In the beginning of 2018, for the first time ever, more than half of all bank transactions were made digitally and in the UK, for example, around 60 brick and mortar branches and around 300 ATMs close every month. Do these closures suggest a decreasing need for analogue banking channels, while proving the overwhelming success and adoption of the digital shift? Not necessarily…we look at traditional banking vs modern banking, and how you can satisfy all your customers using a blend of both.
The digitalisation of the banking sector has undoubtedly created numerous benefits for both the bank and the customer. For example, on average, retail banks that digitalise can achieve 20% increase in revenue and a 30% decline in expenditures, while customers who choose to use digital channels benefit from the convenience and flexibility of banking when, where and how they want.
However, there are also problems associated with adopting absolute shifts in new digital banking models. Customers are at different stages of digital literacy and have personal preferences in how they prefer to bank, and banks are at different stages in the development of their own digital distribution models.
The McKinsey 2016 Retail Banking Multichannel Survey, which spoke to 20,000 customers in 10 countries, and the Finalta Digital and Multichannel Survey, found that even in the Netherlands, the most digitally-advanced country surveyed, 32% of respondents still preferred visiting branches and ATMS for all needs. At the other end of the extreme, 59% in Spain and 60% in Italy said they preferred visiting branches and ATMS for all their banking needs.
The main reason cited for the preference in branch visits was concerns over security, with participants reporting they had “low trust in banks and the financial system”. Low-tech seniors were also a large customer segment that favoured visiting branches. For sophisticated transactions, especially, customers tend to prefer face-to-face interactions over single-trick solutions, like phone calls, where customers can only talk to the agent, or online banking, where customers can only look at information.
The report posits that, for at least the next three to five years, even in digitally-advanced European nations, human touch will remain important for approximately 30-50% of consumers.
“Although digital channels are on the rise, this study shows that people still value the security and reassurance that in-branch face-to-face interactions bring. This suggests there is still a real need for the guidance, credibility and security that ‘in-person interactions’ can provide,” said Bill Safran, CEO of Vizolution.
The research showed that only 13% of participants in the UK and the Netherlands showed a preference for doing everything remotely, including transactions and advice or purchases. At 25%, Italy had the highest percentage of respondents who expressed a total preference for remote banking.
“Banks that put their customer at the centre of their business model are on the right track. Banks need to do at least two things to achieve this. The first: offer simplified customer experiences on traditionally long and complex customer journeys. The second is to provide opportunity for ‘in-person’ interactions in branches or through remote advisory sessions that replicate those benefits. This is especially important on sophisticated transactions, which require a need for reassurance, or to understand multiple features, or to meet a number of internal business requirements,” added Bill.
So, although some now enjoy a lifestyle where brick-and-mortar banks are seen as old-fashioned and unnecessary, at least three quarters of those surveyed in the McKinsey 2016 Retail Banking Multichannel Survey still value the benefits that ‘in-person’ interactions can bring, especially when seeking advice about purchases or complex products. The lesson is clear – banks that don't recognise the individual requirements of their clients and offer a combination of innovative streamlined technology alongside the benefits of face-to-face interactions, run the risk of their customers switching to banks that do.
