Banks share a near-universal problem — as customers gravitate to mobile banking, they still want to go to a branch sometimes. And there’s nothing connecting the two; if customers start to do something in the mobile app and hit a dead end, then walk into a branch, they have to start over again.

Many banks including Wells Fargo and Umpqua Bank are striving to create a pick-up-where-you-left-off experience across physical and digital channels — a concept that used to be referred to as “omnichannel” and is now often called “phygital” (not the most elegant jargon, I know).

This week a fintech startup called Root Banking, founded by a banker who oversaw mobile banking and innovation at two financial institutions, is offering its own twist. Its technology lets customers order banking products on their mobile banking app and schedule a time to either pick them up at the branch or have them delivered to their home or work. A handful of banks have begun piloting the software, said founder and CEO Matt Krogstad.

That approach is a good way to attack the challenge of linking disparate customer-service worlds, two analysts said.

“The appealing part of it is that pre-staging — to get the cashier’s check and whatever you need ready and waiting for you or delivered to you,” said Emmett Higdon, director of mobile for Javelin Strategy & Research.

A chart that shows most customers still use branches, while many also use mobile

“I don’t think everybody must be pushed to self-service, but how can you leverage the physical and incorporate that with the technology piece?” said Stessa Cohen, research director at Gartner. “That’s often missing around all the hype around mobile — how you use it with the physical.”

Whether people want to have bank products delivered to their home or work might depend on the geography, Cohen said. “Is it something that’s only going to work in places where there are largeh numbers of wealthy people or a lot of physical risk in carrying cash?”

From banker to fintech entrepreneur

Krogstad was hired by Bank of the West in 2012 to help the bank make its mobile app more competitive. Three years later, he joined First Republic Bank to help with its “digital transformation.”

While at First Republic, Krogstad came up with his idea for “phygital” banking.

“If you just read the headlines, you hear it’s all going to digital: chatbots, video banking, digitization of service and sales,” Krogstad said. “But if you look at the reality of what’s happening, when people are shifting their primary banking relationship from one bank to another, they want to do it with a person. And when they have a problem, they want to talk to a person.” Large deposits and withdrawals also tend to happen in branches, he said.

Root Banking’s two founders, CEO Matt Krogstad and co-founder and CTO Anbu Paul
Grande vision
Root Banking’s founders, CEO Matt Krogstad (right) and Chief Technology Officer Anbu Paul, are trying to adapt to banking the order-ahead services popularized by companies such as Starbucks, Best Buy and Warby Parker.

But though branches are still needed, they’ve become inefficient, he said.

“Banks have tried to use things like universal bankers, reducing the square footage and micro-targeting their branch locations, but there’s a limit to how effective those things are,” Krogstad said.

He looked to retailers like Starbucks, Best Buy and Warby Parker, which successfully interconnect physical locations with a digital presence, for a better approach.

The main idea he adopted was pre-staging. Starbucks now gets 10% of its business from people who order and pay ahead, skipping the process of waiting in line. A third of Best Buy’s online sales are picked up in the store.

Financial transactions tailor-made for the order-ahead treatment include deposits, withdrawals, cashier’s checks, money orders and replacement credit and debit cards.

The approach is intended, first and foremost, to save customers time.

“That’s the one thing people want more of,” Krogstad said. “It’s a much higher level of service, because now I get what I want, I get everything prepared for me and if need be, delivered to me.”

De-emphasizing the branch

This model could, ironically, breathe new life into bank branches in the short run and lessen the need for them over time.

“Most clients visit the branch at peak times—mornings, noon and right before they close,” Krogstad said. “Many banks have lines at those times because they can’t staff for the peaks or the lulls; they staff for this horrible in-between.”

Using Root Banking, branch employees could prepare and deliver customer orders during slow periods.

It’s also possible that, as people get used to having products delivered, banks could shut down some branches and save money.

Still, branches are popular and closing them is hard. “The minute a bank starts closing branches, its clients go to one of the banks whose branches haven’t been closed,” Krogstad said. “It makes it hard to pull the trigger.”

Home delivery might be instrumental in keeping customers, Krogstad said. Transactions could be handled at a smaller number of larger warehouses. Personal delivery could also be a way to serve elderly and disabled people who cannot easily visit branches.

The software

Root Banking simply adds features to existing mobile banking apps, though it is providing a separate app to some banks that have asked for it. Customers click on an “order ahead” or “on demand” button and select the product, the time and the branch they want to visit or the location at which they want delivery.

When customers enter the branch (assuming they’ve agreed to location tracking), their photos pop up on bankers’ screens.

To authenticate the transactions, Krogstad’s team has come up with a method of “phygital authentication” that involves device ID, geolocation and the customer’s photo, among other things.

When each transaction is complete, a window pops up that lets customers rate the experience on a scale of 1 to 5 stars and leave comments. It replaces the classic survey process, where customers are asked about an interaction sometimes months after it happened.

Higdon agreed banks need a better way to gather customer feedback through mobile apps.

“Today we do a pretty pathetic job of it,” he said. “The customer has to want to leave feedback because banks bury it so deeply in the app. Banks do very little proactive prompting, and when they do, they’re asking too many questions. We often say, just ask for one piece of feedback at a time.”

Banks don’t have to worry about trying to integrate Root Banking software with their core systems, or any systems, because it doesn’t replace or connect to teller or branch systems. Later, the company may add the ability to integrate with core systems to automate certain tasks.

Cohen pointed out that phygital banking could take many forms. Many processes could be split up among physical and digital channels.

“Why does account opening have to all be done on the mobile device?” she said. “What if I just want to upload all my documents and then come in and ask questions, and fill out the application with somebody? How do you build that flexibility and agility into banking?”

Editor at Large Penny Crosman welcomes feedback at