Bank branches aren’t dead, but a new model is needed
One might look at the steep decline in the numbers of bank branches in Thailand and other countries in recent years, and can't help to think that their future is doomed, particularly when considering that much of the world is moving towards all sorts of digital transactions, automated investment devices and cashless payments.
Reports on the death of bank branches are greatly exaggerated, but certainly the impact of new technologies, competition from fintech startups and the evolving demands of modern consumers mean they’ll have to be smaller, much more efficient and serve very different needs than they do today. And, most likely, there will be even fewer of them around.
The number of bank branches in Thailand has steadily declined, dropping to 6,729 in January from 6,780 year on year, compared to a peak of 7,065 in January 2016, according to the Bank of Thailand's figures. In countries such as the UK, the drop has been even steeper, with more than half of the branches having closed in the last 12 years.
To a great extent, that’s because of the evolving nature of financial services, as more and more transactions are done digitally. For banks, it’s not a simple yes or no question whether to keep the branches open, but more about evaluating what types of transactions are best suited for them and how they should re-configure their network and space to make the most out of those transactions.
Thais don’t visit bank branches often, but when they do, they’re happy with their service, according to a recent study by Accenture. About 31 per cent of consumers surveyed said they go to a physical bank branch at least once a week with 66 per cent expressing satisfaction with the service. That’s higher than the global average of 57 per cent .
But as more and more of the global economy becomes digital in nature, the role of branches will have to change for added value. Branches need to be redesigned as an “experience store network”—a connected group of highly visible, digitally enabled, multi-format, market-specific environments offering a positive and personalised experience that supplements and complements the digital experience of customers.
Banks that shift to the new model can bolster their brand as a destination for customers who want human support and an environment that is welcoming, engaging. Based on our analysis, large banks that adopt such a concept can save about 13 per cent of their costs while also increasing network-driven revenue by 11 per cent—an economic equation that should be attractive to most retail bankers.
Nearly three-quarters of Thais (71 per cent) in the survey said they would like their banks to blend physical branches and digital services for a more seamless experience. It makes sense as most customers still have to deal with staff asking for information which are already in the system but not readily available across different channels, often creating a time-consuming and less-than-pleasant experience for them.
The branch of the future is certainly going to be smaller and focused on face-to-face, value-added conversations. It’s going to be a place where you can explore new products, new processes and journeys, such as the overall experience of buying a house or designing your retirement plan.
The physical space and digital technologies will focus on those types of shared conversations, where clients and bank staff discuss these journeys, rather than having a person typing on a computer screen that you’re not allowed to see. It’ll move from a data entry type of experience (the data should be there already), to more collaborative and exploring conversations around products and services that clients need for their financial well-being.
Imagine your bank helping you buy your dream home, provide information on prices of apartments in your area and puts you in touch with the right real estate agent in the neighborhood. That’s much more than just giving you money and the connection is fundamentally different. The same goes for retirement planning and similar “life moments”: you want the bank to help you achieve your dreams in retirement, not just giving you a pension.
Times have changed and customers have moved on, heavily influenced by their Internet experience and it’s time for banks to catch up. As this new, digitally-enabled and engaging breed of branches emerge and multiple, so will opportunities for banks.
Contributed by Nontawat Poomchusri, country managing director and head of financial services practice, Accenture Thailand.
