Physical branch visits are declining so the “digital” branch is now the primary way customers interact with your bank. In fact, Digital Insight data shows that people who bank online and via their mobile and tablet devices log in about 29 times a month and are more profitable to a financial institution than those who don’t bank digitally. With mobile device adoption skyrocketing globally, these are now a banker’s most valuable customers. Still, traditional brick and mortar branches remain a good means for financial institutions to forge strong customer relationships.
Digital Insight and Andera recently announced a partnership that will give financial institution customers the ability to open, fund and use new accounts and loans from a mobile device. Banking.com recently sat down with Robert Cameron, product manager, at Digital Insight and Ying Chen, senior vice president, product management at Andera to discuss how this type of innovation could change the bank branch of the future.
Q: Physical branch visits are on the decline. If consumers can open accounts from their mobile devices, how do you think this will change the branch of the future? What do you envision the bank of the future looking like?
Robert Cameron (RC): In today’s digital environment, bankers must also reinvent the physical branch experience to make branches more compelling, efficient places to visit. Enhancing the branch with tablets and computers to include leading edge, self-service capabilities that elegantly solve customers’ most common banking needs – deposits, transfers, digital banking sign-up, loan origination, new account opening and other tasks – will free up physical branch staff to concentrate on more profitable opportunities like providing data-driven insights, selling more profitable and complex products or services and deepening your most important customer relationships.
Ying Chen (YC): The rapid adoption of tablets and smartphones means that consumers can now do their banking no matter where they are, and it means they don’t have to rely on other devices to get through the process. The built-in camera and touch screen functionality on mobile devices makes applying for new deposit accounts and loans easier than ever. Applicants can now snap a quick picture of a supporting document instead of searching for a fax machine or mailbox, and they can sign their documents by signing their touchscreen devices with their finger or a stylus.
When we envision the future of banking, it’s important to remember that the things that banking consumers need to do today – getting new accounts and loans, paying bills, depositing and withdrawing money, etc. – are the same things they needed to do 20 years ago. What’s changed is that there are more ways than ever to get those things done. While some institutions will succeed by deepening relationships via one-on-one interaction in branches, others will succeed by attracting consumers who prefer to do all or most of their business via self-service channels. This is evidenced in our base of over 550 customers – some of our best performing clients acquire most or all of their new accounts and loans via the online channel while others are finding great success with branch-centric or hybrid models.
Q: Above you discussed the bank branch of the future. With the digital branch becoming more prevalent, what can banks and credit unions do to strengthen relationships with customers or members when they do visit a bank branch?
RC: Let’s take the use case of applying for a loan, which, let’s face it, is filled with mundane tasks: data entry, form filling, box checking, document capture, etc. The good news is mobile devices are making these tasks simpler and more efficient than ever. Spending less time here means that, as the financial institution, you can spend more time doing what you truly care about—ensuring that the member or customer has all of the product, services and support that they need.
YC: When customers and members want face-to-face interaction, it’s not ideal to interact with someone behind a teller window or from behind a computer monitor. Technology is enabling branch representatives to have richer and more natural conversations with applicants. Instead of being trapped behind a desk or computer, representatives can float freely around the branch and sit next to customers and members who need help. Instead leaving new account and loan applicants to make copies of supporting documentation, representatives can use their tablets to snap photos of documents on the spot. And instead of walking customers and members over to a signature pad to finish the process, applicants can sign their documents simply by signing the tablet screen with their finger or a stylus.
Again, it’s important that we don’t just view technology as a way to reduce the number of human interactions because technology can also be used to improve the way humans interact with each other, and often this results in greater operational efficiencies. In fact, we have seen places where customers leveraging our oFlows platform in branch have been able to reduce the time it takes to open a new account from 45 minutes to 15 minutes. That’s better for customers and members, and for the employees who serve them.
Q: Digital Insight data shows that people who bank online and via their mobile and tablet devices log in about 29 times a month and are more profitable to a financial institution than those who don’t bank digitally. For banks and credit unions that have a large contingent of non-mobile users, what is your suggestion to help them transition more customers or members onto mobile devices?
YC: Yes, we know that consumers who choose to apply for accounts and loans in branches tend to rely on branches for routine banking business. In contrast, those who choose to apply online continue to show preference for digital, self-service channels later. While you can’t force someone to embrace self-service options, you can certainly help them appreciate the benefits through frequent communications that address their concerns and through incentives that help nudge them in the right direction. We also see clients who have great success in driving online/mobile adoption because they’ve structured their products to attract people who strongly prefer to do their banking online and via their mobile devices (e.g., they require direct deposit and online bill pay). Again, this is why it’s so important to know who you’re trying to attract and to build products, service approaches and advertising strategies with that end goal in mind.
RC: When you put tablets on kiosks and counters and give them to tellers—enabling them to get out from behind the desk—you create a digital branch environment that can transform the thinking of even the most staunch, non-mobile members or customers. Now, those people are accomplishing the same tasks that they always have, just faster, easier and with better customer service along the way. For example, sitting down on a couch with a branch representative and opening a checking account in less than 15 minutes through a joint interaction on a tablet is far from the expectation of being seated at a desk with a computer for 45 minutes or an hour. Customers or members will realize the power of mobile devices and how they can enhance their financial life outside the branch too.
Q: Gen Y and Gen X are heavy mobile users, and many of them do not visit bank branches. How will the digital bank of the future serve these users as they get older and have more complex banking tasks? Do you think bank kiosks will be able to take care of complex banking needs, such as getting a mortgage or a loan?
YC: While some institutions like Ally Bank, PerkStreet Financial, and Capital One 360 are very successfully acquiring new customers online, most institutions haven’t yet evolved their kiosks or websites to replicate the value that their customers and members receive from human interaction. This is why we see so many consumers researching products online and then visiting branches to make their decisions. For institutions that want to grow their self-service channels, this is less than ideal.
In the future, the most innovative institutions will take a hard look at the selling experience they’re delivering online and via kiosks and they won’t expect applicants to figure so much out on their own. Instead, they’ll build interactions that help guide the decision-making process while reinforcing the value of the products being considered.
RC: Your average Gen Y consumer may not visit a bank branch, ever. If they’re not already discovering and opening accounts at your financial institution through existing digital marketing channels like an App Store, online ads or SEM, then you have to be able to take the digital branch to them. That means being at events like college campus move-in days with tablets that allow them to open up new accounts immediately—no more fliers, pamphlets or email sign up lists. Better yet, ask them to pull out their own phones or tablets, download your app and start the account opening process from there. As their financial needs grow in complexity, so do your digital offerings; since their relationship is entirely digital, they will stay with your financial institution even as they graduate and move throughout the country.
*This post originally appeared on the Andera Blog
Working for a financial software company, I’m often struck by how fast things are changing. Financial innovations come in many shapes and sizes from many different places, but for the most part they all follow a general trend: they turn physical processes into digital ones. The so-called “payments revolution” has often made me wonder what will happen when innovation manages to displace the most physical aspect of finance, cash.
In the financial technology world, cash is so uncool that hardly anyone talks about it anymore. The alternative to a mobile payment is a debit card, and the alternative to a debit card is a prepaid card. ATMs get a shout out every once in a while, but that 3-letter acronym comes up less often than either P2P or RDC.
Perhaps that’s because most of us believe, at least partially, that cash is on its way out. Michael Woodford, one of the world’s preeminent monetary economists and author of a paper called “Monetary Policy in a World Without Money,” put it this way:
“It is possible to imagine that in the coming century the development of electronic payments systems could not only substitute for the use of currency in transactions, but also eliminate any advantage of clearing payments through accounts held at the central bank.” (Interest and Prices, 2003).
That’s economist for “At some point, there will be no cash.” The idea makes sense; I use my debit card for almost everything, and when I need to repay a friend or split the bill, I prefer to send P2P payments from my mobile banking app. I really only keep cash in my wallet for two reasons: the local bar and the bagel place on the corner. Even most food trucks in my area use Square. That said, we’re still a ways out from totally getting rid of the nasty green paper.
When I imagine a cashless future, I foresee three things:
1) Technology will make things a little easier.
When they were first introduced in the 1970s, ATMs were a huge leap forward. Consumers could save time they previously spent visiting the branch to withdraw cash. They could choose to withdraw more frequently and feel safer carrying less cash in their pockets. The spread of credit, then debit, and now prepaid cards has had the same effect. Like most participants in the financial technology space, I’m absolutely gaga about mobile payments, and can’t wait until I can leave the house with only my mobile phone. It’s also easy to imagine how advancements in cyber-security will gradually reduce the risk of identity theft. No hassle, no wallet, no risk – what a world that will be.
2) Banks will consolidate – or evolve.
Right now, many of the features that banks compete on, including ATM networks, branch networks, free checks, and early “cashless” technologies like P2P payments, will, in a totally cashless economy, become moot points. As money moves to the cloud, locality will matter less and less, and community financial institutions sheltered by brick-and-mortar monopolies will face competition from every corner of the country. Hundreds of banks have closed or merged with national banks since the financial crisis, and the onward marching wave of technological change will only continue to whittle down the list of U.S. financial institutions. The ones that fail to adopt the latest mobile and online technologies will go first.
As I see it, the banks of the future will live or die on the success of two things: their lending strategy and the quality of their customer experience. Evaluating the risk and return of loans and investments will continue to be difficult long after cash is gone. As it is today, some banks will be better at it than others. If they can collect more from loans, they will be able to offer more on deposit accounts and attract customers away from competitive institutions.
By customer experience, I don’t mean the ease of withdrawing or depositing money. In a cashless economy, neither of those transactions will take place. Instead, I predict that institutions will partner or expand to offer a wider range of financial services, such as brokerage, insurance, and financial planning under one roof or rather, on one website.
3) The popular notion of money will change
I am most curious to see what will happen to the idea of money in a cashless future. When I say money, the first image that probably comes to mind is a green dollar bill, and most people conceive of money as a limited, concrete asset like gold that we chase around and fight over and trade for things like food and shoes. Money is actually a bit more complicated, and its supply has as much to do with credit as it does with the US Treasury printing press. (When you hear, “The Fed is printing money,” what it’s actually doing is manipulating the banking system into lending and borrowing a little more.) In a cashless economy, how will we talk about money? Will our movies still feature the symbolic suitcase full of 100 dollar bills? Will central bankers and policy wonks still talk about ” the money supply“? Will we spend more with nothing tangible to hold onto or will we spend less when every transaction is digitially traceable (I’m thinking about PFM here)? I’m not sure.
A cashless future may be a long way off, but I genuinely believe that I could be living in it before I die. I’m only 22, so that’s about 60 years. 60 years ago, Walt founded Disney, Walton founded Wal-Mart, and most of the banks on Wall Street were already decades old. Perhaps its time to start preparing.
Melanie Freidrichs: Melanie likes writing and data. She “coordinates,” among other things, Andera’s blog, Andera’s webinars and Andera’s twitter feed. In addition to financial technology and marketing, her favorite topics to blog about include financial regulation, monetary policy, and increasing access to financial services.
She is a member of the first class of Venture for America, a two-year fellowship that seeks to revitalize American urban centers through entrepreneurship by matching recent college graduates with start-ups in low-income cities.
Melanie grew up in Bethesda Maryland, and received an A.B. in Economics from Brown University in 2012. She thinks Providence is a pretty cool town.