How Digital Channels Can Complement Physical Branches

With the rise of digital services and changing customer habits during Covid-19, the future of brick-and-mortar banking may seem in doubt.

Looking ahead, physical bank branches remain crucial for any community bank’s outreach and distribution strategy, but their use and purpose will continue to evolve. Digital acceleration is an opportunity for community banks to reshape the in-person banking environment. Incorporating the digital channel allows banks to offer more comprehensive, customer-focused experiences that complement their brick-and-mortar branches.

Physical Banks Remain a Valuable Asset
Digital banking is a critical way for community banks to provide excellent service. Integrating best-in-class online services allows financial institutions of all sizes to compete against larger banks that may be slower to innovate. Digital branch tools can bring greater accessibility and convenience for customers, a larger customer base and enhanced automation opportunities.

While many customers are excited by digital tools, not every demographic will adapt right away. Customers of all ages may lack confidence in their own abilities and prefer to talk to someone in person. These visits can be a prime opportunity for staff to educate customers on how to engage with their digital platforms.

In-person banking is an opportunity for banks to offer above-and-beyond customer service, especially for more complex services that are difficult to replicate digitally. An in-person conversation can make all the difference when it comes to major financial decisions, such as taking out a mortgage or other loans. Customers may start out with remote tools, then visit a branch for more in-depth planning.

How One Community Bank Is Evolving
Flushing Bank in Uniondale, New York, is using digital account opening software to accelerate growth. The $8 billion bank’s mobile and online banking capabilities went live in March 2020 — the timing of which allowed the bank to more easily serve customers remotely. Digital deposit account openings comprised 19% of Flushing’s customer growth between April and June.

Implementing digital account opening expanded Flushing Bank’s geographic footprint. The online account opening software allowed the existing branches to become more efficient and have a wider reach within the surrounding community, servicing more customers without building new branches.

At the same time, in-person branches and staff remain irreplaceable for Flushing Bank. The bank is leveraging digital tools as more than just an online solution: New technology includes appointment booking, improved phone services and enhance ATM video capabilities, creating a digital experience that is safe, convenient and delightful.

Transforming Brick-and-Mortar Banking for the Future
Digital tools allow more transactions to occur remotely, which may lessen in-person branch traffic while expanding the institution’s geographic reach. Banks can focus on the transactions that do occur in person, and ensure that digital tools improve customer service in branches.

A report from Celent and Reflexis surveying banks on their current strategies noted how more institutions could use digital tools for maximum effect. Just as digital channels offer comprehensive data analysis capabilities, banks can more effectively track each customer’s in-person journey as well. One starting point is to determine why customers visit physical locations — in one case, a bank learned many customers come in looking for a notary and will quickly leave if one is not available.

The report suggests that digital tools can automate their staff’s workflow, ultimately contributing to an improved customer experience. For instance, only a third of surveyed banks offer digital appointment booking, a service that can create a more efficient experience for both customers and staff. Or, banks could onboard customers with account opening software on tablets at physical branches. These tablets are often easier for customers to understand, lower the burden on staff, and help prevent fraud with thorough identity validation.

Community banks have an opportunity during this transitional time to develop a digital strategy that complements their physical branches. A comprehensive plan includes best-in-class digital tools for remote transactions while bringing new digital capabilities to brick-and-mortar locations to ensure the highest-quality customer service.

A Rare Opportunity for Change

Jeff Rose believes there’s no rush to reopen his bank’s branches.

Davenport, Iowa-based AmBank Holdings’ eight branch lobbies have been closed since March, limiting physical interactions to drive-thru lanes and by appointment. Even then, the $373 million bank is exercising caution — customers who schedule appointments have to complete a questionnaire, have their temperature taken by an American Bank & Trust employee, wear a mask and socially distance.

“A lot of banks in our area did reopen their lobbies [around] mid-June,” says Rose, the bank’s CEO. “Many of those are now reclosing, some of them because of the spike in the virus.”

The Covid-19 pandemic has forced banks and other businesses to change their operations to remain open. But while the health crisis underlying the economic downturn may be temporary, it offers banks an opportunity to rethink the role of the branch in serving the customer.

For some financial institutions, Covid-19 has merely accelerated this shift.

Bank OZK, based in Little Rock, Arkansas, doesn’t focus singularly on branch strategy, explains Carmen McClennon, chief retail banking officer of the $26 billion bank. Instead, OZK considers how the combination of its digital, ATM, call center and branch channels can build a high-quality client experience. Its lobbies have remained open during the pandemic, but social distancing measures still limit in-person connection.

The reality is, we’re not face-to-face and having that critical contact with our clients on such a regular basis,” she adds. “What worries me is I’ve got to think about what we’re doing in these other channels so we’re at the top of the consideration when our client has their next financial need.”

An analysis of consumer traffic trends by the advisory firm Novantas finds weekly branch visits down by 20% as of July 14, since the pre-pandemic period of Jan. 30 through Mar. 4, 2020. An earlier survey found branch activity unlikely to recover, with only 40% of consumers saying they’d return to their local branch once the pandemic abates.

Separately, Fidelity National Information Services (FIS) reported that new mobile banking registrations increased by 200% in April, and mobile banking activity rose by 85%.

McClennon believes that personalization across channels will be important. “We’re looking at things like smart offers when they’re logging in to pay a bill,” she explains. Also, “how do we personalize an ATM experience so we’re maintaining that relationship with our client? I think we’ve got to challenge ourselves [to do that].”

OZK plans to unveil mobile app enhancements soon, and will thoroughly train branch and call center staff on its features. “We want them to confidently promote it” to clients, says McClennon.

Covid-19 doesn’t appear to be driving OZK to close locations. These decisions will be made by branch and by market, McClennon explains, based on OZK’s ability to serve its clients and meet its strategic objectives.

It recently sold four branches — two each in South Carolina and Alabama. “Candidly, we didn’t have enough density to deliver a strong client experience. That’s really challenging in a low-density market,” says McClennon. But she points out that the bank opened as many branches as it closed — three — in 2019.

Rose says AmBank will soon field surveys to better understand customer preferences and help the bank’s leadership team plot a path forward. While drive-thru transactions have risen 10% over the past couple of months — which Rose partially attributes to the warmer weather — mobile and online usage are back to pre-pandemic levels.

Data will drive AmBank’s reopening plans, but Rose believes that some lobbies will remain closed in less-frequented locations where customers have adapted to drive-up service.

When its lobbies reopen, Rose believes it will be a rare opportunity to change how customers interact with his bank. AmBank has invested in new technology, including DocuSign and improved payment capabilities; they’re also looking at self-service technology, like interactive teller machines. Rose is inspired by Apple’s stores and the hair salon chain Great Clips, which let customers schedule service appointments digitally.

“We’ve got one shot at modifying the client experience for the betterment of our customer,” he says. “We love our customers, we want to see them, but if they can self-serve and not have to drive to the bank, it’s going to be a better experience for them overall. How do we take advantage of the pandemic situation to permanently upgrade the client experience?”