Industry leaders are starting to realize that the world will look different for customers and the estimated 660,000 employees who work in U.S. branch banking when we emerge from the COVID-19 crisis. The industry is undergoing a radical shift as consumers who are avoiding the branch are increasingly ready to accept digital, phone and other remote ways of doing business for both simple and complex activities.
The branch-banking model will need to react to this tipping point just as it has done before. In the last financial crisis, in-branch service transactions began a steady descent of approximately 7% annually. Novantas now estimates that the current health crisis has triggered an as much as 50% decline in in-branch transactions and face-to-face sales. Once the industry stabilizes after the crisis, Novantas projects that face-to-face transactions and sales will be down 20% from pre-crisis levels, with an additional 5-6% decline each year.
We don’t know all the changes that are coming, but we can anticipate some of them and help the entire branch-banking community prepare.
While line leadership is focused on tactical, day-to-day issues in this crisis, branch executives will start looking ahead and preparing. They are already developing plans that are good for all stakeholders, including employees, customers, community and bank shareholders. Safety and soundness are not simply financial goals. More than ever, they are also community and customer goals.
This “planning ahead” will not be easy. Reacting to a crisis is hard work and emotionally draining, but it’s always highly-focused. In the current crisis, physically-safe employee environments and customer access are the clear priorities. Moving to the next stage, branch executives will need to determine how to convert temporary staffing and branch actions into long-term, strategic delivery changes based on customer demand. This will be much harder, but executives will have plenty of tools and resources at their disposal to make informed decisions.
So how does the front line begin to prepare? One thing we can tell everyone is that flexibility will be key to success. We expect the future strategies will include increasingly-innovative ways to create personal connections through remote, more flexible, customer capabilities.
FLEXIBILITY IS KEY
How this flexibility translates to the front line will largely depend on the personal situation of the employees and the policies and practices of the bank. That said, there are several ideas that bear consideration.
Proactive customer outreach is essential. Now more than ever, customers will remember when they are contacted by the branch and employee recognition by customers for these proactive acts is at an all-time high. Employees should never pass up a moment to shine for customers and for the organization.
The need for flexible hours and flexible locations has already been critical in recent weeks and that will continue. If employees have the lifestyle that can support mobility, flexible schedules will be highly valuable in an environment where staggering hours and/or days across locations could become more normal. Instead of the traditional hub-and-spoke, Novantas believes that branch clusters with shared staff and complementary hours/days will provide more effective workforce deployment.
The migration to a phone center and/or chat support will grow as physical in-person interactions are reduced. Employees should be encouraged to raise their hands and apply to these areas that can build new skills. “Sales” can be an ugly word for a lot of people, but chat, phone and video-enabled sales are going to be in demand. Many industries already depend on outbound sales teams; these skills can create opportunities in and outside of the bank. Gearing ratios for managed clients can be higher in direct sales and service environments, providing increased efficiency.
Novantas research suggests many customers are already predisposed to virtual relationships, eschewing the traditional face-to-face models.
The reduced demand for in-branch banking will result in more part-time positions. Bank leaders will need to think about offering more creative and attractive full-time to part-time conversion programs with benefits. Some forward-thinking banks were already doing this before the COVID-19 crisis.
Now more than ever, customers will remember when they are contacted by the branch.
LEADERS RELY ON STRONG TEAMS
There is little doubt that strategic transparency is the hallmark of great leaders. They use strong, clear strategic vision to steer highly-complex and distributed organizations through massive transformations. They listen to teammates and staff, breaking down barriers to enable creative approaches so that the workforce emerges stronger than before and more committed than ever.
But the best leaders always draw their energy and insights from great field-based teams. We have all seen the creativity, ingenuity and commitment to customers that is embodied by the best front-line employees. Even banks that have subpar systems or policies rely on the individuals in and around the branches to do the right thing for customers.
We urge all managements and front-line employees to begin planning for how their skills and dedication to customers can shift to meet the needs of the new world that is around the corner.