What worked in the past isn’t what will work in the post-COVID future.
When was the last time you walked into a bank branch? The answer varies depending on where you live, your age demographic, and, at this point in the pandemic, your access to a vaccine. It’s clear that brick-and-mortar branches will remain a popular destination for loyal customers despite the fact that most demographics are clearly turning to other channels such as digital to cover their banking needs. With the COVID-19 vaccine rollout chugging along nationwide, once-locked-down bank branches will open back up to a much different new normal.
Banks and credit unions have a long way to go when it comes to encouraging their customers and members how to do their banking. The pandemic almost forced banks and credit unions into digital acceleration and to think outside of a branch-centric mindset. Rapid adoption of digital channels not only made sense because it became the primary means of banking for a large swath of the country around the second quarter of 2020 and onward, but it also made dollars and cents. The cost of conducting a deposit transaction via a laptop, desktop, or smartphone is a fraction of the cost of that same in-branch transaction.
It doesn’t take a financial whiz to deduce why headlines like “U.S. banks shutter record number of branches in 2020,” greeted this new year. It’s true — among 2020’s economic devastation, nearly 3,500 branch locations were shuttered. That follows a branch closure rate that has doubled every three years since 2012. At that count, there might be fewer than 16,000 remaining brick-and-mortar branches in the entire country by 2030.
The situation is dire, but not for the reasons the data may suggest.
The overwhelming cause of branch closures likely reflects multiple factors. So, in that case, tried and true banks and credit unions don’t need to roll over and die — they just need to evolve to accommodate the same digital solutions that are largely driving the explosive digital-only account growth that gave industry insiders whiplash last year.
Yes, many locations were forced to close. But real estate alone doesn’t equate to good robust growth metrics. Where customers go, their financial institutions must follow. It’s just the new reality. Brands accommodating multi-channel functions to merge the online and offline experience for account holders and members will be the ones to thrive. Recognizing a need to pivot to a customer-first mentality is the first step, but how banks and credit unions implement that approach via marketing channels is what leads to a brand’s continued success.
Financial leaders have known about this for a awhile now — “We’ll drop the operating costs out of it,” PNC Bank CEO William Demchak said at a 2013 Goldman Sachs financial services conference about the bank’s plans to close branches and focus on personalized and automated locations, “and it will deliver a service that tomorrow’s bank client expects.”
From an account-holder and member’s standpoint, branches will simply be used less for routine transactions that can be accomplished via digital channels, and be used more for complicated or essentially face-to-face value-add financial needs. From the bank and credit union’s perspective, this is simply a customer-forward shift away from the hub of the bank branch and a compliment toward leveraging digital technology to drive customers’ online banking experiences that are becoming more permanently multi-channel over time.
Not closing underperforming branches may be more costly than keeping them open solely because they rely on an outdated mindset. It will be up to banks and credit unions to target partners that can implement creative strategies and multi-channel plans to drive new accounts, and thus remain economically viable.
For banks and credit unions to survive, they need to do some soul searching and reevaluate how to deliver their audiences what they want. Unless they are willing to adopt customer-first, data-driven strategies that stress digital experiences, then the post-COVID open-doors to your local bank and credit unions branch will be a thing of the past.