As a digital innovators, brands are always asking us what the future of the high street looks like. And with expensive overheads and a declining footfall in physical branches, this is especially true of the banking sector.
This week’s news that HSBC is closing 62 more branches this year yet again raises the question of the value of physical spaces for customers. The Government even has its own Future High Streets Forum comprising retail and industry experts. This committee was set up to create a better understanding of the competition the UK’s high streets and town centres are facing, and how they adapt and compete in the face of changing consumer and social trends.
But what difference can the Government really make in a landscape of fast-paced trends? Perhaps I shouldn’t be too cynical; after all Theresa May unveiled a strategy this week which will see spending increased to help develop digital industries, including better connectivity – improving the shopping experience and what retailers can do in physical spaces with technology.
But back to bank branches: a real conundrum for banking chiefs. Which research published in December 2016 highlighted that HSBC has closed more than a quarter of its UK branches over the last two years, more than any of the other big high street lenders. HSBC has now completed their branch restructuring programme based on current user insights. They’ve stated that 90% of interactions with customers are now through their digital channels – a huge increase from 80% the previous year. Francesca McDonagh, HSBC’s head of retail banking says, ‘The decision to close these branches ensures a more sustainable branch network for the future as we continue to invest in our digital platforms and our people.’ She goes on to say that they will have ‘better branches, with more empowered front-line colleagues using a greater range of technology to support all our customers’ needs.’
90% of interactions with HSBC’s customers are now through their digital channels
As an existing HSBC customer, I have first-hand experience of their branches and online technology. Yes, they have improved their app and online customer experience with a much cleaner look-and-feel and improved functionality, but it is still very clunky and certainly won’t win any awards for usability or innovation. That said, I do like the Touch ID to log in. And you can now transfer money to anyone in your contacts using just their phone number, which is a nice touch. However, there are many pain-points. Just flicking through the reviews on the Apple App Store indicates the frustrations, from ‘ridiculously frequent app updates’ to ‘worst app I’ve ever used’.
The branch experience is mixed. I had to go into a branch to undertake a transaction which I wasn’t able to do online, and I found the experience less than enjoyable – mainly down to the queues and repetitive questioning from branch staff. I thought my bank was supposed to know me, yet I felt like a stranger with no personalised experience served to me.
Despite the increasing popularity of contactless payment and society becoming less reliant on having physical cash, most research indicates that – based on existing trends and technology – cash is not disappearing in the near to short term future, which says to me that we’re still going to need bank branches in some form. The role of the branch will change and evolve significantly over the next five to ten years, with the smart banks starting to serve more experience-led solutions – rather than the dull range of products they currently offer to consumers (which let’s be honest, doesn’t excite or inspire anyone).
Perhaps the smart brands will become more creative in how they use spaces (and indeed where they have those spaces), as clearly there is still a role for cash and more complex banking requirements to be conducted face-to-face. Some may adopt what has started to happen in America where some of the major banks have entered into branch-sharing arrangements. But don’t forget here in the UK, the Post Office offers basic banking at over 10,000 locations, and Metro Bank, who first opened in London in 2010, are still opening branches. They must be doing something right, as since launch – despite spending less than £100,000 on advertising – their brand recognition is at 82%. Part of Metro Bank’s success is their culture and service offering, from opening their stores (they don’t call them branches) 7 days a week, to allowing dogs in (as a dog owner, I applaud this). The service and culture of the brand has been crucial to their success in attracting customers.
Ultimately it is unusual for change to happen from within the company or industry, because disruptors and entrepreneurs look at things differently. I strongly believe that the big four banks as we know them, and the entire banking sector, will transform beyond belief over the next ten years – as will the role of the traditional bank branch. The Competitions & Markets Authority (CMA) has called on the largest banks to develop a set of core open APIs. This impending implementation of open APIs has the greatest potential to transform competition in retail banking and actively shake things up. It will actively encourage innovation and boost competition across the sector. This is set to be in force by the end of March 2019, so this really is the time for the banking sector to start to innovate, start to delight customers by exceeding their expectations and work out how the branch network fits into their omni-channel strategy for tomorrow’s customers.
This impending implementation of open APIs has the greatest potential to transform competition in retail banking and actively shake things up. It will actively encourage innovation and boost competition across the sector.