The Future Of In-Person Banking Services: What You Need To Know

One year ago, our worlds were flipped upside down, and our way of life became unrecognizable. Social distancing, face masks, working from home and lockdowns became a quick reality. One year later, multiple vaccines and states lifting restrictions give us a glimmer of hope for a better future ahead. But will the way we lived and conducted our day-to-day lives return? The banking industry is facing this exact dilemma.

Prior to the pandemic, digital banking was quickly becoming a preferred method for millions of Americans to complete many financial transactions. But once the pandemic-related shutdowns began, both consumers and financial institutions were forced to adapt to a primarily digital environment to satisfy their banking needs. Consumers have responded to these changes by largely adopting and embracing digital banking.

According to the KeyBank 2020 Financial Resiliency Survey, 85% of Americans say they will use digital tools to complete some or all financial transactions after the pandemic. Extensive adoption of self-service digital banking is evident, and consumers appear to enjoy self-service banking.

The trend of online banking and the acceleration in some sectors of moving to a cashless society would appear to create less need for physical bank branches. In 2019, there were 5,000 fewer commercial bank branches open than in 2010. In 2021, several institutions have made recent announcements regarding branch closures, including KeyBank, PNC Bank, U.S. Bank and Wells Fargo.

However, the demand from consumers for in-person banking is still there: goMoxie, a customer engagement software company, published a survey in March indicating that 62% of consumers prefer to use banks or credit unions that have a physical presence, rather than a digital presence only.

Consumer needs are changing, and the banking industry is figuring out how to serve those needs. In a digital world, what does the future of in-person banking look like?

The Changing Nature of Consumer Banking

While headlines have lingered around the closing of bank branches for the past few years, the U.S. is “decades away” from the bank branch becoming obsolete, according to Jamie Warder, executive vice president and head of digital banking at KeyBank.

“Human mixed with digital will be an important combination” moving forward, says Warder, looking to the future. He calls this “phy-gital,” suggesting a mix of physical presence and digital resources as the future consumer banking experience.

However, digital is taking the lion’s share of attention. Warder states that digital traffic at KeyBank is booming, up 100% since the beginning of the pandemic. And it isn’t a secret that some banks, including KeyBank, are reacting to customer needs by thinning their branch networks. Yet, there is still a known need for physical branches.

Chris Manderfield, executive vice president and head of product management at KeyBank, reiterates the importance of the branches. “We want to meet our clients where they are,” he says. He adds that while bank branches have been closing for some time, the pandemic simply accelerated closures.

Emphasis on Appointments and High-Value Transactions

While there is still a need for branches, the look, feel and purpose of them will be much different post-pandemic.

Manderfield’s most compelling prediction of banking changes is the shift to appointment-based banking. “Value-based and higher level services will be going on in branches,” he says, referring to large transactions such as a mortgage or car loan. Lower level transactions—such as check cashing or opening a bank account in-branch—will continue to decrease in Manderfield’s opinion, as foot traffic has decreased 10% to 20% in recent years.

In agreement with Manderfield, Robert Fisher, the newly appointed chairman of the Independent Community Bankers of America (ICBA), stated in a recent American Banker article that community banks were already pivoting the purpose of their workforce. “We were already shifting to recruiting more problem solvers than people handling transactions,” Fisher said. “That pace of change has accelerated.”

With so many financial transactions being handled by consumers on their own, there is a decreasing platform for banks to compete for business. Banks may offer different accounts, fee structures and benefits, but, for the general consumer, the value proposition from bank to bank is nearly the same.

As Warder says, “Digital advisory is the least mature” benefit in the banking space and Americans are inundated with financial advice from all different directions, added to the financial disruption of the pandemic. For Warder, providing financial direction and personal touchpoints for consumers is the new competitive space in consumer banking.

What’s in Demand: Financial Advice and the Human Element

While banking historically has involved a human element for many consumers, including forming relationships with their regular banking tellers and managers, the digital space has taken away the human touch from the experience. Although digital options are essential in today’s consumer landscape, “Customers tend to need person-to-person experiences to boost loyalty,” according to the Deloitte 2021 banking and capital markets outlook report.

The KeyBank survey indicated that younger Americans have a desire for in-person banking services. The survey states that Millennial and Gen-Z banking customers prefer a mix of digital and in-person banking compared to older Americans, who would rather exclusively use digital banking tools. The idea that older Americans are more traditional and younger people prefer digital options doesn’t appear to hold true, contrary to many preconceived notions.

From services such as money coaching at Capital One Cafés, to financial wellness checkups with KeyBank, to setting appointments with financial advisors from SoFi, banks of all kinds are offering consumers help with their personal finances.

Even large national banks like Chase are expanding their services to offer financial workshops. Stephen Baron, head of consumer branch banking at Chase Bank says, “We’ll continue to grow and expand financial health workshops, like Chase Chats, to help customers learn how to save, budget and invest. We’ll continue to introduce new digital products and tools to reach more customers and set them up for financial success.”

What the Future Looks Like

For the branches that continue to be open post-pandemic, Manderfield says there will likely be “an evolution of roles and responsibilities of bankers in branches.” This may include fewer tellers, more bankers, functionality changes and adjustments to what can be done in the branch.

In the Deloitte report, even Jetsons-like changes are being considered for the in-banking experience, including live interactions with virtual tellers via ATM, contactless kiosks, AI-based robots and virtual/augmented reality experiences.

According to Richard Walker, regional banking lead at Deloitte, the pandemic has created the “de-averaging” of banks, meaning that banks are now truly competing on their value proposition to consumers, whereas in the years prior to the pandemic, larger financial institutions could simply value their established brands. Now, consumers are demanding “an experience that represents the brand to which they are associated,” says Walker.

Walker believes that banking is in a “midlife crisis,” and that the future of in-person branches heavily depends on “what they do with their branches,” in regard to “how they make customers feel and the complements they offer.” The quality of the in-person experience, while not utilized by all customers on a regular basis, will be pivotal to customer acquisition and retention. In the hypercompetitive consumer banking space, providing a positive customer experience is essential to long-term viability.

What the future of in-person banking looks like is still uncertain, and financial institutions of varying sizes are rethinking their branches to meet new consumer needs. While it is highly unlikely we will see large waves of retail bank branch closings in the immediate future, it is equally likely that your local bank branch may look and function much differently in the days and months to come.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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