Online banking replacing brick and mortar institutions?

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With the skyrocketing adoption rates for digital banking solutions, the one question that remains unanswered for most bankers around the world is, why do people continue to use branches?

A prevalent hypothesis that attempts to clarify the persisting branch phenomenon puts the blame on digital banking inadequacies, suggesting that if people had better access to user-friendly digital banking tools they wouldn’t wouldn’t bother with bank branches. The common assumption here is that nobody really wants to visit a credit union branch or a bank for that matter but they do because the mobile and web channels can’t take care of business entirely.

However, contradicting this theory, a Samsung-commissioned report from Celent probed into the kind of interaction and engagement almost 2,500 customers in the U.S. have with their banking providers. As per the results, Americans don’t feel that they are being compelled to use bank branches by any means – in fact, they prefer branches for carrying out banking activities for more in-depth and multifaceted matters. In the research, more than seventy-five percent of respondents said that they had visited their nearest branch to administer a transaction in the past two years. Half of all customers, including millennials, went to a branch to get a question answered, apply for quick online loans, or open a new account.

While customers incline toward advanced digital channels when they’re looking to make a quick transaction, for example, withdrawing money or transferring funds, however, when there is a need for more substantive conversation or discussion, they would rather talk to a real person.

For quick inquiries, most customers (53%) lean towards picking up the phone and calling the point of contact, instead of dealing with a computerized system of operation. For lengthier issues, complicated problems and more involved discussions, more than 77% said they will head to a branch in search of an up close and personal communication.

When Celent asked study participants about their preferred means of interacting with their banker, only 6% of all adults admitted to being partial towards fully digital solutions. Two out of five said that even though they use digital banking on a regular basis, they look forward to relying on a face-to-face meeting to get rid of specific issues.

“Faced with massive growth in mobile banking alongside declining branch traffic, many bankers conclude that people would rather interact with their bank digitally,” Celent addressed in their report. “This is only partially true. Consumers increasingly prefer to transact digitally, but prefer to engage face-to-face. Simply said, many banks are blowing it.”

Celent also noted that there were predictable variations in an individuals’ inclinations depending on their age, however, the differences were not very pronounced. Typically, customers beyond 60 years old favour face to face assistance only, whereas the millennial crowd happens to be the least branch-centric. In any case, the large segment of millennials in the Celent survey (93%) said that they prefer settling at least some issues in bank branches.

These discoveries line up with numerous different investigations carried out by other financial institutions that demonstrate that millennials are as keen on using branches than other generations, in spite of their overwhelming utilization of digital banking channels. In the Celent research, a mere 7% of millennials said that they believe bank branches should be obsolete as they are more inclined towards communicating with their banking provider’s service representatives through digital channels. Two out of five Millennials admitted that they prefer connecting with bankers in branches, while half of them said they lean towards a blend of both digital and in-person branches.

“Many in the banking industry wrongly believe that face-to-face channels are losing relevance,” Bob Meara, an analyst with Celent explains. “They invariably cite seismic changes in consumer digital habits and downward trends in branch traffic. But such trends are a lousy predictor of how people actually prefer to engage with their bank.”

“These results highlight the continued premium placed on face-to-face interactions when it comes to banking,” Meara reveals. “Investments in technology and staffing must reinforce the branches’ current and future strategic role. If banks do not provide a compelling sales and service in-branch experience to customers, it may be costly.”

Customers may lean toward going to branches for specific issues, yet a poor branch encounter is seemingly going to ward off them, or considerably think about changing banks. The greatest pain points for people switching banks included ill-equipped banking associates (68%), impersonal administration (49%), long wait times (55%), and the inaccessibility of authorities (43%). With regards to improving physical bank offices,  the change people were most open to was faster, more accessible, and personalized service through technology adoption. Customers were most excited by greeters prepared for their arrival with customized data (62%), an extended mobile application where they could register or browse wait times at nearby offices (55%), and intuitive touchscreen displays to explore products and get some guidance while pausing (53%).


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