Chris Skinner recently published a blog post titled Banks designed for humans, not money in which he argues that:
“Branches are banks’ retail stores but were designed for money. They were designed to handle physical forms of cash and cheques, as secure transaction centres. This is the core challenge of why everyone thinks branches will disappear. Because they are not retail stores engaging the brand community but transaction centres run like some administration process.”
In imagining — in Chris’ words — “how the branch experience becomes a retail experience fit for 2013 and beyond,” he identifies a few examples:
- Washington Mutual (Occasio) and Umpqua removed teller counters and opened the dialogue over a face-to-face table form.
- Caja Navarro and ING Direct instigate “community engagement” (Chris’ words) by having open house sessions. Caja Navarro offered evening classes in their stores including hair styling and flower arranging, and ING Direct offered sessions where anyone could just ask questions like: “how does a mortgage work?”
- Umpqua allows branches to be booked in the evening for cocktail parties or business meetings.
My take: These are all interesting examples of alternative (and creative) uses of branch space, but do little or nothing to prove that the branch is an economically viable (i.e., profitable) way of doing business for banks.
In his post, Chris cites a Bloomberg article that appeared shortly after Apple launched its retail stores:
“Jobs thinks he can do a better job than experienced retailers. Problem is, the numbers don’t add up. I give them two years before they’re turning out the lights on a very painful and expensive mistake.”
Bet that guy wishes he could take those words back.
But the important point is why he was wrong. So-called “experienced retailers” were experienced at selling consumer products (clothing, jewelry, shoes) — not technology products.
At the time of Apple’s launching of retail stores, there were two frames of reference: 1) How existing retailers sold consumer products, and 2) How existing technology companies sold technology products. Apple stores didn’t fit either frame of reference, and hence, geniuses like the one at Bloomberg wrote them off.
Apple reinvented the way technology products were sold. (It took a couple of tweaks, they didn’t get it right on the first try). What Apple has got right, regarding the sale of technology products, is creating a retail experience that is:
- Visual. People want to see the product.
- Tactile. People want to touch and use the product.
- Informative. People want to talk to store reps who know about the products.
- Advocative (I made that word up). People want reps who will recommend products that are right for the customer, not just for the store.
- Lean. The buying process if fast, with a minimal number of steps. No waiting in cash register lines. Fast and lean.
Apple stores are successful because — for the most part — they succeed at accomplishing these five things. And it doesn’t hurt that the products Apple sells are products that consumers consider to be very important in their personal lives.
This is why bank branches suck: They don’t accomplish these five objectives (yeah, I know, if I flip-flopped #2 and #3 we could say that branches aren’t VITAL. I hate stupid acronyms).
Granted, banks are handicapped here.
It’s tough to “see” and “touch” most financial products and services. You used to be able to touch a checking account — i.e., your checkbook — but nobody does that anymore, and you didn’t get that until days after opening your account anyway.
And, for the vast majority of consumers (at least here in the US), although money is really really important to us, our choice of financial products and providers isn’t. We spend more time figuring out what restaurant to eat out at on a Saturday night than we do which bank we do business with.
There is, however, no excuse for why banks don’t meet the informative and advocative hurdles.
This is also why the various “branch of the future” concepts fall short: They don’t do anything to reinvent the way financial products are sold.
The branchlet concept is great — as are the hair styling, flower arranging, yoga classes, and cocktail party ideas. But they only address the efficiency (cost) side of the coin, not the effectiveness (sales) side.
Chris was spot on in describing the branch as a “transaction centre run like some administration process.” Hair styling and flower arranging classes, however, is just lipstick on a pig.
Chris was also spot on in suggesting that banks should “combine the two worlds: the retail store and the remote experience.” But I’ve yet to see a “branch of the future” concept that does that. Most BOTF concepts bring more technology into the branch, but few (if any) do anything to integrate the branch experience with the remote experience.
Banks (and credit unions) have two huge hurdles to overcome in order to make branches profitable:
1. Redefining how financial products are sold. Sitting down at a desk with someone who may or may not be well informed about the products, asking me personal questions about my finances that I have no interest in sharing, talking about they may or may not be right for me….it’s a crappy experience.
2. Getting more people engaged in the management of their financial lives. Chris talks about “using stores as a method of building a sense of community around your brand.” It works for Apple because people really care a lot about their choice of smartphones, PCs, and music devices. You don’t get brand engagement without product category engagement.
There’s a chicken-and-egg situation with this last point. If I’m not engaged in the management of my financial life, why would I go into a branch to learn how a mortgage works? (Unless, of course, there was a free meal there. Free drinks, even better. Offer Macallan 18yo Scotch and I’ll even come in for the hair styling and basket weaving classes).
Apple may have reinvented the way technology products are sold, but the company is successful with its retail strategy because they get people in the door. Ironically, when new products are released, there’s often a line, and people can’t get in. But you know what I mean.
Flower arranging classes don’t count as a way of “getting people in the door.” Banks don’t have the luxury of having a “cool” product that, when announced, will drive flocks of people to line up at the door.
The recent consumer research I’ve done (not yet published) suggests to me people are increasingly engaged with their financial lives. Younger consumers are more engaged with their financial lives than older consumers, and certainly more so than older consumers were when they were in their 20s and early 30s.
But the financial services industry has a long way to go before it can talk about branches as a place that fosters a sense of “ownership, belonging, and loyalty.”