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This Week in Retail Banking | May 16, 2020

Transforming the Role of the Network as the U.S. Reopens

Another three million Americans filed jobless claims last week, bringing the tally to almost 37 million over the last eight weeks and creating even more tension between the desire to open the economy and the desire to maintain stay-at-home conditions.

Assorted data illustrate some differences across some of the early re-entry markets but there are clear patterns that are starting to suggest we may see a longer-term evolution in commuter patterns.

While this period represents an unprecedented opportunity to transition customers to a more digital-first world, new (and surprising) data suggest some consumers are already thinking about returning to their old habits. As a result, banks must be careful not to fumble the opportunity to train consumers (and some employees) in digital usage.

BANKERS RISK MISSING AN OPPORTUNITY FOR DIGITAL TRANSFORMATION

In the current environment, almost all banks have made significant changes to branch operating hours and lobby access, with many choosing to offer drive-up tellers and lobby access through appointments only. Without question, this period represents an opportunity to migrate customers to a new operating model as the traditional face-to-face model is already altered.

There is potential for the industry to continue migrating activities that typically occur inside the branch to other channels, so that branches can focus on advice and guidance. This can solidify the bank’s investment in the community, allow for proactive customer management and drive deeper relationships. At a time when lobbies are limited to appointments, this presents an ideal opportunity to continue to push consumers to adopt a servicing model that is less lobby-centric while, at the same time, scheduling time inside the branch for more complex transactions and sales.

Unfortunately, many consumers still don’t believe they can shed the use of tellers. While initially only 40% of consumers surveyed by Novantas’ FindABetterBank.com said they expected to return to branches post-COVID, that number was up to 53% last week. The most common reasons for people wanting to return to the branch: deposit a check and deposit cash. While some of these transactions can be migrated to other channels, this requires significant customer education to ensure they understand the capabilities that exist so they can conduct these transactions remotely.

Consumer Likelihood to Return to Branches (%)

Week 1
Week 2
Week 3
Week 4
Week 5
Week 6

Source: Novantas Customer Knowledge | Covid Pulse Survey #3
Sample: FABB shoppers – week 1 is 3/30 to 4/5 (N=157), Week 2 is 4/6 to 4/12 (N=215), Week 3 is 4/13 to 4/19 (N=365), Week 4 is 4/20 to 4/26 (N=275), Week 5 is 4/27 to 5/3 (N=304), Week 6 (N=282)

As markets begin to reopen, it is time to start building more fulsome reopening plans for branch staff as well. Banks should develop a new two-to-three-year roadmap for this, identifying how customers can be trained over the next six months to facilitate the transition. Novantas believes there are several key pieces to this.

First, banks can permanently limit lobby access in select locations for everyday transactions, where possible. While customers may still want to deposit checks at the bank, limiting time and place for such activities in the community will accelerate adoption with likely little attrition. Other industries have been successful in changing consumer behavior by emphasizing convenience. Movie theaters, for example, now often require customers to select their seats ahead of time rather than search for a spot once they enter the darkened theater.

At the same time, banks can deploy multi-channel messaging to continue to promote omnichannel capabilities while also emphasizing appointment-setting more aggressively both in the lobby and via phone. Banks already know that customers hate waiting in line to see a teller or a banker. By letting them know they can avoid a line by setting a specific time and place to be heard, they can appeal to the customer’s sense of control and help drive better engagement. This requires some coordination of branch staff and phone-center technology as we have discussed in prior publications.

Banks also need to rapidly expand digital and multi-channel communication. They need regular dialogue with customers via email, internet, ATMs and other non-bank channels to communicate changes in hours, services and accessibility. Again, it is important to focus on how these changes will benefit the customer.

Reaching customers where they are will be increasingly critical. As a result, bank-branded vans that perform select services could start becoming in vogue. Just as bookmobiles once brought books to people in rural communities, going to where the customers are shows a commitment to convenience and community. And it also provides awesome billboard value in a fluid manner.

This is also the time for banks to build outbound muscles. Platform staff now have more time to make outbound calls. But they need proper training in order to be sensitive to customer financial hardship and the difficulties that people are experiencing in their work lives. The objective for the call must be clear and they need to be trained to handle various situations they encounter.

Reasons for Returning to a Branch After COVID-19 (%)

Source: Novantas Customer Knowledge | Covid Pulse Survey #3
Sample: FABB shoppers – Week 7 (N=110) * data from 5/11 to 5/15

UNCERTAINTY FOR THE FUTURE OF WORK CENTERS

Even though many markets still have stay-at-home orders of different strictness, there was an increase in movement patterns across every U.S. market over the last two weeks, with the average market seeing a 10% increase. The differences by type of location are still very significant, though, and the recovery is not equal either.

Work centers, or markets that traditionally have large proportions of workers and limited residential population, have been some of the most impacted areas. This is because these areas, often the downtown sections, typically have large numbers of white-collar workers – many of whom are currently working from home in many cities across the U.S. While work centers saw some increase in traffic over the last couple of weeks, it was less than 50% of the rebound that other market types experienced.

As more companies and employees become accustomed to people working from home, there are new conversations about the ability to work increasingly remote in the future. Many expect that work-from-home rates may double post-COVID with a larger portion of employees working from home a few days a week, even if they still go into the office. Corporations are also seeing this as an opportunity to reduce costs over time because square footage can be reduced and supplies can be decreased.

The path to the new normal in traffic patterns is unlikely to be a quick one. To maintain social distancing, companies will be cautious to bring people back into the offices and some guidelines require 50% capacity in the initial stages of reopening. Furthermore, millions of Americans rely on mass transit to get into these work centers. Not surprisingly, many of them will be hesitant to do so if they have an alternative available. All of this points to a long road to normal levels of traffic for work centers.

Banks need to consider these implications as work life continues to evolve for many Americans. Most importantly, branches in work centers will likely not be as busy in the near-term and the activities conducted in-person will likely be different than normal.

Also, the idea of “iconic” locations in work centers, where the idea is to generate billboard value, will be less valuable during this time and will likely also have less ‘billboard value’ in the long-run as fewer people will be working in these areas. Classic hub-and-spoke strategies that are often leveraged in city centers will need to be reconsidered. This change won’t only require near-term decisions, but there may be lasting impacts as consumers shift previous banking habits in the work center toward their home branch instead.

Consumer Visitation Trends (% Change vs Jan. 30 – Mar. 4)

Atlanta, GA

Feeder
Hybrid
Work Center

Minneapolis, MN

Feeder
Hybrid
Work Center

Los Angeles, CA

Feeder
Hybrid
Work Center

Source: Novantas Analysis, NovaLocation, PlaceIQ

INDUSTRY BALANCES GROW, ALTHOUGH STIMULUS FUNDS DRAWING DOWN

Industry deposits continue to increase despite continued runoff of stimulus funds, according to weekly data from weekly data from the Novantas Comparative Deposit Analytics program. Banks are enjoying strong deposit growth as average customer balances are up more than $600 compared with a month ago.

While industry balances are up overall, stimulus funds continue to draw down. Customers who received stimulus funds during the week of April 11 saw balances drop below initial stimulus levels, particularly among low-balance customers – an indication that they need the funds.

Meanwhile, the past week finally saw meaningful downward pricing among a number of direct banks that previously had been in a “game of chicken.” Most of the major players made material moves downward (as much as 25 bp). Should direct banks continue to downprice, branch players may have freedom to reduce their acquisition rates, particularly for their highest-balance tiers.

A full weekly deposit tracker is available to CDA clients. Contact Adam Stockton at astockton@novantas.com for details.

Industry Consumer HH Production*

Acquisition
Attrition
Net Growth

INDUSTRY CHECKING ACCOUNT PRODUCTION*

Acquisition
Attrition
Net Growth

Source: Novantas’ Comparative Deposit Analytics, representative sample of banks submitting weekly
Note: Average reflects all bank branches, does not exclude closed branches

NEWS OF THE WEEK

As stores slowly start to reopen, more than half of American consumers surveyed by First Insight last month said they feel safe shopping in grocery stores. The percentages were lower in other retail settings, however, with 43% feeling safe in small businesses and warehouse clubs and just 33% feeling safe in shopping malls.

Samsung said it will launch a debit card this summer with SoFi. The card will be backed by a cash-management account, although no other details were provided.

Suncoast Credit Union of Tampa cancelled its acquisition of Miami’s Apollo Bank due to economic disruption from the pandemic. The transaction was announced in December.

The percentage of Americans who described themselves as “doing okay” financially fell to 43% in April from 75% last fall, according to a survey from the Federal Reserve. The survey also found that 23% of all adults said their income in March was lower than in February.

Nearly two-thirds of Americans said they had worked from home in the period between April 20-26, representing the highest level since mid-March, according to a Gallup poll. More than a quarter of respondents said they believe the level of disruption to travel, school, work and public events will continue through the rest of the year before it starts to improve, also representing the highest level since mid-March.

Twitter CEO Jack Dorsey told employees that they can work from home permanently, but offices will still be available for those who want that option.

A growing number of executives said their employees may not return to offices full time. Connecticut Governor Ned Lamont told Bloomberg that CEOs of large companies have told him that such changes to work patterns could help them cut office space by as much as 30%.

Stay up to date on the latest banking trends

For more information, contact Novantas Marketing

+1 (212) 953-4444


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