Branch channels are improving engagement, not just transactions, says Bob Meara, who looks at the evidence that suggests bank branches remain key transaction points.

I take no issue with the growing importance being placed on digital in financial services. Indeed, it doesn’t take extensive examination to see, in Wayne Gretzky’s words, “where the puck is going”. Digital needs to be a top technology priority among financial institutions, particularly in highly digitally directed markets such as North America and Western Europe. But that doesn’t mean physical engagement is unimportant. In my opinion, in-person (physical) engagement will be of lasting importance in financial services for at least three reasons:

  1. Most consumers rely on brick and mortar for commerce, and will continue to do so.
  2. Most retail deposits still take place at the branch.
  3. Most banks don’t offer a decent digital customer acquisition mechanism.

Most consumers rely on brick and mortar for commerce

This week, comScore released its most recent measurement of digital commerce. It was truly exciting, with Q4 2016 m-commerce spending up 45% over 2015! But, even with that astonishing year-over-year growth, m-commerce constitutes just 21% of total ecommerce. And, with two decades of ecommerce, total digital commerce comprised just 10% of total commerce in 2015. Plenty of consumers still like stores.

Smartphone usage, mobile banking usage, digital commerce share of total, and m-commerce share of digital. Source: Celent

* FRB Consumers and Mobile Financial Services 2011-2016, percent of smartphone users with bank accounts.
** US Department of Commerce, Internet Retailer, Excludes fuel, auto, restaurants and bars.
*** comScore

Digital is not equally important across segments. Books and music, for example, are highly digital. Not so much for food and beverage. I’m being simplistic for brevity, but the data suggests that most commerce will remain tied to the store experience – at least in part – for the foreseeable future. I don’t think financial services will be an exception.

Most retail deposits still take place at the branch

Banks are keen to migrate low-value branch transactions to self-service channels, and there’s perhaps no better low-hanging fruit than cheque deposits. Yet, with a decade of remote deposit capture utilisation behind us, a January 2017 survey of US financial institutions (n=269) clearly shows that the majority of retail deposit dollar volume still takes place in the branch.

Retail deposit mix by asset tier. Source: Celent

Like it or not, the branch remains a key transaction point for many consumers and small businesses. Sure, the trend lines support digital transaction growth (thank goodness), but we have a long way to go – farther than the hype would suggest.

Most banks don’t offer a digital account and loan origination mechanism

Even as banks would love to acquire more customers digitally, most aren’t well prepared to do so. Unlike most every other retailer on the planet, most banks initially invested in digital banking for transaction migration, not sales. This is changing, but not quickly. The mobile realm needs the most work. In a December 2016 survey of North American financial institutions, Celent found that large banks, those with assets of >US $50bn, had made noteworthy progress in mobile customer acquisition capability since the previous survey two years ago. Smaller institutions lag considerably.

Digital selling and originating (2016 vs 2014). Source: Celent

For these reasons, branch channels are getting a makeover at a growing number of financial institutions, with the objective of improving channel efficiency and effectiveness – effectiveness with engagement, not just transactions.

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: joe1719,

About the author

Bob Meara

Bob Meara is a senior analyst with Celent's banking practice. His research focuses on branch and ATM delivery channels, customer analytics, and check and cash payment processing technologies.

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