Virtual branch concept making inroads in U.S.

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As the coronavirus pandemic continues to limit consumers’ access to branches, a concept that banks in other countries have embraced is starting to appear here: the virtual branch.

A virtual branch is similar to an online bank, but it’s not the same thing. The term typically describes an all-in-one package of communication tools housed in an app or other digital platform that is meant to simulate interactions at a regular branch.

The idea goes way beyond the chat tools many banks offer or have been scrambling to add since the pandemic began.

“Chat is a pretty well-developed capability, but it’s about what else you can do within or surrounding a chat session,” said Bob Meara, senior analyst in Celent’s banking practice. “Maybe you start chatting and the customer service agent says ‘let’s go to a video call and let me share my screen.’ You can easily move from one interaction mechanism to another and have them all connected without authenticating again or changing devices.”

Citigroup, with the help of the technology firm Moxtra, launched Citi Hello in 2017. It began as an in-app audio and video banking platform for affluent customers in India, and Citi is piloting something like it in the United States.

With online or mobile banking, on the other hand, one can perform a number of tasks that one would normally do in a branch, from opening a new account to depositing a check. But if customers run into problems, they likely have to interrupt the process to call the contact center or start a message thread with an agent who doesn’t have any prior context of what they were trying to do or an easy way to demonstrate a solution.

Raiffeisen Bank International, an international corporate and investment bank based in Vienna, is one institution looking for new ways to digitally connect with its customers. RBI debuted its RaiConnect “virtual branch” in September, where premium customers can converse with their relationship managers by video, voice or chat and share information between screens.

“There are many solutions in the market and available in our subsidiary banks, but none of these contain all these features in one tool,” Zsofia Jokai, a RaiConnect executive, said by email. “We can provide excellent customer service with the features of a branch, but in a digital channel.”

The concept of a virtual branch is still emerging in the United States. But banks that hand off some branch functionality to a digital realm may find several advantages, including greater convenience and one cohesive experience.

Customers can resolve issues without calling an agent who isn't familiar with their problems, and avoid breaking off a conversation midstream to fill out documents, for example. Instead, they can share files and sign electronically on the spot.

RBI partnered with Moxtra, a business collaboration company in Cupertino, Calif., to create the RaiConnect mobile and web app. Private individual and corporate customers in several Central and Eastern European countries can reach their relationship managers by video or audio, exchange documents, share screens or leave a message by voice or text, all on an encrypted platform. Chat transcripts and call records are stored for future reference.

“We want to be constantly relevant to our customers, and remote collaboration is highly valued today,” said Jokai. “RaiConnect’s goal is to give our customers new ways to get in touch with us apart from mobile and internet banking.”

Vendors who peddle omnichannel solutions to financial institutions around the world have noticed rising interest within the United States.

Glia, a digital customer service company in New York, lets financial institutions meet customers in a digital environment and transition between modes of communication, including voice, messaging and video conversations. It also allows for co-browsing. CEO Dan Michaeli notes that historically, the company’s European clients have been most focused on omnichannel and experimenting with virtual branch-type experiences. Glia’s biggest markets are in Europe, Latin America and the United States.

However, he says U.S. clients' mindset is shifting in the same direction, especially with the onset of the pandemic.

Moxtra has built digital branches similar to RaiConnect for more than 30 banks around the world. Its virtual branches were adopted by countries in the Asia-Pacific region in 2015 and 2016, followed by Europe, the Middle East, Africa and Latin America. In the last 12 to 18 months, it has had significant adoption in the U.S., and adoption has accelerated during the pandemic.

Meara points out that virtual branches may be more popular in countries where large population centers are separated by even larger patches of rural areas, making a broad branch infrastructure unprofitable. Plus, when branches are sparser, the lines may become unmanageable at branches that do exist.

Big banking names in the United States sometimes use the virtual branch term and the idea, but typically in their international operations.

Moxtra is also behind Citi Hello, an in-app audio and video banking platform for affluent Citi customers in India that launched in 2017. In 2018, Citi launched a new service called Virtual Remote Engagement (VRE) for emerging and affluent customers in the Asia-Pacific region that enabled live audio, chat and video banking on Citi's digital channels, as well as screen sharing and document uploads.

Currently, Citi is piloting a video banking program involving 200 personal bankers, relationship managers and branch managers in 50 U.S. branches.

J.P. Morgan uses the term Virtual Branch to describe its mechanism in the Asia-Pacific market when digitizing cross-border payments for corporations. Clients can send supporting documents digitally through the Virtual Branch and, in some markets, make statutory payments.

This service was launched in 2016 and currently exists in nine markets, including China, India and Indonesia. The company reports that COVID-19 is driving higher adoption.

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