There was a popular song at
the end of World War I, “How Ya Gonna Keep ‘Em Down on the Farm,” about how
soldiers returning to rural America might be restless after having seen the
wonders of Paris (“How ya gonna keep ’em down on the farm after they’ve seen
Paree [Paris]”). We believe financial marketers should be feeling a similar
anxiety about their customers today, who during the new reality of our social
isolation have experienced very different ways of interacting with their
There’s absolutely no
question that none of us want to continue living the way we have since
mid-March, but customers’ experiences with new ways of conducting business are changing
their expectations and needs with respect to financial services companies.
Certainly, some of these experiences have been far from positive, but the
forced disruption of the status quo has opened people’s eyes to new
possibilities and has elevated new and different attributes to important and
valuable parts of their financial services relationships. For example:
Financial advisors and brokers may
not welcome as many wholesalers into their offices after finding that virtual
conversations work just fine.
Small businesses may set a higher
bar for their banks to provide digital support and services after going through
the pain of PPP.
Middle market companies may not welcome
one-on-one conversations with prospective commercial lenders.
Consumers may place even more
importance on the availability and quality of phone and online customer support
— enough to overcome their normal bank-switching inertia.
EMI is currently conducting
research, in partnership with The Gramercy Institute, among asset management
firm marketing leaders to understand how they are providing support to
socially-distanced sales teams. This research has revealed many different
approaches (which we’ll share in future blog posts), but a common thread is
that these marketing leaders believe that many of the adaptations forced by
social isolation are likely to drive greater alignment between marketing and
sales. Whether or not rose-colored glasses are playing a part in these
assessments, this positive outlook indicates that at least some of the new
approaches will carry on even when our world begins to open up.
On the one hand, it’s a good
sign that firms may be more inclined to challenge assumptions and “standard
operating procedures” in favor of new ideas that could better serve client
needs. On the other hand, there is danger in greenlighting even
well-intentioned new ideas if they aren’t subject to any more validation of
their effectiveness than the old ways of doing things. It is therefore vitally
important that financial marketers treat our current reality as a testing
opportunity, not just an exercise in making the best of a bad situation. The
key to this testing mindset will be analyzing data for answers to questions
Has the volume of sales
opportunities gone up or down?
Have salespeople had more or fewer
direct interactions with customers and prospects?
Has the quantity of inbound
inquiries increased or decreased?
Have customers and prospects
interacted more or less with digital communications?
Many or even most of the new
virtual and digital approaches have the virtue of being cheaper than their
pre-pandemic equivalents. That is why it is so important for financial
marketers to not only “feel” that a new approach has been a success, but also
quantify the increases or decreases in sales performance and customer
satisfaction. Failing to do this runs the risk of marketers waking up in a
world of lower budgets (“you proved that you don’t need to do as many expensive
things”) and even more unobtainable objectives. In short, unless marketers can provide
an alternative narrative, senior management may easily assume that marketing
really can do more with less — and make budget allocation decisions that are
disastrous for financial marketers and their companies.
There’s no longer any question that banking has hit the digital tipping point. According to a 2019 American Bankers Association (ABA) survey, the banking channels used most often by consumers are online (37%) and mobile apps (36%), with bank branches now in third place at 17%. But before we declare the branch model is doomed…take note: a 2018 Celent survey found that 77% of consumers prefer visiting a branch to discuss a lengthy topic, 63% prefer a branch for investment advice, and 51% opt for a branch to open a new deposit or credit card account. And Deloitte’s Global Digital Banking Survey revealed that branch experience influences customer satisfaction more than mobile or online channels.
So while banks are investing more and faster in digital platforms, they are also looking to solve the puzzle of next-gen branch banking. Here are 3 ways that banks can reinvent their human channels to perform effectively in a digital world.
Reduce the overall number of branches, but look to open branches to expand reach.
Over the past decade, there has been a net decline of more than 13,000 bank branches in the U.S.
The pace and extent of each bank’s branch reductions have varied widely, driven largely by growth opportunities in footprint geographies and competitive intensity:
In April 2019, midwest-focused U.S. Bank announced plans to trim up to 15% of its branches by the end of 2021 as it pursues a digital-first strategy.
Wells Fargo’s branch strategy maintains significant branch presence in attractive markets, while aggressively reducing branch counts in other markets.
Lower branch density has reduced the cost of entry into some new markets. While many banks are cutting their overall branch numbers, they are also opening branches in targeted strategic markets.
In 2018, Chase announced plans to open 400 branches in 15-20 expansion markets, including Boston, Washington, D.C. and Philadelphia. As a result of this expansion, Chase’s branch network coverage will rise from 69% to 93% of the U.S. population.
Similarly, though Bank of America has reported a net reduction of more than 750 branches over the past five years, it has also opened 200 new branches, with another 400 expected to open over the next three years in markets like Cincinnati, Cleveland and Pittsburgh.
To achieve its ambition of national presence, PNC has targeted new markets with a digital-first strategy supported by a thin branch network. It recently opened branches in markets like Dallas and Kansas City, and reports these new branches are generating deposits at five times the pace that the bank would expect for a de novo branch in its legacy markets.
Branches have long since begun transformation from service centers to…well, something else. Some banks have set an immediate course for sales, driving service transactions to smart ATMs and contact center hotlines and pulling real estate from tellers to sellers. Other FIs have redesigned select branches or entire networks as everything from experiential attractions to coffee houses to community centers.
Universal trends are fewer square feet and more open space. Matching those changes, branch headcount is lower and skill levels higher. From the nation’s largest banks to some of the smallest, branches are being reinvented.
On the regional end of the scale, 132-branch Berkshire Bank is introducing new “storefronts” in greater Boston. No tellers, but if you need to make a conference call, you’ll find free co-working spaces and event rooms. Just be prepared to have a “needs assessment” with your friendly Berkshire banker coming or going.
Global bank, HSBC deployed “Pepper,” a humanoid robot in New York City, Seattle, Beverly Hills and Miami. Likely more of a marketing play than a scalable technology innovation, the bank claimed that the presence of Pepper boosted business by 60% in New York alone.
Chase–ever practical–launched Digital Account Opening in branches, so the technology can handle the busywork leaving bankers time for providing advice (read selling). And Bank of America is in the middle of a six-year plan to renovate 2,800 branches, flat-out taking humans out of many, leaving only machines.
Oregon-based Umpqua takes a contrarian view that people want to bank with people, and invites branch traffic with cookies, chocolate coins, movie nights and marketplaces where small business clients can share their wares with retail customers.
Make physical and digital work together. Human matters.
Intuitive technology is good for reducing cost, but humans are better at driving sales, creating relationships and building loyalty. Beyond the small businesses and aging boomers who still prefer the corner bank to the cool app is the reality that in “money moments that matter,” people turn to people–whether it’s in a branch or a contact center. But those humans must be consistently positive, empathetic and “know” everything that the technology channels know. Winning banks will:
Design an onmichannel approach that enables customers to use the channel they choose with consistent experience
Recognize the brand value and acquisition horsepower of branch networks
Give your customers great digital experiences, but power your human channels with the best in technology and insights to make the most of those moments that matter
Consumer transition to digital channels for everyday banking needs reached a tipping point in 2019. A recent ABA/Morning Consult survey found that 73% of Americans access their bank accounts most often via online (37%) and mobile (36%) channels. And more consumers are also now embracing digital channels for more financial activities, from buying new financial products and services to securing financial advice.
Responding to this trend, and the march towards improved efficiency, many financial providers are “chasing digital” from the boardroom to the back office. Some take an incrementalist strategy, doggedly adding functionality or product sets to online and mobile platforms. Some have bought or built standalone digital brands, or layered digital over thin branch networks out of footprint. And, of course greenfield revolutionaries continue to dive in to the fray. We look at four models that are working, and what marketing mix and methods matters most for each.
National Banks Double Down on the Human-Digital Model
Banks with a national or quasi-national branch footprint and strong brand equity – including JPMorgan Chase, Bank of America and Wells Fargo – have focused less on driving digital deposit growth to date and taken evolutionary approaches to driving digital banking. Take Erica, for example, Bank of America’s AI-based personal assistant, launched in June 2018. Over the past 18 months, Bank of America has systematically expanded Erica’s capabilities, and methodically marketed it to customers. The platform recently reached 10 million users. The same month that Erica appeared, JPMorgan Chase launched Finn, a standalone digital banking platform designed to appeal to a younger demographic. Just one year later Finn was shut down in a “fail fast” move, and Chase now appears to be doubling down on both digital banking evolutionary enhancements and selected branch expansions.
These national banks have significant technology budgets, and they are using them to launch a steady stream of new digital banking capabilities, citing increased customer satisfaction, higher share of wallet and reduced attrition. Bank of America calls it “moving from digital enrollment to digital engagement.”
Bigger banks are also pointing marketing budgets at digital adoption. We see an increasing number of multi-channel programs promoting digital capabilities and driving trial, including broadcast advertising, online banking ads, in-branch demos, social media and more.
While technology and marketing budgets are driving results, national banks will benefit most from a long-term channel-agnostic approach that emphasizes the strength of physical channels in acquisition, advice and complex product sales. Treating the digitization of human channels with the same attention as customer capabilities will yield higher return for banks with big branch horsepower. Too often, the glamour and appeal of digital banking pushes training and tooling for branch and contact center staff down the annual project queue. Putting next-best product predictors, automated diagnostic tools and intuitive digital solution finders in the hands of client-facing humans has high ROI.
Regional Banks Expand Reach with Digital Models
Regional banks by definition are deep in their footprints, and see digital banking as a lower-cost geographic expansion play–in some cases supported by a thin physical network. This strategy typically starts with a high-yield savings account, then adds other products (e.g., checking, lending) and digital tools. Whether regionals find the equation to manage cost of acquisition, driven by high marketing costs and NIM pressure, will be key to delivering on the promised cost-efficiency plan.
Regional banks leading the digital bank charge include:
Citizens Bank: With national aspirations and low brand equity outside of its Northeast and Midwest footprint, Citizens Access offers this high-performing regional a “nationwide digital platform.” Launched in June 2018, Citizens Access had generated $5.8 billion in new customer deposits by the end of 2019. Next up, Citizens is talking expansion into business savings and digital lending.
PNC expanded its digital banking capabilities in October 2018, leading with a high-yield savings account. Like several others, PNC has articulated a “thin network” strategy–combining digital bank investments with lean branch buildout in a few high-opportunity markets (in PNC’s case, Kansas City and Dallas).
Union Bank: Another thin network player, MUFG Union Bank introduced a “hybrid digital bank” under a separate brand, PurePoint Financial, in 2017. With a NYC headquarters setting it apart from Union Bank’s West Coast heritage, the PurePoint positioning emphasizes its parent Mitsubishi’s size and global scale, and its 22 locations in Florida, Texas and Chicago. The requisite high-rate savings and CD offers are complemented with heavy financial education.
Santander Bank recently announced plans for a digital bank later this year, but unlike others, plans to pilot in its Northeast footprint.
Monolines, Specialized Lenders Turn to Digital for Diversification
This category of financial firms includes dedicated credit card issuers with no branch presence (e.g., American Express, Discover), as well as banks with a strong heritage in card or other lending and who have a limited retail banking footprint (e.g., Capital One, Citi, Ally, CIT).
Marketing Priorities and Challenges:
These banks have national lending franchises and strong brand equity. However, as their brands are often strongly associated with their lending operations, a key marketing challenge will be to expand consumer awareness of the bank as a provider of other banking and financial solutions.
They will need to focus on data analysis, targeting, offer development and messaging to effectively cross-sell deposits and other products to their existing card/other loan client bases. This approach will also involve significant cooperation among different business units. Citi has been at the forefront in marketing deposit accounts to its 28 million credit cardholders and generated $4.7 billion in digital deposits in the first 9 months of 2019: two thirds of the deposits came from outside its six core banking markets.
Fintech Disruptors Continue to Emerge
Widespread availability of venture capital and private equity money continues to fuel a spate of fintechs entering the market, including Chime, N26, Radius Bank and Monzo. Many predecessor neobanks have been challenged to achieve scale, as the cost of customer acquisition in digital banking has continued to rise. Fintechs typically partner with a small bank or servicer to offer deposits, but some (such as Varo Money) are now looking for independent bank charters.
Marketing Priorities and Challenges:
The digital bank upstarts tend to appeal to younger age segments who are both more accustomed to using technology to manage their financial needs and less loyal to traditional banks. These companies need to clearly understand how these younger segments consume media and make financial decisions and tailor their marketing investment and messaging accordingly.
As “new kids on the block,” fintechs will need to develop solutions and marketing to differentiate themselves from both traditional banks and other challenger banks.
The design and ongoing review of the digital user experience is critical, as this is the only platform consumers will have to interact with the bank. Some digital banks are not even offering phone-based customer service.
While challenger banks have a number of advantages over traditional banks (such as higher rates on deposits), there are other areas where these newcomers are seen as inferior (for example, a recent Kantar study found that 47% of consumers completely trust traditional banks, but this falls to 19% for challenger banks). Challenger banks need to develop messaging to directly address these areas of vulnerability, and communicate consistently through all consumer touchpoints.