Local bank branches are losing their relevance, according to new research from consulting firm Accenture.
In a survey of more than 4,000 bank customers in Canada and the U.S., 82% of Canadian respondents said they would not switch banks if their local branch closed. Almost half (46%) said they prefer banking online to banking at branches, compared to 23% who prefer banking at branches.
And for the first time in Accenture’s research, consumers ranked online banking services as the number-one reason for staying with their bank, ahead of branch locations and low fees. With online becoming the dominant banking channel, 37% of Canadian consumers said online is the most important channel for banks to invest in over the next five years, followed by branch (17%) and mobile (15%).
What this signals for banks is “to increase their investment away from branches into more of the digital services that they provide,” said Jodie Wallis, managing director of Accenture’s banking practice in Canada. But at the same time, banks can also reimagine the local branch.
“If people don’t really care about the local branch as it is, are there things that banks can do to make the local branch more interesting?” said Wallis. In the U.K., for example, staff at Barclays give tutorials to customers about banking online, and the company also runs coding sessions for kids at local branches. “If people could go into a branch and get technical help or learn how to use online services, that might make it a more attractive place to come,” said Wallis.
TRANSACTIONS VS. RELATIONSHIPS
The Accenture survey also found, as the branch channel fades, 75% of consumers define their banking relationship as being transactional (i.e. paying bills), rather than being based on value from advice-based products and services.
For banks, the risk of being transactional is consumers are more apt to shop around for advice-driven products. Nearly two-thirds (64%) of respondents went to a competitor to purchase auto loans; 38% went to a competitor for brokerage accounts; and 31% went to a competitor when considering registered retirement accounts. Two-thirds (67%) of consumers went to a competitor for financial advice and home mortgage loans.
“When the relationship is very transactional, it’s impersonal and it’s easy to switch [banks],” said Wallis. “When the banks are involved in more aspects of their [customers’] lives, that’s when loyalty builds.” For example, rather than just doing a mortgage, banks can help with upfront analysis of neighbourhoods and pricing.
WHAT MILLENNIALS WANT
Millennials 18-34 is the demo most likely to swtich banks. Though 92% of millennials in the U.S. and Canada said they are satisfied with their online banking experience, 18% switched banks in the past 12 months. By comparison, 10% of consumers 35-54 and only 3% of those 55+ said they switched from their primary bank. Though local/community banks were the biggest “winners” of this trend, 17% of millennials who switched chose digital-only banks.
“Banks haven’t had to deal a lot with the threat of switching and as millennials come of age, this is will become more of a threat,” said Wallis.
This influential group also has distinct preferences for how banking services should be delivered. Two-thirds (67%) of millennials said the traditional and digital banking experience they receive at their current bank is only somewhat or not at all seamless. Nearly half (47%) said they want their bank to provide tools and services to help them create and monitor their budget. And 48% want their bank to offer video chat on their website or mobile/tablet app compared with only 23% of those over 55.
“Millennials’ expectations of interactions are really coloured by their digital experiences in other industries,” said Wallis. “They take their cues from their Netflix experience and their Apple experience and their Starbucks experience. They don’t necessarily see why that has to be different from their banking experience.”
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High Tech, High Touch
At least one Canadian financial services company is offering high tech with a personal touch. Oaken Financial is opening its new Toronto location in the PATH network, a modern space with an iPad bar, interactive multi-media wall, high-tech meeting spaces, a coffee bar and free wifi. A second street-location is opening in Calgary in the coming months.
“It’s not like a typical bank branch,” said Benjy Katchen, senior vice-president, deposits at Oaken Financial. “We call it a store… The whole space is set up to educate, inspire and engage customers.”
The media wall, for example, features 10 52” televisions with content that inspires customers to save for their future. Customers can also read educational content on touch screens, while sipping a coffee and chatting with the staff. “We really want to foster a space where we can have those human-level conversations, which we think is missing from financial services in this day and age,” said Katchen.
Oaken Financial is a direct-to-consumer brand launched by Home Trust, a subsidiary of Home Capital Group, in 2013. It focuses on consumer deposit products including GICs and savings accounts.
