banking app.
Third and most importantly, nests must be complementary to online and mobile offerings. A customer might set up a checking account online and then come to the nest to have a barista quickly show her how to set up mobile bill pay or to pick up her debit card. With digital banking at the helm of the nest model, these outlets are highly-conducive to the omnichannel experience sought after by modern-day banks.
And then there is the profitability aspect. Large QSRs like Starbucks have surely run analyses on the economics of making shops available to the free-riding public that justify lengthy stays with the purchase of a tall latte. Cost-cutting banks, burdened with heavy occupancy expenses, would seemingly be the last enterprises to lend their floors as internet-surfing hangouts. But, if such innovation can drive foot traffic to their suddenly-cool nests – where staff can easily promote loan and investment products –banks may have found a way to make branch networks profitable again.
Banks must weigh the incremental value of a customer visit against the potentially-large fixed overhead costs and variable staffing expenses associated with nests. If nests are advertised as socially-acceptable locations for surfing the web, catching up on work and building financial literacy, transformation may be in-play for branch banking. It took some time for coffee shops to evolve into widespread lounge-type venues, just as it will take time for T-Mobile stores to be viewed as bank retail outlets. When it’s all said and done, the survival of banks’ physical presences could trace back to the public’s unusual bond with coffee shops.