Why Are Financial Institutions Still Investing in Branches? – Interview With Whitney Loe Part 1

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Despite an accelerating adoption of digital banking in response to the pandemic, credit unions and community banks are still going full steam ahead with physical branching strategies. We recently sat down with Whitney Loe to ask why. As Director of Business Development at Ignite Sales, Whitney has gained a unique perspective of consumer behavior and preferences uncovered by analyzing data gathered by the platform.

This is the first of a two-part series covering our interview with Whitney on the future of banking. In Part 2, Whitney discusses the transition to digital banking and the role of personal interactions as the industry transforms. Keep an eye out, or subscribe to be notified when it’s published.

Momentum: With the transition to digital banking accelerating due to the pandemic, why aren’t financial institutions just ditching branching altogether?

Whitney: If you read financial industry news, this is probably featured every day. You’ve got a big difference of opinion. There are some people that really think that branches are going to be non-existent by 2050 or even 2035. That’s a little out there, but I think the people that have been around for a long time and have seen what’s going on before and after the pandemic understand that we’re not ditching branches because they’re still going to remain relevant. There’s still going to be some form of human interaction that’s going to be desired in a physical presence. It’s just going to be a lot different than how we see it now. Branches are not going to be so much transactional as they’re going to be experience related. Now that doesn’t mean I don’t think we’re going to lose some branches or that the physical branches aren’t going to change.

If you’re in a market where you don’t have a presence, not having a physical branch is going to really hinder you from continuing to grow that market. You’ve got to have a foot in the door in that market, and I think you will see at least one branch within a ten-to-twelve-mile range versus two or three branches  within a five mile range. That’s why we don’t see financial institutions ditching branching.

From a psychological or marketing perspective, what are the downsides to pulling branches from a market?

Even though people may not be going to a branch frequently, just the fact that they know one is there is reassuring to them. If the institution pulls out of the market, there’s a strong indication that many members or customers would switch to a different provider.

If you’re out and about, you know driving to work, taking your kids to school, or going to dinner, you’re going to pass that branch. You see that sign and it’s a reminder. It’s like an “out of sight, out of mind” deal. You still have to maintain that presence and remind your members “oh yes, they’re still here.”

What do you think the primary function of branches will be in the future?

Verity Credit Union - A Branch Design Build Project - Personal interactions in a digital banking world.I think it’s going to be based on what kind of experience your consumer is  looking for from their financial institution, and I think there are a couple of different statistics that verify that. One of them is that 67 percent of consumers do not feel comfortable where they are in their financial journey right now, especially due to the pandemic.

We see them looking more and more to their financial institutions to help them get back on the path of financial wellness, and to give them the resources and tools that they’re looking for. And that isn’t going to just come over a digital channel, educational app, or something like that. They are going to want to sit down and talk to somebody about the complex issues that they’re facing. Maybe it’s on getting a mortgage or a small businesses loan.

Credit unions are getting more and more into small business banking and small business lending. Those are not the type of conversations you’re necessarily going have over an app. That’s something where you’re going to want to sit down at a branch and talk to a financial expert and have them help you work through it.

So like I said, I think it’s going to be more based around the experience than it is just the transactions. I think you’re going to see less and less of tellers in branches, with more ITMs handling the transactional functions from remote locations while branch staff focus on experiences.

How do we design branches to offer the right mix of technology and services as well as the experience that consumers are looking for?

The branches are going to become less traditional. When you start talking about what that’s going to look like, I think it’s almost going to be more like a lounge cafe style type looking branch like Neighbors down in Baton Rouge.

You walk in and they  have like this café style area with an ITM that you can go talk to in the middle of the floor. Then you’ve got tables and lounge chairs, and they can get coffee and things like that with some self-service options. And then on the perimeter of the branch are a few different offices for relationship bankers who come out and interact with the member in the lobby or take them back there to help them with those more complex issues that we’re talking about. The things they’re not going to do online or through another digital channel.

I think it’s going to become more like the set of an experience. You don’t want it to be overwhelming, and you don’t want them to feel like they don’t know what they’re there to do. It’s a relaxing place and a place they’ll want to have a conversation.

And ultimately, people want to do business with other people. You can’t take people out of the banking experience. You can change it, but I think that it’s important to point out that the experience still needs to revolve around people.

Thanks again for joining us and sharing your insights!

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