Combining physical and digital, a new era of bank branches

Banks are shuttering physical locations as digital and mobile banking adoption rises and footfall in branches dwindles. According to Forrester ’s “The State of Digital Banking 2023” March report, online banking is the most popular channel in North America and throughout most of Europe. The report, which surveyed more than 15,000 online adult banking customers from Canada, France, Italy, Germany, the United Kingdom and the United States, found that only 35% of consumers in the U.S., 24% in Italy, and 22% in the U.K. did their banking in branches. In fact, 71% of technology professionals at financial institutions are prioritizing digital initiatives within their operations, according to the report. Rising digital banking adoption At $1.7 trillion Lloyds Bank , branches are an integral part of business, but the rise of digital banking has led to consumers using branches much less over the last five years, a Lloyds spokesperson told Bank Automation News. In fact, the bank announced last week it aims to close 155 branches by the end of the year, leaving it with 1,107 branches in the U.K. region, the spokesperson said. “Our branch and digital banking offerings sit alongside our other channels, including telephone, mobile and video services, which means customers have a wide range of choices to bank in the way that suits their needs best,” the spokesperson said. “Lloyds Banking Group now has over 21 million regular online banking customers and 18.1 million using mobile banking.” The bank uses more than 100 different measures to see how customers are engaging with existing branches, the spokesperson said. How often customers visit branches and the types of transactions they are doing have changed in the past five years, according to the company’s website. For example, a Lloyds branch based in Piccadilly Square, London, saw a 42% dip in visits by personal banking customers while business customers’ visits dropped by 52%, according to the company’s website. Adoption of mobile banking among different banks : NatWest branch closures NatWest is axing 81 branches and will be left with 678 branches by the end of the year. “As with many industries, most of our customers are shifting to mobile and online banking, because it’s faster and easier for people to manage their financial lives,” a NatWest spokesperson told BAN . The $890 billion bank has seen the adoption of its digital-only business bank account, Mettle, increase 20% since the start of 2023 to 100,000 total accounts, according to the bank’s second-quarter earnings report. While closing branches, NatWest is making sure “that no one is left behind” and plans to provide support to those who struggle with digital adoption, the spokesperson said. “We have a dedicated support line for customers who are over 60, which is open 8 a.m. to 8 p.m., seven days a week with shorter waiting times,” the spokesperson said. “Our customer care experts will be able to guide customers through how to register and use our online and mobile services.” The London-based bank expects to invest “around [$4.2 billion] between 2023 and 2025 to future - proof the business as our ongoing digital transformation helps to drive efficiencies, improve customer experience and deliver future growth.” Katie Murray , chief financial officer, NatWest. Automated branches As online banking adoption grows, “the importance of branch automation is increasing significantly,” a spokesperson from Zurich-based financial services company SIX Group told BAN . An August report by SIX found that European banks are paying close attention to customer behaviors, innovation and new technologies to improve their experience at branches — including investment in automated branches. “What we're seeing is the needs are both from an efficiency and effectiveness perspective,” Danny Baker , vice president of market strategy at financial services technology company Fiserv , told BAN . “Efficiency is important, but they're also looking about how can automation help them better serve their current customer and their desired prospective customers.” Younger generations visit the branches for different reasons than older generations, Baker said. “The primary driver of their interest is more related to advice versus transactions,” he said. Automated branches drive traditional banking needs like transaction processing and account opening while also serving new needs like education, financial management and planning, he said. Branches will evolve into processing transactions through digitized ATMs along with providing financial advice, which will provide the human element to banking, Baker said. A ‘phygital’ experience According to the SIX report, branches will offer a mix of physical and digital experiences. For example, a customer who wants to withdraw cash can generate that request from their phone, and collect the cash at a branch by using the QR code generated and given to them by their bank, according to the report. Such experiences can give customers a more seamless experience while driving customer retention rates for the banks, the report stated. Evolution of branches Even as branch usage falls, in some cases they continue to be an area of investment for banks, according to the Forrester report. TD Bank ’s Chris Giamo , executive vice president and head of commercial banking, told BAN : “I think it establishes that loyalty and security and comfort for safety and soundness, knowing that there's brick and mortar and you're not just dealing with some phantom organization that you can't feel or touch." Most transactions done at the bank are being digitized and automated, which helps bank branches become more “advice oriented, where you need subject matter experts, whether they be consumer, commercial or wealth advisers, to engage with customers on more complex matters,” Giamo said. The $1.9 trillion TD Bank is targeting the Southeast region of the U.S. to open 150 new branches by the end of 2027, as traditional needs move online and more niche experiences are desired in person, TD Bank Chief Executive Bharat Masrani said during the company’s Q2 earnings call on May 25 . Similarly, PNC Bank announced that it will convert nearly 60% of its branches to automated models by the end of 2026. The $554 million bank wants to provide the right mix of digital tools and experiences with more personalized human interaction, according to a June press release. Most transactions will be automated, giving bankers more time to hold more in-depth conversations and engage with customers to offer financial guidance, according to the PNC release. The $222 billion Citizens Bank also is prioritizing how customers want to interact and will evolve its offerings accordingly, Jo Wyper , executive vice president of commercial digital operations , told BAN . “As long as our customers want and need [branches], they will be there,” Wyper said.

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Major shakeup at Truist’s tech innovation operation

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