Why the Retail Store Bank Branch Is Making a Comeback

Why are banks -- including Royal Bank of Canada, Citi and Huntington -- spending millions of dollars on high-tech branch redesigns modeled after retail stores such as Apple's (as well as setting up small in-store branches in supermarkets) when branch traffic is in decline? With the proportion of truly branch-centric U.S. consumers dropping for the first time this year below 50 percent, to 43 percent, according to research conducted by Novarica (New York), why are banks investing in branches at all?

The answer is multifaceted. Of course, there's still that 43 percent of U.S. consumers who prefer banking at a branch over any other channel. Madhavi Mantha, principal and head of banking research at Novarica, breaks this market into four segments: obsessive service addicts, deliberate cash managers, struggling average consumers and branch traditionalists.

"One significant reason people interact with the branch is they want our people and our expertise," says Alan Depencier, vice president of marketing services and transformation, at Toronto-based Royal Bank of Canada. "Historically it's been a transaction channel. We see it in the future more as a place where people can shop, interact with our people, learn more about financial services and how we can help them with their overall plan. We see our retail store as a whole new experience where you're combining the best of retail with the best of financial stores."

Complex financial needs are another reason people still go to the branch. U.S. consumers across the board prefer to complete complicated financial transactions in a bank branch -- according to research conducted last year by Cisco, 70 percent of Generation Y (i.e., smartphone-addicted 18 to 30 year olds) said they would prefer to finalize complex financial matters, such as investment decisions, in a branch; this was more than any other segment.

"We all recognize that the online experience doesn't replace a consultative relationship that customers have with experts on the spot," says David Hawkins, SVP and director of customer experience at Huntington Bank. "While transaction-driven visits might be going down, the number of more in-depth visits and consultative sessions will increase over time."

Banks are well-positioned to be the financial experts that consumers trust for advice on retirement, mortgages and other financial-related life events, Hawkins adds. "You have to create an experience that's supportive of those conversations and relationships," he says. "The question always is, 'How do you create the space and experience that supports that?' It's about creating spaces where bankers and customers can do more together."

Another, critical driver in the branch revival is technology itself. Maturing technologies are available to help branch employees make more of the time they spend with customers in the branch, helping them sell, provide advice and transition customers from full-service to self-service.

One such technology is Microsoft Surface, the coffee-table-like touchscreen computer the company launched in 2008. As part of the overall makeovers of two branches, Royal Bank of Canada (US$732 billion in assets) deployed Surface in November.

Bringing Engagement to the Surface

RBC's Depencier says most bank clients come to the branch to conduct a transaction or ask a question. "Surface helps engage such customers by answering their questions or making them aware of new things," he asserts.

A so-called Discovery Zone at the front of the branches provides a setting for Surface that's designed to be comfortable, unintimidating and simple, Depencier adds. "We know clients have something on their mind when they walk in, but they're not always comfortable starting a conversation with us," he notes. "Surface was designed to help you engage the customer to start a conversation about what's on their mind in a fun, interactive way that's not intimidating."

The first app the bank built for Surface, along with Microsoft (Redmond, Wash.) development partner Infusion (New York), is referred to as the "drop a coin" app -- according to Depencier, the customer drops a coin on the screen to deploy the app, which provides information about the concept of investing regularly and being in a tax-free versus a taxable account. The app, he says, quickly shows that by putting a couple of dollars a day into a tax-free savings account, the customer can build up his or her nest egg. This has driven many customers to open new tax-free savings accounts, Depencier indicates.

"The uniqueness of Surface is, one, its size -- it's a very large surface that's engaging for the client and a great interface for staff and a client to interact at the same time," Depencier notes. "The second piece is the actual technology."

Version one of Surface used cameras to sense where the user was touching the screen. With Surface 2.0, Microsoft has implemented Pixel Sense technology that uses infrared sensors dispersed throughout the screen; each pixel can act as an infrared camera. Now Surface "sees" an object, beyond just sensing its presence. Microsoft's trials reportedly have included putting a piece of paper on the new Surface display and having the technology read the writing on the paper.

To further leverage Surface's capabilities, RBC built a merchandiser next to the Surface display that provides literature about the different ways the bank can help clients. "A customer can pick up a card, for example, about buying a home, and drop that onto the Surface," Depencier explains. "It instantly loads the content about buying a home so the client doesn't have to touch screens to get to that. It's much easier for the client to get to what they need, and it has a bit of a cool factor."

The Surface applications are not linked to any other applications at the bank nor to account information, and that's deliberate, Depencier points out. "It's in a very public area so we've purposely steered away from having the client enter any private information," he says. "Also, part of our objective was simplicity; it's not like an online experience where you can go in and enter a lot of information and get a tailored recommendation. This is more to start a conversation, and it brings simple concepts to life. Once the client's interested, we can move to a meeting room or other area for that private information."

RBC will deploy Surface in a third refreshed branch in early summer 2011, Depencier reports. Whether the technology makes it into more of the bank's 1,200 branches depends on how well the current tests turn out, he says.

Reaching Experts Via Video

Another assistive technology adding dimension to banks' latest branch redesigns is videoconferencing. In a recent survey, San Jose, Calif.-based Cisco, a provider of videoconferencing technology, asked wealthy investors under 50 years old about their interest in using two-way videoconferencing with an adviser to connect with experts outside or inside the firm, such as accountants, lawyers and others who may need to be part of the decision-making process. Most (63 percent) said they were interested or very interested in that experience, and 63 percent said they would move some of their assets to gain access to those capabilities.

Banks are picking up on this and several have begun experimenting with videoconferencing to let customers interact with an expert on a topic such as investments or mortgages who can't physically be in the branch. "We'll see more money spent on collaboration, within the branch and between the branch and other channels, lowering the cost of the branch while taking some specialist roles out," observes Nigel Smith, a New York-based senior executive in Accenture's financial services group. "A number of banks are experimenting with telepresence to achieve that."

Huntington Bank ($52 billion in assets) is in the midst of a $70 million branch refresh in which it will make over all of its 608 branches with new digital signage and e-merchandising. The Columbus, Ohio-based bank is scheduled to complete the overhaul in the first quarter of 2012. "We're looking to improve and provide more consistent messaging, eliminate as much paper in the branches as we can, and to use technology as a way to localize and personalize the space, providing branch managers a way to promote local events and businesses as well as provide more traditional bank product messaging," says the bank's Hawkins. (Hawkins was recruited last year from Umpqua Bank, where he helped create the Portland, Ore.-based bank's branches of the future, which feature Internet cafes and touchscreen digital walls.)

One element of Huntington's new branch strategy is a foray into supermarket banking, through an agreement with Pittsburgh-based grocery chain Giant Eagle. The bank will open 27 small, in-store branches in the supermarkets by the end of 2011. Hawkins plans to introduce videoconferencing in these branches.

"We did significant research on customer perceptions of grocery store branches," he relates. "One thing we heard was that the folks working at these locations are considered to be generalists and not as well versed in all subjects as those in traditional branches. We thought about how we can, in these limited spaces, offer an opportunity to connect customers with distant subject matter experts."

Hawkins reports that the bank is in early discussions with Cisco but has not yet settled on a specific videoconferencing technology. He has, however, ruled out using self-service videoconferencing kiosks.

"A self-service solution doesn't align with Huntington's focus on taking care of the customer," Hawkins explains. "But we think there's an opportunity to demonstrate and coach customers on how to use a number of technologies within the branch that they can also use at home, and help them to be more comfortable accessing the bank using other channels."