An industry vet’s take on the branch

The long-term strategy of many, if not most, banks is “digital-first,” or even more precisely, “mobile-first.” It makes sense from a cost viewpoint, the technology is ever improving, and it’s what younger customers want and expect.

The bank branch is not going away any time soon, but what is it going to become?

For insights into what may lie ahead for branch networks, we spoke with Jon Voorhees, executive vice president for physical distribution strategies at Wells Fargo. Voorhees’ career in banking goes back more than four decades, including lengthy stints in retail distribution at Bank of America and as an industry consultant.

BAI: What do you foresee in terms of right-sizing of branch networks in light of the heightened focus on digital banking?

Jon Voorhees, Wells Fargo: In general, national and regional banks simply don’t need as many branches as we used to. Three decades ago, a bank’s strategy was to build a new branch and it acquired customers who would come in every week to interact. Over time, the branch got “full,” meaning long wait times or teller queues. So, the bank opened another branch and went through the same ramp-up. Today, new branches may never get “full” because customers don’t have come back into the branch as frequently, given the move of many of those interactions to digital alternatives.

What do you see as being the enduring takeaways for banking institutions from the pandemic experience when it comes to their branch networks?

I believe that any business with a physical presence, including banks, is seeing four common trends:

• Though COVID-19 accelerated mobile adoption across all segments, the physical space still remains important;
• Appointments and reservations became a widely accepted practice, but not without new challenges or problems to solve, such as what to do with “walk-ins”;
• All businesses are realizing they must pay more to attract talent. Many people view jobs as more than a paycheck and they’re looking for work that has higher meaning;
• Running lean due to staffing shortages creates risk – not just disappointing customers who have to wait, but in even being able to open the doors if not enough staff are there to operate.

We hear a lot about branches being reimagined as advice centers over the longer term – do you think that’s the right vision for banks to pursue?

I absolutely see this happening in the industry. We see many industry players saying they believe the branch visit will be even more about the relationship, where customers engage in financial checkups with bankers to create and fine-tune their long-term financial goals. The bigger challenge is that no bank or credit union in the U.S. has figured out what that means exactly. Some European players are ahead of the U.S. on this. They focus on educating customers and explaining how things work. You no longer have salespeople or transaction experts; you have educators and advisors.

How do you think banks and credit unions should be thinking about their branch staffing in terms of numbers and desirable skill set to become that branch of the future?

When I wore my consultant hat, I would have told you that it all depends on how your firm evolves. In the near future, I believe there will be some firms that take the high-touch approach to reach a segment of the U.S. market. Others will go the other way and try and eliminate all financial transactions from the physical branch, as we’re now seeing in some European banks. So, your staffing roles and levels will vary by your business model.

Some pioneering banks are using small “pop-up” branches that can easily be moved, while others are using “banks on wheels” that are highly mobile to serve underbanked areas. Do you see these as part of a new paradigm for branches?

Many of these ideas have been around for years. The idea of mobile branches makes great sense for disaster recovery. Given how the long-term climate changes are making weather events more extreme, I believe there will be a greater need for quick-response banking teams. In Great Britain, multiple banks are even sharing space throughout the week in order to serve more rural areas. Each bank operates from the space one day a week.

Personalization is a popular buzzword among banking innovators these days – how do you think banks achieve a closer personal relationship with customers at a time when their physical presence is shrinking?

Personalization has been on industry minds for some time, driven by experiences customers have outside banking – think online shopping, streaming video, music – and that is only going to accelerate with the emergence of artificial intelligence. Demonstrating a personal connection needs to happen in every interaction in all channels, not just in person, and in fact it may be easier to deliver digitally.

Terry Badger, CFA, is the managing editor at BAI.

Ideas and insights for banks and credit unions creating the next generation of branch experiences are highlighted in the BAI Executive Report,  “Branches are changing with the times.”