Don’t underestimate the power of branches post-pandemic

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I often find myself on the opposing side when I hear “this changes everything” after any technology advances or new digital banking functions are rolled out.

Of course, change is occurring in the banking industry. It has been evolving for decades and continues to do so today. The pace may even be picking up.

The recent implementation of coronavirus pandemic protocols and a seismic economic disturbance has yet again generated predictions of sweeping shifts in bank operations. However, the sea change some frequently forecast almost never happens as quickly as predicted.

Many have forecasted for decades that the end of the bank branch is nigh. This chatter has increased as banks temporarily closed branches amid the coronavirus pandemic. That’s understandable.

If so many banks have been able to function and serve their customers with such restricted branch access, many wonder if this truly is the new normal.

Maybe this time will finally be the tipping point.

However, I would not consider the customer patterns or behavior these past three months as a signal that they are abandoning branches.

There is a difference between what someone is forced to do when options are taken away, and what a person chooses to do while other options remain.

A former banking executive, now consultant, recently suggested to me that many bank drive-up windows were packed with cars because customers are afraid of human contact inside the lobby.

I politely suggested that the lobbies of those branches had very restricted access at that time, and some were closed altogether.

Perhaps, for every person queued in a car, there was likely another who would have preferred to walk into the branch, if given that option. Some observers are predicting that the human desire for personal, face-to-face interaction will change. I would bet otherwise.

This week, I spoke with a community banker from an area that has already lifted most stay-at-home orders. During their lockdown, use of digital and phone banking skyrocketed, to no surprise.

Their branches have now resumed normal hours with full staff. While social distancing is encouraged and hand sanitizer is provided at branches, no customer or employee is being required to wear a mask. It’s optional.

The bank’s lobby traffic returned to around 75% of normal volume within a week and that number is expected to rise in subsequent weeks. Customers are thanking branch bankers and telling them how much they appreciate seeing them again.

Will this be the normal with banks as states gradually reopen? We’ll soon find out. It’s possible this will be the normal in more areas than some pundits are predicting.

Still, this unprecedented disruption will have long-term impact.

Irrespective of the speed or level to which customers return to pre-pandemic banking behaviors, bankers are realizing they can go on the offense in many markets with the facilities and staff they have now. They can expand their outreach without adding to their branch footprint.

As many banks were forced to fully engage in providing and promoting remote banking services, they have awakened to the fact that the viable service area of their existing branches is greater than it has ever been.

While customers want to know that physical access to a branch is available, the number of critical physical visits to a branch is lower than before. This is a concept I have called “shopping circles.”

As the number of physical visits a customer makes to a business decreases, the distance they consider “close enough” to be a customer of that business increases.

For instance, grocery stores tend to have smaller shopping circles than clothing stores. People require more physical visits to grocery stores each year than clothing stores.

For decades, bank branches have operated with circles of similar scale to grocery stores. Digital technology has expanded those individual circles.

The practices adopted during this crisis have shown many banks that the tools to expand each branch’s target market are already here.

All that some needed was a wake-up call. They’ve received one.

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