Banks have been experimenting with branch design for 30 years now, but WaMu’s Occasio branches (which in Latin means favorable opportunity) were still a significant leap. By creating teller pods stationed in the middle of the branch, and using cash recyclers, tellers were free to greet customers as they came in the door and create a more retail feel to the bank experience. Curving floor plans, softer color schemes, and quirky touches like selling teller “action figures” wearing WaMu insignias sent a message that this was a different kind of bank.
Now, with the collapse of WaMu and a chastened industry eager to earn
back the public’s respect, some argue that WaMu’s unconventional branch
design represented the kind of flamboyant experimentation that got
banking into such trouble. “Customers want knowledgeable friendly
bankers in an environment that’s convenient and reassuring,” says Tom
Kelly, a Chase spokesman. “Customers aren’t interested in lingering;
they want to do their business and go.” So, in the end, is Chase’s
traditional branch design more appropriate for the serious-business of
banking?
Getting the answer right to this question is important for the industry
as it emerges from the current crisis. Branches are expensive to
operate, and Bob Meara, a senior analyst at Celent says they’re getting
less profitable all the time as branch traffic ebbs and more
transactions move to the Web and other channels. At most banks, says
Ron Shevlin, a senior analyst at Aite, people go to branches to resolve
problems they can’t resolve elsewhere, or because they have privacy
concerns using the Internet, or just out of habit-and this is not a
profitable business model. “For most bank transactions, what’s
convenient for the customer, and cheap for the bank, is not the
branch.” To turn this around, he says, banks must find a way to make
the bank branch the channel of choice for certain customer
interactions, not just the default choice for problem resolution and
Luddites.
In fact, some bankers are thinking along these lines, and they repeat a similar mantra: innovative branch design and technology must encourage engagement with employees, not to discourage human interaction. Executives at Barclays, Umpqua, Key Bank and TD Bank, to name a few, view the branch as the channel of choice to build customer relationships. “The biggest thing in banking is the relationship, and you can’t do that online,” says Lani Hayward, evp of creative strategies at Umpqua Bank. “You can make mistake after mistake after mistake, and the customer will stay with you if they believe you’ll take care of them.”
Viewed in the light of building customer relationships, Chase’s move to dismantle the Occasio branches makes sense. Jeffry Pilcher, president of ICONiQ, a financial brand consultancy, says “Everyone in the financial industry is looking for a single blueprint, and it doesn’t work; it depends on who you are serving, what products you are offering, where you are located and what competition you face.” In Chase’s case, the bank has two important businesses that WaMu didn’t, business banking and private banking. “Both of these require people to sit down. These are private, consultative relationships. Occasio’s were built for cash transactions. It’s was not a sit down, it was get in and get out. They wanted to build a lot of branches, collect deposits, and use those deposits to serve their mortgage operation.”
Thus, according to Pilcher, it is a mistake to characterize Chase’s decision to dismantle the Occasio branches as a retro move by a stuffy bank unwilling to try new ways to reach the customers. Chase’s business strategy is fundamentally different than WaMu’s. It needs efficient teller lines for quick transactions, but also privacy for customers to sit down with investment reps. Likewise, it is a mistake to characterize WaMu’s branch design as a failure because the bank failed. “People get the wrong idea that this is some kind of cosmetic thing; there’s a strategy behind it,” he says, and for WaMu it was to gather deposits for its mortgage arm.
Despite WaMu’s high profile demise, some banks have pushed unconventional branch design even further-so far that actual transactions aren’t even possible; the sole goal is relationship building. ING Direct is an online bank, but management realized the bank needed some physical presence to reassure the public the bank was more than a billboard. So execs devised the ING café, which look like Starbucks; people can go have coffee, smoothies, use a free-wireless connection, and learn about ING if they choose. But the eight “branches” have no transactional ability whatsoever; people still must sign up and do transactions online. For example, the ING café in Chicago had “Bike to Work Week Specials” in mid-June. “Every bicyclist that rides to the ING DIRECT Café during Bike to Work Week will be treated to a free bike valet, beverage and tune up. While you’re there, ask a Café Associate about other simple ways to save your money.”
Meanwhile, Umpqua Bank, which uses its branches more conventionally to collect deposits and transact business, is also dedicated to innovative design and technology. Umpqua decided in the late 1990s to “sell products and services like retailers and create a customer experience,” says Hayward. She says banks can be more than a “transactional place.” Like ING DIRECT, Umpqua’s neighborhood stores-not branches-are designed to feel more like cafés and serve as a place for the neighborhood to connect with community information.
In addition to bank products, stores feature electronic bulletin boards that provide community information, and neighborhood calendars, as well as access to computer cafés called MyBooth that are equipped with community and online resources. The stores also incorporate enhanced banking automation technologies, including cash recyclers that maximize space and improve store efficiency and security. Umpqua’s neighborhood stores also feature an interactive Discover Wall that allows customers to print and takeaway only the materials they want.
The bank will soon be rolling out “ask an expert” video conferencing across a dozen branches as well as touch screen technology for product information. These and other technologies are vetted at Umpqua’s Innovation Lab in Portland, which opened in late 2007. “Our intention is to innovate because we have to,” says Hayward. “But it can’t be technology for technologies sake; it needs to be about the customer experience.”
To judge the
success of its branch strategy, Umpqua compares itself to peers.
According to a Harland Clarke survey earlier this year, Umpqua’s
average deposit relationship and loan relationship are $27,700 and
$39,200, rwespectively, versus the industry average for its peer group
of $17,800 and $22,900, respectively. Also, Umpqua’s average of 3.8
accounts per household is better than its peer group’s 3.4 accounts per
household. Internally, Umpqua tracks products per household as part of
its Return on Quality program, and has found the scores consistently
and significantly higher in its new/remodeled next generation branches.
When Deanna Oppenheimer, Barclays CEO of U.K. retail banks, arrived
four years ago the entire network of 1,700 branches needed an upgrade.
“We decided that rather than just change the carpet and paint the
walls, let’s create the next generation of bank branch,” she says. Like
Umpqua’s Hayward, she views technology as a way to “enable a customer
experience, not replace it.” Barclays used a warehouse in Northhampton
to build out prototype branches to see what worked and what didn’t, and
ended up with a modular design easily deployed across the network.
Also like Umpqua, Barclays uses a flagship branch, in Piccadilly, as a quasi lab. Among the many high-tech touches in the branch was the first bank deployment in the world using Microsoft’s Surface technology, which allows users to grab digital content on a screen with their hands and navigate information about products and services with simple gestures and touches. The Surface technology is a 30-inch screen built into a table top. Customers and a bank employee sit across from each other and move through the digital content together by touching and swiping the screen.
The Piccadilly branch took inspiration from retail stores such as Nike and Apple to redesign the space and engage the customer. One of the first aspects visitors see at the branch is “Being: London”, an interactive, evolving installation representing London and what people in the capital are doing and talking about. A large video wall graphically represents London using content from blogs and customer interest. Personal consoles let people contribute to the installation and find information such as restaurant reviews, theatre openings and museum hours from Time Out, a guide to the goings on in London. Outside of operating hours, the front of the branch is transformed into the “Night Life” screen. The installation picks up the images of passers-by using face recognition technology and cameras and creates moving silhouettes on the screen together with thought bubbles creating random messages.
Inside the branch, to reduce wait times, employees use hand-held PCs they call “service angels.” With these PCs, they can intercept people waiting in line and conduct certain simple transactions, such as balance inquiries, transfers, and change of addresses. This matchmaker system can also schedule an appointment with a financial advisor and give the person an approximate wait time. They are then free to leave the branch and come back, or explore other information available in the branch.
While refusing divulge company-wide numbers, Barclays says the new branch design has increased market share, and that customer usage of new technologies has steadily increased. Erin Biertzer, head of distribution services at Barclays, is a bit more specific about the results at the Piccadilly branch. In the first few months after the branch opened sales of its Premier Life product-the only product so sold via Surface at the time-increased 50 percent, a gain she attributes largely to the Surface technology.
Ultimately, Oppenheimer and Hayward agree that branch design and technology can only contribute so much to a customer experience. Relationship building requires old-fashioned, face-to-face customer service. “Our greatest asset is the culture, that’s the crux of our success,” Hayward says. “What sets us apart is how we operate and how associates get trained.” Not only are employees educated across products so they can cross sell, she says, they are trained by the Ritz Carlton in service.
In the opinion of Aite’s Shevlin, the need to train employees in relationship building is not a message most banks have absorbed. “The problem most banks have in terms of building relationships will not be solved by branch design.”
