Traditional Banks Prepare for the New Digital Reality by Expanding Digital Functionality

Banking customers’ growing preference for digital (online and mobile) channels – as well as the huge number of digital challengers looking to gain a share of the market (read our December 2020 blog on segmentation among new entrants) – has led established retail banks to ramp up their investment in digital channels.

Growing digital banking users continues to be a prerequisite in establishing strong customer engagement. The onset of the COVID-19 pandemic in early 2020 was the catalyst for many reluctant consumers to use digital (online and mobile) banking channels for the first time. Many of these have continued to use digital channels even through branch banking has returned.

The top three retail banks – Chase, Bank of America and Wells Fargo – all report steady growth in active digital users. Bank of America claimed that 70% of its Consumer Banking households now use its digital channels.

Many U.S. banks also publish metrics illustrating that customers are using digital channels to carry out an range of banking activities, such as:

  • Conducting banking transactions:
    • The digital channel accounted for 68% of Region Bank’s total customer transactions
    • Interactions using Bank of America’s Erica virtual financial assistant rose 153% y/y to 94.2 million
    • 18% of UMB Bank’s consumer deposits were made using its mobile app
  • Making person-to-person (P2P) transfers:
    • Regions reported a 75% y/y rise in Zelle transactions
  • Acquiring new products and services:
    • Truist reported that 44% of new checking accounts were opened digitally
    • The digital channel accounted for 65% of U.S. Bank’s total loan sales
    • Citizens Bank’s digital sales volume rose 61% y/y
    • Huntington Bank reported that the digital channel accounted for 12% of new business deposit account production (a significant change from 0% in 3Q20)
  • Scheduling appointments:
    • Bank of America booked 871,000 digital appointments, up 31% y/y, and reported that these appointments accounted for 31% of its total financial center traffic

Obviously, banks will want to continue to enhance their digital functionality to meet consumer needs and differentiate themselves from competitors. Here are a few tips for doing so effectively:

  • Identify the bank departments, product lines or customer segments where digital channels have significant scope for growth
  • Carry out regular assessments of customer behaviors, needs and perceptions to inform digital investments
  • Conduct ongoing competitive intelligence to understand what digital functionality is now common among many banks, distill best practices, and identify competitive gaps
  • Prepare ways to counter internal barriers (e.g., organizational inertia, legacy processes) to speedy development and rollout of new digital solutions
  • Ensure that new functionality enhances the customers’ digital experience
  • Develop closer integration between digital and human service and sales channels
  • Develop plans to leverage marketing and customer communications channels to promote new digital functionality

Banks Optimize Engagement With a Diverse Content Mix

Many banks are amping up their investment in content development. This is being driven by growing customer demand for financial advice, changing customer perceptions of financial providers and a need to differentiate from both established and new competitors.

Traditional content channels for banks include content-and-advice portals, surveys, blogs and newsletters. But it’s becoming obvious that banks looking to develop a robust and client-centric strategy are leveraging both established and emerging contact forms and channels – including videos, infographics, webinars, podcasts and of course social media platforms
– to meet customers’ changing consumption patterns.

Established Content Forms/Channels

Portals

Most leading banks provide portals that offer a combination of advice and content tailored to specific customer segments, such as:

Recently, bank-wide portals, which are then categorized into various business segments, have started to appear. Examples include U.S. Bank’s Financial IQ and Regions Bank’s Insights.

Surveys

Banks have been using customer surveys for years to both gain insights into changing perceptions and behaviors, and to highlight the bank’s thought leadership in specific areas of the market. A growing trend is for banks to carry out recurring (annual, quarterly, monthly) surveys, which are designed to generate regular press coverage and ongoing customer engagement.

Newsletters

A number of banks have recurring newsletters that they either publish online or distribute via email to opted-in subscribers. Many of these newsletters are titled “Insights”, including Regions Bank’s Wealth Insights and Commercial Insights magazines, which reflect the content and branding on the bank’s Insights portal.

Blogs

Blogs are also well established. They tend to emphasize financial education and well-being, and often have appealing names, such as MoneyFit (BBVA), do it right (Ally) and MoneyLife (MoneyLion).

Emerging Content Forms/Channels

Banks are also starting to develop and promote content on emerging content channels, such as webinars, webcasts, podcasts, videos and social media.

Webinars and Webcasts

During the pandemic, as banks were unable to host live events, webinars and webcasts became a key channel to maintain customer and prospect engagement. These channels have been most prevalent in the commercial banking space with the rollouts of new webinar series by BMO Harris (Expert Conversations), JPMorgan Chase (Treasury & Technology Trends) and M&T Bank (Managing Through Challenging Times). In consumer banking, JPMorgan Chase launched the Chase Chats webcast series.

Podcasts

In the past year, many banks also developed podcast series – including Bank of America (Treasury Insights) and Regions (Commercial Insights) – for commercial banking clients.

Videos

Banks have been using video to spotlight local small business owners, while helping to promote the bank’s local connections. Examples include Huntington Bank’s Support Local video series featuring real small business owners and Webster Bank’s similar small business video series called The Moment.

Social Media Channels

Finally, banks are using their social media channels not only to promote content that is provided through other bank channels but also to present new content, which allows the bank to extend its reach to customers and prospects who might not use the other channels.

Key Takeaways

To develop a multifaceted content strategy, consider the following:

  • Create a dedicated unit for continual content development, publication and promotion
  • Understand target market content needs and consumption patterns
  • Develop a consistent look-and-feel; create templates and guidelines to support seamless content provision
  • Develop a communications plan to promote the value of content development to internal stakeholders
  • Maintain ongoing customer engagement with recurring content (e.g., series of webinars, recurring surveys)
  • Where appropriate, use the content as a prospecting tool by listing relevant executives (with titles, emails and direct phone numbers)
  • Brand the content (e.g., give names to surveys, podcast/webinar series)
  • Identify best practices within the banking industry and from other industry sectors
  • Establish feedback channels to identify content needs and gaps

Adapting branch networks for a digital banking future

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.

Reimagine branches.

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