Customer Acquisition Channels
While it’s true that fewer people overall are visiting branches, data consistently shows that in banking retail drives growth – with more than one-third of institutional leaders reporting that they leverage de novo branches in their network for profitability. Network optimization is creating efficiencies for banks and credit unions, but retail closures come at a cost. “Every time you close a branch, you’re missing out on at least half of new customer acquisition that would’ve come through the front door,” says Andrew Hovet, Managing Director at Curinos in a recent webinar with Adrenaline’s Ben Hopper. “Some consumers will be picked up through nearby branches, but there is definitely an impact every time you close a branch.”
Digital channels can fill in the gaps in acquisition that closures can cause, but it’s important to understand that banking relationships started digitally are not as profitable or durable as those started in the retail channel. “The quality of those relationships is weaker,” according to Andrew. “We see lower average balances and lower retention rates for those relationships established via digital, so it’s not a fair trade, if you will. You should not be willing to trade a new customer acquired via the branch channel for one acquired digitally.” What financial institutions count on is their branch network continuing to deliver the same number of new customer relationships as a foundation, with digitally-acquired customers as a bonus on top.
The Branch Paradox
What we’re witnessing in retail banking is a branch paradox. Branches are closing AND they’re also opening. Branch networks are shrinking in some places and growing in others. Customers want digital channels for convenience and efficiency and they very much want a physical branch to go to where they can talk with experts and solve their problems. “Gen Z comes into those moments that matter,” according to Ben. “They prefer the branch channel for those big moments – applying for a loan, getting some advice, opening an account or even closing an account. For those moments, the branch remains the preferred channel.” While digital channels take on more transaction loads, branches are where relationships are formed.
Branch Purpose Equals Opportunity
Not only do branches serve as the #1 way to attract and acquire customers, but retail banking locations also serve as a key awareness builder for financial institutions. While the renewed purpose of the branch should be built around what customers want and need, that evolved purpose translates into prospects for institutions. Outside the branch, signage signals to consumers that a bank is there, serving as a brand beacon for attracting new customers. Inside the branch, the financial advice and consultation taking place create opportunities for cross-sell and providing banking that’s personalized to customer needs. Specialized service deepens loyalty with customers and access to digital transactions equals efficiency for institutions.
Leveraging Location
To ensure the branch can live up to its potential, institutions must have the right presence in the right markets. The Four Factor analysis examines potential, competitiveness, position, and performance to help banking leaders prioritize markets and submarkets for investment, assessing demographic aspects in key areas, both current state and forward looking. “That doesn’t mean you always reinvest in a big dog market,” says Andrew. “Sometimes the markets where you have good scale end up being more in the middle, in what we call defend markets, where you want to defend your current position and strength and then, ultimately, performance.” This analysis ensures that institutional investment in the market is aligned with expected growth.
Network Planning & Purpose-Led Design
Strong analytics makes a case for market presence, whether an institution is staying or expanding in a location. After market validation, informed planning and purpose-led design ensure banks and credit unions can maximize the ROI of network investment. “You need to have really powerful, strong analytics that you can trust for those nuanced decision points,” says Ben. Strategy and design must be fused together before delving into planning and implementation. Even more, starting with strategy means having design conversations upfront. “Try some things, refine, remediate those pieces in the puzzle, and only then get into mass application across your network.”
Adrenaline is an end-to-end brand experience company serving the financial industry. We move brands and businesses ahead by delivering on every aspect of their experience across digital and physical channels, from strategy through implementation. Our multi-disciplinary team works with leadership to advise on purpose, position, culture, and retail growth strategies. We create brands people love and engage audiences from employees to customers with story-led design and insights-driven marketing; and we design and build transformative brand experiences across branch networks, leading the construction and implementation of physical spaces that drive business advantage and make the brand experience real.