Banks turn to espressos, dancing robots to help keep U.S. branches alive
Banks turn to espressos, dancing robots to help keep U.S.
branches alive
By Rishika Dugyala & Anna Irrera SEPTEMBER 6, 2018 10:12
PM
NEW YORK (Reuters) - Free Wi-Fi, discounted cappuccinos,
artwork, and a dancing robot are among the features banks across the United
States are touting to convince customers that even in an era of smartphones it
is still worth it to visit a bank branch.
Banks are in a bind - branches are costly and keep losing
traffic as phone apps take over day-to-day banking, but they need them because
that is where customers still get advice, resolve tricky account issues or deal
with cash and checks.
To square that circle banks have been trying to drum up
more branch business with location upgrades and eye-catching features.
JPMorgan Chase & Co branches, for example, feature
local art, Bank of America Corp highlights new technologies at its “technology
bars,” and at HSBC Holdings PLC’s Fifth Avenue flagship New York branch a
humanoid robot Pepper greets visitors with a wave and a wiggle.
However, wooing more customers with self-service kiosks,
touchscreens, consulting zones and modern decor is just the start, consultants
and designers say. The challenge is how to turn that into more sales and brand
loyalty.
“Innovative designs have proven to be successful in
driving additional traffic,” said Brandon Larson, a managing director at
financial consultancy Novantas. “The thing people struggle with is, how do they
convert that traffic into new deep relationships with the institution?”
In other words, can a cappuccino sell a mortgage?
Reuters interviews with eight patrons at Capital One
Financial Corp’s hybrid flagship bank-café in New York suggested it may be
hard. Six said they were there to charge phones or enjoy an iced coffee, not to
carry out any transactions or become bank customers.
“To me, the café is more of a public co-working space,”
said Chai Lee, 45, who regularly relaxes there. “I really come in for the free
Wi-fi.”
Lee, a Chase customer, said he had no plans to switch
banks, and that his main consideration when opening an account was getting the
best interest rate.
And Pepper, for instance, can offer the weather forecast
and help direct customers, but it is not set up to open a new bank account or
answer complicated financial questions.
Yet bankers say the eye-catching features are more than
just marketing stunts.
PART OF FAMILY
Jeremy Balkin, HSBC’s head of innovation for the U.S.
market said the Fifth Avenue branch opened 20 percent more accounts in July,
the first full month of Pepper’s assignment there, compared to a year earlier.
“Clearly Pepper has been a seismic historic
intervention,” Balkin said. “We don’t see it as marketing. Pepper is part of
our family in the branch.”
Capital One considers its cafe model so successful that
it is adding new locations in Washington D.C. and San Diego to the existing
network of 33 cafes run in cooperation with coffee chain Peet’s Coffee.
Lia Dean, Capital One’s head of bank marketing and retail,
told Reuters that half of those frequenting its cafes were not customers, which
was good because more people get familiar with the brand. Dean would not
discuss the effects on profits or new account openings, but said: “We would not
be expanding them if we weren’t pleased.”
If done right, branch redesigns can boost sales and
reduce costs by 60 to 70 percent thanks in part to lower staffing and space
needs, according to a July study by McKinsey management consulting firm. But
doing it right means spending heavily on back-end technology to bring
information now scattered across various businesses in one place and investing
in training so a single employee can help a customer with a range of questions.
Bank executives say integrating technology across apps,
web portals, ATMs and physical locations is a complex, time-consuming
operation, but they are moving in that direction.
“We recognize that our best customers and most engaged
are ones using both branches as well as digital,” said Sol Gindi, chief administrative
officer for Chase. Around 75 percent of Chase’s customers use both the bank’s
mobile app and its branches, he said.
In response, Chase launched Finn, a digital-only bank
that targets younger customers, but also plans to add 400 new branches to its
nationwide network of around 5,100 branches over the next five years.
Similarly, Bank of America is adding another 500
locations and redesigning 1,500 over the next four years. As of February, it
has opened more than 160 new centers and renovated 620 after closing some 1,500
branches in the wake of the crisis.
“Is it worth the investment? It’s a question we’ve
grappled with,” Jon Wolf, Bank of America’s senior vice president of Consumer
Business Transformation, told Reuters. “However, I think we’re done grappling:
branches are a critical part of what our customers want.”
HSBC, which mainly targets international customers in the
United States, recently made “a sizable investment” to replace its main U.S.
technology platform, according to its spokesman Matt Klein.
Building on its technology investments the bank plans to
launch early next year a new mobile app and new online banking capabilities,
Klein said. Now, HSBC’s app is rated 1.4 out of 5 in Apple Inc’s U.S. App
Store, well below its peers.
GLOBAL DILEMMA
The question becomes, though, how much to commit to
branches that are important now, but may end up like video rental stores -
upended by technology and changing consumer habits.
It is a global dilemma, but for banks in the United
States the challenge is especially daunting.
While rivals in parts of Europe and Asia are further
ahead with their digital products and branch redesigns and their customers more
comfortable shifting online, U.S. banks find it hard to compete without a strong
branch network.
Those that shuttered thousands of branches to slash costs
in the aftermath of the 2007-2009 financial crisis ended up losing customers or
deposits.
Yet with branch networks estimated to account for 10 to
30 percent of total costs, investors have been pushing executives to make
branches work harder.
Rising interest rates and growing importance of deposits
as a low-cost financing source have only added urgency to banks’ search for the
best branch strategy.
Some analysts, however scoff at branch redesigns, saying
they may create some buzz, but banks should rather spend the money to improve
their digital products. They say U.S. customers visit branches so often not
necessarily because they want to, but because they get frustrated with the
technology.
“Who do you know who actually wants to go to a bank for a
simple transaction?” said Sam Maule, a managing partner for North America at
financial services consultancy 11:FS. “You’re forced to go for things like
account opening and, in my opinion, it’s because the digital offering sucks.”
Reporting by Rishika Dugyala and Anna Irrera; Editing by
Lauren Tara LaCapra and Tomasz Janowski
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