Jim S Miller

Thoughts on the Client Experience and Banking

4 Reasons Why the Branch Remains the Cornerstone of the Retail Banking Relationship

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Face to Face Still Trumps Technology

Upon reading the news and listening to industry experts, you may think bank branches are going the way of the buggy whip.  News reports claim “For the first time in 15 years, banks across the United States are closing branches faster than they are opening them,” (boston.com) and “Bank Branches Are Closing; People Using Nearby ATMs Don’t Notice”(time.com).  In November 2010, analyst Meredith Whitney predicted 5,000 branches would close in the next 18 months (fortune.cnn.com) and according to author and consultant Brett King, “The current network of branches for most retail behemoths has absolutely no chance of survival in the near future. I’m not talking 10 years out here… I’m talking in the next 2-3 years,” (banking4tomorrow.com).  To paraphrase a quote from Mark Twain, reports of the death of the branch have been greatly exaggerated.

As part of the 2011 Bank and Credit Union Satisfaction Survey, Prime Performance surveyed over 12,000 retail bank customers.  The findings from this survey show that the branch continues to play a vital role in the customer experience.

4 Reasons Why the Branch Remains the Cornerstone of the Retail Banking Relationship

1)  59% of customers performed a teller transaction at a branch within the last two weeks  

Even though branch transactions are declining, branches continue to be highly visited. In 2011, 59% of customers performed a teller transaction at a branch within the last two weeks. While younger customers make more use of self-service channels, they still frequently visit the branch.  Among Gen Y customers, 56% performed a teller transaction at a branch within the last two weeks.

2)  74% of bank customers said they opened their most recent account in a branch

Most customers still choose to open their bank accounts in a branch.  Almost 3 out of 4 (74%) bank customers said they opened their most recent account in a branch.  This compares to 19% opened on-line and 6% by phone.  As expected, older customers in the Boomers and Pre-Boomers generations (customers born before 1965), were more likely to open their account in a branch, and 81% did so.  Among Gen X, 69% opened their account in a branch, and surprisingly 74% of Gen Y did so as well.

3)  52% say branch location is the top reason why they selected a bank

Customers claim convenient branch locations is the primary factor in selecting a bank.  Fifty-two percent of new customers who opened their account in a branch rated convenient branch locations as the number one reason for selecting the bank and 74% said it was one of the top three reasons. New customers who opened their most recent account online, also rated convenient branch locations as the number one reason why they selected the bank, even though they chose not to open the account in a branch.  Twenty-seven percent of customers who opened their account online rated branch locations as the number one reason why they selected the bank and 43% ranked it in the top three reasons (35% and 49% among Gen Y).

4)  Live interactions continue to drive customer satisfaction and loyalty

While self service channels can play an important role in the customer experience, branch interactions and interactions with bank representatives by phone are, by far, the primary drivers of customer satisfaction.  Regression analysis on over 12,000 customer surveys showed that customer satisfaction with the branch had the greatest influence on their overall satisfaction with the bank, how likely they are to recommend the bank and how likely they are to return to the bank first for future financial needs.  Still in its infancy, at this point in time, mobile banking is showing virtually no impact on customers’ overall satisfaction.  The branch has over three times the influence on overall satisfaction than both the internet and ATM channels.  Customers value self-service channels, but don’t see them as significant differentiators between banks. Ultimately, their interaction with humans has the greatest affect on how they feel about their bank, for good or ill.

Ron Johnson, who left Target to build the Apple Store from scratch and now is the CEO of J.C. Penney department store, said in a recent Harvard Business Review interview, “The only way to really build a relationship is face-to-face.  That’s human nature,” (hbr.org).  As long as customers continue to place significant value on the locations of branches and the interactions they have with representatives in branches, banks needs to continue to make the branch the cornerstone of their retail strategy.  Banks must recognize that strong customer relationships are the key differentiator that will drive long-term growth and the branch is the key to developing and nurturing those relationships.  Successful banks listen to their customers and use that feedback to energize behavior change and create a shared vision of consistent service excellence and then deliver on that vision on each and every customer interaction.

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Written by Jim S Miller

December 20, 2011 at 6:23 pm

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