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High-Tech, High-Touch in a Socially Distant World

June 25, 2020
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It’s been four years since Raddon asserted in our study, Channels and Payments Insights: High-Touch and High-Tech Consumers Are the Norm, that “most consumers … are using electronic channels in addition to, rather than in lieu of, traditional banking channels.” Since then, our research repeatedly has confirmed that consumers like the option of multiple ways of doing business with their financial institutions.

Brick-and-mortar branches have been at the center of consumer banking for decades, and new research shows that even with the rise of the internet and mobile phones, 81 percent of banking consumers visit a bank or credit union branch at least once a year. And 70 percent visit a branch at least once a month.

Or at least they did before COVID-19.

The shelter-in-place and social distancing directives that have gripped the world this year have put immense pressure on all aspects of life. Banking has not been immune, and it seems likely that there will be lasting effects on how we work and conduct business. Even with states and cities opening up, many Americans remain concerned about the pandemic.

As we get past these frenetic, critical months, bank and credit union leaders would do well to reflect and ask how they can serve their accountholders adequately in the future – both in general and in unusual circumstances.

Two things are likely to hold true: One, consumers won’t behave as they did before the pandemic. But equally, consumer habits won’t change irrevocably.

While many consumers welcome digital interaction, the high-tech, high-touch formula still holds sway. According to a Raddon study released in April, 34 percent of accountholders nationwide prefer to bank face-to-face; 29 percent prefer digital interactions; and 37 percent prefer a blend of the two. Since 2014, the percentage preferring digital has grown quickly, but 71 percent still prefer to conduct at least some business face-to-face.

Preferred Method of Banking

preferredmethodofbanking

Source: Raddon Research Insights Branch Transformation: Building for the Next Generation 2020

The pandemic might continue to hasten some of that existing trend toward digital, but it will certainly not move all 71 percent. Serving all accountholders well will require understanding and education with a particular focus on those who may not have used remote channels previously.

Branches will exist into the 2020s and beyond, just as face-to-face interaction with accountholders will exist. But how branches exist and why branches exist must change.

The Way Forward

Institutions should consider both the short and long term. In the short term, branches should reflect new consumer demands. Security should be adjusted to account for mask-wearing. Sanitizing wipes should be available at all ATMs. Even better is touchless palm-scanning technology, by which sensors scan the unique vein pattern in an accountholder’s palm. This technology allows fast identification without the consumer needing to touch anything directly.

In the long term, institutions should consider why they have branches at all. The pandemic has taught consumers of all ages they do not need to go into a branch to use their bank or credit union account. They might want to, of course, but they do not need to.

Instead, branches should exist to provide customer service and sell new deposits and loans. Younger generations already understand this. When we asked consumers to indicate how important certain elements were to have in a branch, baby boomers were laser focused on transactions at a teller line, with smaller percentages expecting ATMs and customer service employees. Millennials found tellers less important (though still valuable), but they put much more value on sales and service officers and on extras like coffee bars, community space and children’s play areas.

Importance of Branch Features: Millennials Versus Baby Boomers

importanceofbranchfeatures

Percent claiming a branch feature is extremely or very important Source: Raddon Research Insights Branch Transformation: Building for the Next Generation 2020

Branch of the Future

Branching is no longer about transactions but engagement. Consider branching as part of a single delivery strategy, alongside mobile and online banking. These tools all reflect how a consumer interacts with the institution – not for moving money in and out, but for asking questions, taking out new services, and engagement.

As consumers live a more digitally focused life, the way they interact with their providers is evolving. Raddon tested four types of branches: a traditional teller line-centered branch, one with simply a row of ATMs, a tech-friendly model with touch screens and interactive branch kiosks (IBKs), and a coffee bar/branch. While 75 percent currently use a traditional branch, only 60 percent would prefer that type. More importantly, among millennials, only 35 percent prefer a traditional model. Younger consumers want and expect more from their branches.

branchmodels

Source: Raddon Research Insights Branch Transformation: Building for the Next Generation 2020

In each of the newer branch models, institutions separate engagement from transactions. By placing engagement front and center, they align more closely to the expectations of the consumers of today and tomorrow.

One way to ensure a unified approach to delivery is to examine how your institution is aligned. In my past life, I ran marketing at an institution that had branches under Operations and mobile and online banking under IT. The experience differed greatly between the two, leading to poor consumer engagement. By aligning delivery together, institutions can better provide leadership.

Ultimately, the days of 5,000-square-foot branches are over.

As you re-evaluate your branch strategy post-pandemic, consider three key areas of focus:

  1. Develop a delivery strategy, not a branching strategy that employs technology to provide service 24/7 from anywhere
  2. Separate transactions and engagements, physically and organizationally
  3. Make your in-person experience about the experience