Next Article Next

SWGSB Presenter Dave Martin on the Human Touch

August 2020

Published under the title: There's No Replacing the Human Touch of Branch Banking

Dave Martin, Founder of bankmechanics

First published in American Banker, August 6, 2020 ( Republished through the courtesy of Dave Martin.

Sometimes the industry gives that eerie feeling of déjà vu.

It first began a decade ago after a particularly active wave of "branches will soon be obsolete" columns and conference presentations rolled through the industry.

It was hard for anyone in banking not to feel concerned about the apparent pending upheaval of banking business models. Smart people at cool companies told them repeatedly that new bank technology would soon turn their branches into relics of a bygone era.

Spoiler alert: It didn’t.

Now the coronavirus pandemic protocols and forced closures of many branches nationwide have brought those arguments back to the forefront. Should bankers pay attention to those arguments?

They absolutely should. There is no denying that millions of customers being forced (for a longer period than expected) to stay out of branch lobbies will impact customer behavior once lockdowns are over.

However, impacting customer behavior and changing human nature are two different matters.

The idea that banks in America can thrive (or even survive) with an online-only banking model is specious — a suggestion I’ve made for more than a decade, especially to community bankers. But this is true for most regional and national banks as well.

Imagine asking community bankers to pretend they ran a bookstore or maybe a small chain. Then, Amazon emerged and became ascendant online.

Would they think their best bet in competing with Amazon would be to abandon their physical store(s) and attempt to go head-to-head with the best online bookseller in the world?

The answer would assuredly be "no," of course. They would likely attempt to build an online presence to remain relevant to those customers living more of their lives online. But their focus would be turning on-site visits into more pleasant experiences and remaining connected with customers.

In today's climate, bankers might need to refocus resources. They might decide to tighten their offerings or get more creative and proactive with community outreach. However, physical presence and personal engagement remain vital as ever, perhaps even more so.

Frankly, it's the last true differentiator they have.

I often ask bankers: Would it seem like a wise strategy to attempt to take on giant competitors entirely on their own (digital) homefield?

The point is, for the great majority of banks in America, the physical presence in communities is what really defines that bank. The branches and, more importantly, the bankers differentiate who and what they are.

That does not mean that the business models of the past are ideal for the future. Branches and bankers remain vital, but not necessarily for the more tedious tasks once required to meet customers’ basic banking needs.

Branches that once largely served as the factories and warehouses of the banking industry are becoming more like financial "Urgent Care" facilities for many customers. These are places for trained professionals to provide assistance and consultation when detailed questions and more complex issues arise.

Sometimes, the assistance needed is something that could have easily been handled with a phone call or online chat. Sometimes, the physical visit was necessary for a more accurate diagnosis.

And sometimes, it is discovered that an issue requires a referral to a professional or specialist better equipped to provide the assistance needed.

Think of it this way: WebMD didn't close doctors' offices. While many people use it or similar sites for health education, they still prefer to see someone face-to-face for important issues.

In theory, all financial institutions are only a Google search away. It's entirely possible for many banks to serve customers without them ever having to set foot in one of their branches.

Yet, customers still strongly prefer banks with a reasonably accessible physical presence and available human bankers.

Of course, simply having a physical branch is not enough. A nearby urgent care facility with poorly trained or unhelpful employees is not one that customers would choose again. There are other options.

Will some branches close? Sure. It's happened in the past and always will. New ones will open, as well.

Always remember, however, that customers do not visit branches. They visit bankers. In the end, the institutions with the most engaged and helpful bankers win.