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Keeping retail banks relevant (Part 1): Becoming a post-pandemic “third place”

February 03, 2021

By Brian Reno

Defining a new role for bank branches in the age of remote banking

Social unrest, cyber-attacks, and COVID-19 have resulted in bank branch closings, workplaces shifting to the home, and social isolation. Much of banks’ in-person branch activity has been taken up by online and mobile applications. The pandemic and its social side effects are accelerating change in how and where we want to bank.

Surveys agree. According to a 2019 and 2020 Bank Administration Institute consumer surveys, 83%of consumers ranked their primary bank or credit union as the organization they trust most to handle their finances. But a year later, that dropped to only 52%, with the numbers for nontraditional providers rising.

Next generation branch design includes interactive and educational presentation areas and after-hours office for US Bank in San Diego, California. (Image: Stantec + Shikatani Lacroix)

Tech tools

During the pandemic, consumers turned to alternative players in person-to-person payment systems such as PayPal, Zelle, and Venmo. Despite the ground that nontraditional players gained, three-quarters of consumers surveyed still say their primary bank or credit union understands their financial service needs. But that does not guarantee loyalty, because in the next breath respondents said they are essentially an app away from switching financial service providers. In 2019, 41% said they would defect for a better mobile app; in 2020, 54% said digital capability would sway them. In this year’s survey, three-quarters of millennials would make the switch.

At the close of 2020, more than 90% of retail bank transactions had been automated. Many banks are considering deploying interactive terminals next to their walk-up branch and remote ATMs to help address the service needs without direct teller contact. ITMs offer an ATM-like interface with the option to connect with a live remote teller or service representative via audio/video in real time.

In 2019, 41% of survey respondents said they would defect from their bank for a better mobile app. In 2020, 54% said digital capability would sway them.

Brick-and-mortar assets

One big advantage traditional financial service providers have is the visible branch network, which can serve functions that the physically invisible payment startups can’t. During the pandemic, many outlying branches have been utilized by banks as a network to accommodate the needs of displaced employees from city centers. Branch banks remain uniquely positioned to service businesses and the baby boomer generation because both groups prefer traditional relationships.

One big advantage traditional financial service providers have is the visible branch network, which can serve functions that the physically invisible payment startups can’t.

Creating a third place and fourth place

We all need a place to be ourselves. Home is the first and the workplace is second, but modern people also long for “the third place”—as first described by sociologist Ray Oldenberg, where we can hang out and express ourselves between the two. Once upon a time, this might have been the neighborhood bar or diner. In recent years, Starbucks has emerged as a third place of choice. Is there a fourth place? The digital space, whether it be social media communities or apps, has recently taken that spot. Banks will need to stay conscious of their physical and online presence to meet consumers where they want to be.

Humans are social beings and just as we expect to see a resurgence and return to other physical environments post-pandemic (perhaps redefined), we expect consumer demand for the third place within the bank branch to surge.

Reduced demand for in-branch teller services and increased usage of ATMs for cash, online, and app-based digital banking services will certainly continue. Strong brand identity, reputation, and high traffic locations are still key for banks in driving branch activity. However, banks will need to reconfigure to maintain existing customers and build new relationships through redefined experiences. 

Interactive telepresence-equipped customer gathering booths and seminar event space at a new Chase branch in Los Angeles, California.

So, while banks are left with consumers who have switched to apps and remote transactions, they still enjoy a healthy degree of trust. And they’re wondering how important their physical assets—those bank branches—will be when reopening occurs. Smaller, more automated bank branches will need to reimagine their offerings and use of space to stay viable. Strategies that can help branches become a third place include:

  • Co-locating the branch (while possibly leasing unneeded floor area) with other high traffic or complimentary uses such as a coffee shop, Amazon package pick-up/Amazon Locker location, real estate office, or investment office
  • Co-locating branches with coworking space environments
  • Utilizing the branch as an alternate workplace for non-retail branch bank employees
  • Consolidating low-performing or low-volume branches into regional market focused banking centers
  • Adding community focused conference and seminar spaces and cosponsoring local events to better connect to the local community
  • Redeveloping free standing, multi-floor branches into mixed-use developments with the bank as a co-anchor in high-traffic locations.

Creative real estate and redevelopment strategies will be key to the success and profitability of the branch network—combined with design that enhances personal relationships—will result in high-performing branches.

In part two, I’ll look at how understanding generational preferences is key for banks in leveraging space and digital offerings to suit consumers.

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