COVID-19 and Retail Banking Evolution
The COVID-19 pandemic came along at a time when the retail banking industry was entering a new and exciting phase. Financial institutions were transforming their branches into enticing places to visit, and branch efficiency was at an all-time high. Branch design, technology, and staffing were poised to combine in ways that would embody the four cardinal principles of the so-called new retail paradigm:
And then the pandemic hit. The question now is can we continue to design to these four principles in the aftermath of COVID? It is notable that each of the four demands retail experiences be convenient and fun. Convenience matters now more than ever, with e-commerce booming and many employees working as productively from home as they would at the office. Branch transaction culture has become branch wellness culture, as financial institutions monitor COVID data through the reopening period. Transparent shields now stand between customer and teller. Floor decals enforce social distancing. Hand sanitizer dispensers encourage frequent hand washing. These short-term solutions will be revisited over the next several months, as banks learn how to make branches safe and functional while remaining welcoming and engaging. Several issues in branch design and function will need to be addressed going forward, starting with the physical and progressing more deeply into the experiential.
Air Quality in Bank Branches Post-COVID
Fortunately, we already know a lot about healthy buildings thanks to our old friend the Influenza virus. We know that infectious diseases spread more easily indoors, and air quality is all-important. Ventilation standards are rarely met in today’s commercial buildings, and this will have to change. The rate at which indoor air is replaced by outside air is crucial to diluting virus concentrations, as is the filtration method used. One study published in Nature demonstrated that significant reductions in transmission rates can be attained by simply meeting ventilation standards. Meeting these higher standards, combined with fewer people permitted in branches at one time, will reassure customers that the greater community is being protected. Financial institutions should consult with reputable industry-experienced contractors to determine how this relatively simple work can best be accomplished.
Modified Pods and Teller Lines
Before the pandemic hit, branches were trending away from traditional designs, and barriers between staff and clients were being eliminated. This direction may reverse if COVID-19 proves to be a permanent issue in our lives. Financial institutions currently use temporary acrylic barriers but going forward pods will likely require glass barriers incorporated into new designs should the virus become part of the seasonal rotation. It is worth remembering pods and teller lines can be designed to complement any architectural style and fulfill multiple requirements, including combating the spread of viruses. Put briefly, we do not need to return to bulletproof teller lines.
Another solution that is perhaps at its tipping point is the video teller machine (VTM). This technology is the next level in self-service banking and is expected to see considerable growth over the next several years. VTMs and other types of advanced terminals can be installed inside branches, in standalone kiosks, and in a variety of other market-appropriate contexts where delivery channels can be optimized for maximum ROI.
Consumer Engagement Restructured
As discussed, convenience is a top priority for consumers. It provides a sense of being included, valued, and catered to. Convenience can mean many things, but in retail banking it usually means branches established in productive locations, swift and easy transactions, and all customer needs attended to in one place by one person. Protecting consumers’ physical space is currently top of mind, and social distancing will probably endure as a concept beyond any implemented mandates. Branches will be reconfigured to accommodate this. In a recent survey conducted by Big Red Rooster, 93 percent of consumers stated that they felt brands should make “some or significant change to their physical environments” because of coronavirus. Consequently, merchandising media and branding will have to be more legible, succinct, and informative to consumers coming into branches by appointment, or as part of reduced capacity traffic.
“Phygital” — The Physical-Digital Hybrid Experience
Consumer anxiety over public exposure has catalyzed the rise in online shopping. Recent banking surveys confirmed a general agreement that increased digital engagement is inevitable, and that financial institutions will need to beef up their online capabilities. It was also discovered that physical branches will continue to play an important role in concert with their digital counterpart, known as the “phygital” consumer experience. In the post-COVID-19 era, we should expect to see a much tighter line between branches, websites, and apps, in terms of appearance, bank brand voice, and advertised services.
Why It is Crucial to Keep Branches Open
While many banks have closed branches temporarily due to decreased traffic during the lockdown, others are seeing the reopening period as an opportunity to make concrete downsizing decisions. Closing branches is not a good strategy to better compete against digital challenger banks. In fact, it is a short-sighted one; online-only banks have deep resources where digital is concerned, and physical branch networks are a valuable differentiator for legacy banks over digital newcomers. Branches can be transformed into lean and glamorous billboards in perfect locations—as opposed to hidden away in Google’s search index or broadcast fleetingly via TV or radio commercials—where communities see them as a concrete presence every single day. Branch networks are an asset, not a burden. They provide a form of human support that digital banks cannot. It is a universally accepted fact that people need a physical location they can go to for help, advice, and visible empathy when dealing with finances, something a digital-only bank is unable to provide. In addition, if the “by-appointment-only” banking trend continues, it will mean even more activity in the financial education, consulting, and planning space, but with an exclusive, boutique twist.
Physical Branches are Community Lynchpins
Physical branch locations play a central role in the communities they serve. Historical photographs, accounts of community origins, and references to a region’s earliest civic structures, inevitably include their financial institutions. In many cases throughout our history, community banks and credit unions have been solely responsible for keeping local economies alive. On a day to day basis across America, branches perform a vital role in maintaining local economies by processing and safeguarding cash for their small businesses. Physical branches are part of the communities they serve. We should, therefore, keep branches open and continue to design bank branches that reflect the latest retail banking trends.
Omnichannel and the 360-Degree Customer View
As online banking continues to grow its share of overall banking activity, branch and digital banking will align with consumer expectations of an enhanced omnichannel experience. Smaller, agile branches will function as extensions of banking websites and apps, offering the types of personalized retail experiences that are now a form of brand currency. Banks and credit unions have, in most cases, an unexploited, 360-degree view of their client base beyond anything other retailers could ever dream, and the time to use this data is now. Today’s consumer expects merchants to have analyzed their preferences and habits to better serve their needs. This data, which is both confidential and nonconfidential, can be used to do everything from locating and designing the physical branch, to sending segmented email newsletters and other timely customer communications.
Post-COVID-19 Branch Design Strategy
Banks and credit unions are still in brainstorm mode for the moment, rethinking operations, strategy, branch design and staffing. Branch transformation is more important now than ever, as leaner, brand-heavy platforms become key to keeping branches viable through these types of events. Video teller machines (VTMs) and other self-service technologies were gaining in popularity prior to the pandemic and present a ready-made solution to many of the questions being asked. Some branch design issues remain though, particularly regarding accessibility; ATMs and VTMs always need to be accessible to customers, but even lobbies previously open 24/7 have been closed to the public recently. Going forward, branches will be designed so that technology is not just always accessible to customers, but also to maintenance personnel, even during lockdown conditions, so that banks can continue to function. Some banks are encouraging remote working for certain employees which, if widespread enough, could also result in new design and technology requirements in branch offices or corporate headquarters.
The Branch Still Has the Edge
The challenges in post-COVID-19 branch banking are many and varied, ranging from architectural and functional, to philosophical and commercial. The good news for community banks and credit unions is people still need branches, in whatever form they take. Branches will still have the edge over digital, but the two will increasingly complement each other as omnichannel banking and personalized service become the norm. Coronavirus has temporarily derailed retail banking evolution, but the problems to be surmounted are relatively small and finite. Retail branch banking’s odyssey to embody the “Show-Entertain-Teach-Help” paradigm has hit stormy waters, but the wind is slowly and carefully returning to its sails.
For more information on post-COVID branch design, modification, and construction, please contact Solidus CEO, Mark Charette at: