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The Branch Is Not Dead, Just Different

October 28, 2021
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By Lynne Cornelison and Caroline Vahrenkamp

The pandemic has altered U.S. consumers’ behavior in countless ways, and banking behavior is just one of them. Branch staff have not been replaced by interactive teller machines (ITMs) or purely digital resources. Consumers want access to staff – now more than ever. Understanding how different generations view and want to engage with branch staff will enable financial institutions to meet service needs and expand relationships across their client base.

Today’s Branch Behavior

As the pandemic roared through our nation, the way consumers interacted with the branch began to change. Financial institutions across the board showed an overall increase in their digital channel usage, particularly during the height of the pandemic in 2020 and the first part of 2021. Raddon asked consumers in 2021 to share how the pandemic impacted their interaction with financial institutions. While most generations indicated they are now more reliant on digital forms of communication, the preference for face-to-face interaction is not one size fits all.

Millennials have shown the strongest reliance on face-to-face interactions with their financial institutions, and as consumers age, their reliance for in-person interaction diminishes. We make a lot of assumptions about the aptitude of younger consumers and technology, but that does not preclude their need for the in-person guidance and interaction their financial institution provides. As seen in the data in Figure 1 from the latest Raddon research, Branch Evolution: How Has the Pandemic Changed Branching?, almost a third of millennials say they are now more reliant on face-to-face interactions since the pandemic struck.

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Branch Functionality

Overall, almost three-quarters of today’s consumers (72 percent) perceive the primary function of a financial branch as a place to conduct banking transactions (see Figure 2). But as we dig deeper and go beyond the broad strokes, different generations embrace the branch function much differently. As seen in Figure 3, before the pandemic, approximately two in 10 millennials felt the branch was a source to get financial advice. Since then, that figure has grown to roughly three in 10 millennials. Even Gen X has shown a heightened perception in seeing the branch as a source for advisory services, from 7 percent prepandemic to 11 percent post-pandemic.    

Different generations expect different service levels and forms of engagement with staff from their branch experience. Financial institutions need to embrace the high-tech/high-touch approach to meet the consumers’ needs efficiently and effectively. Older generations may require the high-touch approach to transactions and financial dealings, as well as hands-on assistance in technology functionality. Younger consumers may be sufficient with the high-tech processes but place more reliance on the face-to-face guidance and education their branch staff can offer.

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Millennials Want More; Can You Provide It?

The experience of using branches they may have previously ignored has encouraged nearly a third of millennials to say they will use branches more than they did before, compared to the 24 percent who said they will use them less frequently.

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Given this demand, isn’t it wise to ensure those branches work for younger users? The current branch model does not suffice. Prior to the pandemic, 78 percent of consumers – and 60 percent of millennials – were using branches with a traditional teller line model. Only 35 percent of millennials actually preferred this model, compared with others that had more technology or a more open feel or more self-service options.

Now that they have had a chance to visit branches more frequently during the pandemic, millennials are even more reluctant to use a traditional transaction-centered branch. Only 21 percent now prefer the teller line model. Instead, they prefer self-service options with video for basic transactions and a more open, modern environment for asking questions and finding financial solutions.

Because baby boomers and older consumers still prefer the old way of banking, financial institutions may feel little pressure to invest in evolving their branch network. This is short-sighted, as consumers under 45 years old are consistently selecting institutions with an in-person experience that meets their expectations.

Branches aren’t going away, and with the pandemic causing more people to use branches, their value is higher than it has been for years. Their role is different now, and institutions that are not aligning their in-person experiences with the expectations of younger consumers may find themselves struggling to remain relevant, like a horse and carriage company in a motorcar world.