No amount of wishful thinking is going to change the cold reality: Branch banking as we know it is headed down the same

path as the dinosaurs, says author and banking consultant Brett King.

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IS THE BRANCH DOOMEd?

INTERViEW BY WALT ALBRO

I
Photograph 2012 GettyImages.com / ShutterStock.com

F YOU WANT TO UNDERSTAND WHAT IS GOING TO HAPPEN TO BRANCH-BANK NETWORKS IN THE FUTURE, you should look at another example of a massive

shift in technology adoption that is taking place with respect to telephone landlines and mobile telephones.
In 1997, 97 percent of U.S. households had a telephone landline. Then along came the mobile telephone. In June of 2010, the National Center for Health statistics stated that one out of every four Americans has given up their landline phone and are now using their mobile phone exclusively. By 2015, the percentage of households with a landline is expected to drop to 36 percent. Owning the physical network infrastructure is not enough to save your business from changing consumer behavior, according to banking consultant Brett King, author of the new book, Branch Today, Gone Tomorrow: The Case for the Death of Branch Banking. He argues that changing customer behavior will kill your bankunless the bank adapts to evolving consumer attitudes. Walt Albro, editor of ABA Bank Marketing magazine, recently spoke with Brett King and asked to him for more details about his vision for the future of banking. Their conversation is recorded below.

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Is the existing bank branch distribution system going to die?

Not completely, but some may very well call a 50 percent reduction in branch numbers over the next decade the death of branch banking. Some might claim that the system is already in its death throes with plummeting in-branch activity across the board. The fact is that were realizing that the branch is a poor fit with the day-to-day behavior of most customers. By 2016 the average customer will use his or her mobile phone to access the bank 20 to 30 times a month and Internet seven to 10 times per month. Thats around 400 times a year. The problem for branches is that those same customers are likely only to visit the branch one or two times a year in 2016. You cant have that Brett King magnitude shift in channel priority without an impact. The only reason it hasnt already happened is that the industry lags in key processes like know your customer (KYC) that force customers to come into the branch when they dont really need to.

How is bank advertising going to change in the future?

The current methods of campaigns that push an offer to a customer or the industry practices of emphasizing product features and rate will largely disappear over the next decade. Banking needs to become a great deal more about creating great customer experiences when you need a bank to facilitate a solution in your life.

Today around 88 percent of Internet users start their journey looking for a mortgage or a new bank account online through search.

What is it about changing consumer behavior that is hurting the branch?

The same thing that killed bookstores and video rental storesa change in core distribution modality. For books it was the ebook and the online bookstore. For video it was downloads, streaming, NetFlix, Hulu and iTunes. For the bank it is mobile banking, mobile payments, Internet banking and the loss of many physical artifacts associated with banking (checks, paper statements, application forms and soon the card itself). The core problem right now for banks is that customers might visit a branch to open an account, but after that their need to visit a branch is almost nonexistent. Since 1995 weve had a 90 percent drop-off in average customer visits to a branch If people arent coming to your branches, then in most developed clearly at some point the economics of the economies. If people arent business no longer work the same. coming to your branches, then clearly at some point the economics of the business no longer work the same. Borders and Blockbuster both found this lesson to be painful in the extreme. Banks right now are subsidizing branch real estate with other fees, but since the Durbin amendment, theres a great deal more attention on those fees, so it stands to reason that the economics of the business will be under significant pressure. Often Im asked what banks can do to get customers back in the branch? I ask how theyd get customers back into a bookstore .

To illustrate: You dont buy a mortgage from a bank. You buy a home and the mortgage facilitates the purchase of that home. Currently we treat the financial transaction as a completely separate process to the home purchase transaction, but that will change with mobility, contextuality and consumer buying behavior over the next few years. A product like a mortgage will have more success if we embed it in the process of buying a home, rather than requiring the customer to stop the home buying process to negotiate with his/her bank. Journeys to a bank product or service may start anywhere at anytime. Well need to shift from product advertising, to journeys that enable the customer to solve his/her problem or facilitate a need. Those journeys will start with a need, and as a bank well need to respond to that need. While well still have brand marketing and advertising to build advocacy, for products it will all be about enabling an application or purchase as seamlessly as possible when there is a need. Right now, theres way too much friction in applying for bank productsthe cycle were in right now is attacking that complexity.

Where are consumers going to begin their search for information about a bank product?
Today around 88 percent of Internet users start their journey looking for a mortgage or a new bank account online through search. That will continue, but will also move onto the mobile phone. This shouldnt be a surprise. Customers dont walk down to the branch and pick up a brochure on a product anymoreits just not convenient. The same is happening online. However, theres another factor emerging that will strongly influence your selection process in banking, and thats social media. The key for banks, when it comes to social media, will be building customer advocacy. Already in markets like Japan and the U.S., 70 to 80 percent of Y-Gens and Digital Natives will use recommendations from friends before they purchase a product. This will become embedded in search also, so that

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Want to Hear More of Brett Kings Forecasts?

Plan to attend Brett Kings keynote presentation at the ABA Marketing Conference Sept. 23-25 at the Manchester Grand Hyatt in San Diego. King, a consultant who is based in New York and London, will discuss the outlook for branch banking and other trends in the financial services industry including: the scramble for dominance of the mobile wallet, the expectations created by tablet computing, the operationalization of cloud computing, and the explosion of social media. Kings latest book, Branch Today, Gone Tomorrow: The Case for the Death of Branch Banking, was published this year. To register online for the ABA Marketing Conference, go to www.aba.com and look under Training & Events, then Conferences, and Marketing Conference, (www. aba.com/Training/Conferences/Pages/MKTG. aspx) or telephone 1-800-BANKERS.

the products your friends recommend or like will float to the top of the search results. This is tough for banks that are, as a group, universally disliked since the global financial crisis. We need to figure out how to make customers delighted, and how to get happy customers to talk about their experience with our brand. This sort of brand sentiment will be exposed heavily in the near-term and start to drive purchase behavior too.

What is future bank marketing going to look like?

Banking wont be a place you go to anymore. You wont come to a branch or even the bank website necessarily when you need a product. Youll look for a solution from your bank when and where you need it. So bank marketing will become heavily personalized and contextual. Take, for example, credit card marketing and usage offers. Right now we group customers into segments and then blast offers at them for a specific promotionUse your Citibank Gold Visa Credit Card at Best Buy this month and get 10 percent off. In the future, well match offers for card usage based on what youve purchased before. So if you like Italian food, youll get a deal for a local Italian restaurant pairing your card. If you shop frequently at electronics stores, youll get an offer perhaps for a competing store close to your home, etc. For other products they might be triggered by an activity or eventsuch as walking into an airport after youve made a ticket purchaseand offering you travel insurance.

While well have creative themes and artwork around core segments and behavior, agencies will be chosen for their ability to be rapidly adaptable to outlying opportunities in the data stream. Champion/challenger analytic approaches to offers and messaging will become the norm, rather than the current incubation cycles around creative and campaigns. Marketing essentially will need to become more real-time, more relevant and timely. Understanding where a customer is or what he/she is doing that provides the back drop for a bank product will be perhaps the most sought after skill. n
ABOUT THE AUTHOR
WALT ALBRO is the editor of ABA Bank Marketing magazine, Washington, D.C. E-mail: Walbro@aba.com

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