Digital-First Banking Branches Out


How important are humans to your retail banking experience? It’s a fair question given that ATMs and mobile banking can now make the whole “teller in a window” thing disappear permanently. Is that what people really want? It’s one of the themes explored in the February 2020 Digital-First Banking Tracker®, done in collaboration with NCR Corporation.

We’ve all heard that millennials, for example, think of bank branches as a vestiges of another century with little relevance to their financial lives. Turns out that’s inaccurate. As the new Digital-First Banking Tracker® notes, “Mobile and online banking’s prevalence has reduced physical branches’ importance, but these brick-and-mortar establishments are still vital to customers’ financial lives. Even millennials, who heavily lean on remote banking, still visit physical bank locations for more complex functions like loan applications” monthly.

Despite that, the survival of branches is debated in banking circles, much the same way that retail is obsessed with what to do about America’s half-empty shopping malls. We examine issues and answers around these questions in the latest Digital-First Banking Tracker®.

Going to the Bank

It looked like bank branches were teetering on the brink, with net closures of retail locations consistently ahead of new branch openings. But it’s a deceiving picture. While there are fewer full-service branches in the U.S. today than one year ago, sizable sums and deep thought are going into new kinds of branches that will carry the branch concept into the future.

Interactive Teller Machines (ITMs) are replacing ATMs in more locations, with remote human tellers on video at your beck, real-time transfer capabilities and a stack of helpful banking tasks that customers can do themselves. In other news, cash recyclers are nowhere near as sexy as ITMs, but they do enable ATMs to require less frequent cash fill-ups, and that’s digital-first thinking, even if it’s not the pure-play definition of digital-first banking. That’s partly because the definition is a moving target as financial institutions (FIs) test their digital boundaries.

In the U.K., Leicester-based Cambridge & Counties Bank did a digital deal with developer OutSystems, transforming “… four key areas of its front end: customer risk assessment, internal agent applications, online applications and its servicing portal. Cambridge & Counties made the decision after its existing business savings platform became obsolete,” the report states.

China does things in a big way, and digital-first banking is no different. According to the latest PYMNTS report, “A much larger-scale digital push is occurring in China, where approximately 80 percent of all banks are expected to integrate financial technologies from the cloud market.” The report says Chinese FIs are expected to spend “… up to 220 billion yuan ($31.6 billion USD) on IT products — including AI, cloud computing, and internet of things (IoT)-enabled applications — by the end of the year, with at least 40 banks working directly with FinTechs on incorporation.”

The High Price of a Good Experience

Personalization, speed and access — three things that digital-first banking brings to branches in bulk. “Surveys have found that digital-first technologies can improve branch effectiveness by up to 70 percent, both in terms of sales and the cost savings realized by streamlining their real estate portfolios,” according to the February Digital-First Banking Tracker®.

Cost savings and revenue increases will come in handy, because digital-first banking infrastructure isn’t cheap. “The sheer cost of updating existing systems and implementing new ones represents an obstacle for digital-first banks,” the report states. “Financial services spend an average of $45 million per year on digital transformation efforts, with components such as advanced ATMs with touchscreens and high-speed internet connectivity costing as much as $25,000 each. These expenses can be prohibitive: Approximately 88 percent of financial services chief information officers reported difficulties with digital projects’ high costs, claiming they had to either reduce these efforts’ scopes or cancel them entirely.”