Digital banking grew rapidly in 2020, with the use and adoption of online and mobile banking tools skyrocketing as many consumers and businesses decided to manage their financial lives virtually. A late 2020 survey found that 55% of consumers were visiting bank branches less now than they had before the COVID-19 pandemic began, and over 25% said they wanted to avoid face-to-face interactions. This shift in consumers’ behavior and preferences is unlikely to change in the short term. It is estimated that four out of five U.S. bank account holders will be using digital banking tools monthly by 2024.
Although pandemic surges are not entirely to blame, consumers’ use of bank branch locations in the United States steadily declined over the last 17 months. Branch numbers have been declining for over a decade for a number of reasons, including the 2007 to 2009 financial crisis, along with the increasing availability and usability of digital banking tools. It is worth noting that, while consumers are not visiting bank branches as frequently, they still value having access to them. Most consumers still express the desire to live 15 minutes or less from the physical branches of their chosen financial institutions (FIs). Credit Unions (CUs), especially smaller ones that serve local communities, cannot rely on old, tried-and-tested ways of serving members at physical branches, however. These CUs must fundamentally reconsider their approach to in-person banking if they wish to remain competitive. CU members today expect access to digital-first touchpoints — regardless of how they are choosing to bank.
The following Deep Dive examines how CUs must plan their brick-and-mortar banking strategies to meet the shifting needs of their members. Also, it analyzes the functions of various tools and technologies to conclude what this could mean for the future of banking.
Optimizing Banking Experiences for Members
Determining the best approaches to innovate the in-person banking experience requires CUs to carefully track how their members conduct routine financial tasks in a post-pandemic environment — both through their online channels and inside brick-and-mortar branches. While consumers are not ready to give up on bank branches, their expectations concerning in-person banking have changed. Consumers primarily used branches to make cash withdrawals or to deposit checks before the pandemic began. As COVID-19 rapidly spread, two-thirds of financial service leaders claimed call volumes increased by at least 5%, suggesting that many consumers were logging in and making transactions online. This behavior has rapidly shifted over the past 17 months, however. As many as 70% of deposits at surveyed FIs are being conducted using self-service options instead of with help from tellers, according to a recent report.
Financial entities are moving to adjust their customer service strategies at physical branches in response, catering
to a world where routine banking needs, like deposits and withdrawals, are increasingly handled online via mobile devices or ATMs. Ninety-seven percent of FIs are planning to redesign their branches to meet changing customer needs. To better compete with banks and other players in the financial services space, CUs must also innovate their branches accordingly. They must ensure that they are not treating branches as a simple, auxiliary channel to digital services, given that the personal touch of in-person banking remains a significant draw for CU members.
Credit Union members place a premium on personalized banking experiences across all channels. As a result, CUs must make personalization an essential part of their branch innovation strategies moving forward. This challenge is likely familiar to many CUs, which often market themselves as banking service providers for consumers seeking a more involved and dedicated relationship between themselves and their FIs. A lack of engagement from CUs tends to create loyalty issues — this reason was cited by 43% of individuals who did not renew their CU memberships in 2020, up from 37% who said the same in 2018. CUs that create a more engaging and personalized experience observe higher spending and greater use of their banking services. Research shows that “engaged” CU members spend 22% more on average than non-engaged members.
CUs must thus work toward offering an engaging and personalized experience through online services and brick-and-mortar branches to provide the convenience and speed consumers are finding increasingly
appealing when banking digitally. Placing self-service solutions at the forefront of the offered in-person banking experiences is one way to achieve this balance.
The Rise of Self-Service Banking
Delivering the personalization and the convenience today’s members now seek requires CUs to assess the self-service technologies and devices that can best enhance their branches’ banking experiences. The good news is that CU decision-makers are already well-aware of the prominent role digital technologies will play in the future of banking, as approximately two out of three CU executives agree they will need to build out their digital offerings to stay “economically viable” by 2023, and 57% of CU executives in another report note that adoption of self-service tools for improving their branches’ experiences was on their innovation roadmap.
Bank branches are thus positioned to play a critical role for several years to come, even as consumers’ use of branches will continue to shift. Consumers are becoming increasingly self-sufficient when conducting financial tasks, making it essential for CUs to offer services that let their members bank how and where they want while maintaining the personal relationships that have been key to their membership for decades.