Designing digital bank branches—and why their time is now

Until seven years ago, “tellerless” or digital bank branches delivered little more for a financial institution (FI) than a brand “point of presence.” Typically, smaller footprint, self-service branches, which were at best cost neutral, offered customers only a transactional convenience. For these “digital” locations, there were no customer onboarding capabilities or gathering of retail assets.

Indeed, only 60 to 75 percent of customer teller line interactions were capable of being fulfilled digitally, which meant customers still had to visit a larger, more traditional branch to meet their needs, delivering limited value.

But all of this has changed dramatically in the last few years. Advances in both technology and customer acceptance have transformed the digital branch from marketing hype to operational strategy that offers effective and efficient, full-service delivery at a reduced cost.

In this article, we’ll look at what's driving digital branches and their increasingly key role in retail and business banking service delivery. We’ll also cover how the pandemic has accelerated existing trends driving the digital branch.

The right way to take bank branches digital    

Making branch processes more digital is a common objective for FIs. They can get customer-facing digital technology like number keypads, signature capture pads and associated software relatively swiftly from suppliers only too happy to sell them. But implementing these into branch processes is the time consuming and expensive part; it involves installation, redesign of processes, staff training, testing and maintenance.

It’s often the case that FIs retain many of the paper-based components of a process, usually for tenuous or imagined security and compliance reasons. But keeping the paper component of a process just creates a digital appearance without delivering significant operational benefits. This digital front end that’s superimposed on existing paper processes often creates a sub-par customer experience fraught with slow service and long wait times.

Investing in technology that enables a genuinely paperless (or more accurately, “no paper retained”) process, however, creates significant benefits. These include faster service, increased security, significantly reduced branch administration overheads (often after the branch closes) and a customer-first culture. Read more: see how one of the largest ATM networks in the UK was able to maintain and manage all their devices and services from one integrated platform.

Driven in part by the pandemic, the move to paperless operations has allowed FIs to reduce operating costs and improve staff safety (social distancing is easier when no paper is involved). Going paperless also helps FIs enable their employees to work remotely, including performing remote branch audits.

Customers are now more comfortable with screens        

During the pandemic, people very quickly made the leap to video interactions, whether Zoom calls, Microsoft Team meetings or even videoconferencing for doctor visits. That’s great news for financial institutions who a decade ago began deploying assisted service or Interactive Teller Machines (ITMs). Now that customers are comfortable with screens, it’s even easier to migrate more transactions to self-service technologies like ITMs and improve adoption.

ITMs allow customers to have video, face-to-face interactions with staff who are remotely based in call centers. There, the bank staff receives scanned instruments like cheques and other documents, can see and validate the customer’s identity via ID cards or passports and control the machines remotely for transactions like dispensing and accepting cash.

The technology also makes screen sharing easier, which significantly improves both the customer experience and the bank’s ability to cross-sell effectively. Consider how often you see customers in a retail bank branch craning their necks to see a computer screen the teller or customer service rep is trying to rotate to show them. This verbal “shared screen” information falls into two broad categories: routine account servicing and product information. The most common examples of each include specific funds movements between linked accounts and “what if” calculations relating to unsecured personal finance.

With modern ITM software, the financial institution can enable screen sharing from the call center. Customers can see various screens presented by the call-center agent, and the agent can also transfer the customer to a more appropriate representative if needed.

One important note: these screen sharing transactions are usually conducted verbally. Since they’re not easily visible or recorded anywhere, bank management can’t give them the true digital migration focus they need. Yet these interactions are time-consuming for FI staff. And it’s a place where assisted service technology can help.

FI staff can use assisted service technology to drive the adoption of online banking. Using modern software, the call center agent can send the online banking URL to the customer. The agent is prohibited from seeing the customer’s username and password, but after the customer logs in, then the staff can see the customer’s interactions and talk them through how to use online banking.

With assisted service technology, customers can switch from basic self-service interactions like depositing or withdrawing cash using a card and PIN to more robust interactions that require a trained teller, like validating signatures or ensuring complex compliance with account rules. Customers can also select which call center staff they wish to speak to.

As FIs migrate more transactions to ATMs and intelligent deposit machines, they can free their tellers to deliver more personal, more profitable advisory services and get more value from the branch staff’s customer facing time. That’s because the comprehensive suite of selling, explaining and transactional interactions can now be conducted at the customer’s convenience, typically during extended hours or even 24/7 when a manned or traditional branch is closed.

And it’s all possible thanks to advances in technology, such as the ITM, which are enabling banks to reposition the digital branch from brand perk to smart operational strategy that makes it possible to extend full-service hours at a much lower cost.

Changing cash usage patterns and the growth in online shopping

Sometimes, changes that become fundamental to society first appear as anything but. Let’s use signage to illustrate. Older generations may remember riding buses that had smoking sections. It was common to see “NO SPITTING” signs. These were from a time when chewing and spitting tobacco was common and public health officials wanted to curb the spread of communicable diseases like tuberculosis.

Around 30 years later, “NO SMOKING” signs, especially in places like restaurants and airports, became common. But today, those signs are gone; society has moved on.

Around 10 years ago in the U.K., “CHEQUES NO LONGER ACCEPTED” signs began to appear at gas stations and supermarket checkouts. Today, cheques have now almost completely disappeared from U.K. retail transactions—and so have the signs.

See where we’re going with this? During the worst of the pandemic outbreak, for countries with higher levels of cash in circulation, it became common to see signage with messaging that said, “To reduce the risk of infection, please use payment cards instead of cash.”

In many northern European countries, these are now replaced with “CARD ONLY, NO CASH ACCEPTED” signs. And, globally, almost all countries operating contactless payments increased the "PIN free limit" in 2020.

In almost all developed societies, the proportion of transactions involving cash is declining and it’s unlikely to change direction. It’s no surprise that the pandemic has been a factor driving an unprecedented growth in online shopping globally, from $1.3B in 2014 to an estimated $4.9B in 2021.

Online purchases typically involve card not present payments made using a debit card linked to a money transmission account or a revolving credit card. These cards are now almost all compliant with major card association schemes.

It's led to an increasing usage of banking cards—and, consequently, new requirements for these cards to be more robust. Flat cards with ink that wears off with increased usage are no longer acceptable since the PIN, security and expiry information must be easily read to make online purchases. Embossed cards allow card details to be read easily long after the ink has worn off.

The increased reliance on and usage of these debit and revolving credit cards means that cards in need of replacement (due to damage or loss) and renewal (due to expiry) must be rapidly and conveniently issued.

The latest digital branches are configured with embossed card issuing machines. The best of these are fully PCI-DSS certified (Payment Card Industry – Data Security Standard). The machines access the FI’s card management system. A one-time password (OTP) texted to the customer’s phone is regularly used to ensure secure issuance. Card issuing machines tend to operate predominantly in self-service mode but can also be Interactive Teller Machines capable of providing teller assistance on demand from a teller or card specialist in the call center.

The issuance of cards at these digital machines means the customer no longer needs to go to a branch or wait for a centrally-produced card to arrive via courier or postal service. This digital delivery means the customer can choose when and where to get a replacement card—which is the kind of instant convenience today’s customers expect.

Meeting the needs of younger generations       

As new generations reach maturity with no knowledge of life before mobile phones and the internet, expectations for digital access and instant fulfilment have become mainstream.

Having to write by hand is increasingly a source of customer frustration—and friction. (How often have you seen customers in the teller line pull up their phones to grab information the teller then has to manually input into a digital system?) Indeed, as customers rely on digital channels, especially mobile, they don't want to be slowed down by FIs who mandate that forms be completed by hand.

It also leads to more errors and more time spent waiting—and tends to perpetuate a “branch-centric” rather than a “customer-centric” approach.

The next normal for post-COVID bank branches    

The Covid-19 pandemic has turned previous customer transaction migration options from efficiency “nice to haves” to urgent priorities. Because FIs now operate in an environment where strategies to preserve a high level of service while maintaining public health are now essential.

Indeed, during COVID-19 branch closures, migrating customers to digital channels was critical to ensuring customers had access to financial services while maintaining crucial business continuity. And it’s a trend set to continue as banks look to technology to enable the deployment of new, digital branch design configurations that meet customers where they are today—while gaining the flexibility to deliver for tomorrow.