Protiviti director Jason Goldberg
Protiviti director Jason Goldberg

Protiviti report shows death of bank branch greatly exaggerated

A new report from global business consultancy Protiviti confirms some assumptions about technology in banking, debunks others and suggests tough sledding for mobile commerce.

Researchers contacted 2,000 American consumers in the second quarter of this year to analyze perceptual and behavioral trends in banking and purchase practices.

Protiviti Director Jason Goldberg
Protiviti Director Jason Goldberg

Protiviti Director Jason Goldberg said that despite reports of its demise, the physical bank branch is alive and well. At the end of 2014, the FDIC reported there were 82,613 physical branches in the United States, down a tenth of one percent from the high set in 2012.

That is almost double the 42,717 branches that existed in 1984, Mr. Goldberg said.

What is likely driving that perception is the number of different banking institutions have declined by 61 percent during that period, creating a perception of scarcity.

Despite what we may tell our friends at cocktail parties, most of us like to physically check in on our branch at least once a month, Mr. Goldberg said. The 84 percent who do, aside from those who have always done it that way, need human interaction for the last steps of complex decisions such as mortgages, credit lines and opening accounts.

“They want to interact with someone before pulling the trigger,” Mr. Goldberg said.

Some banking behavior is indeed moving online, Mr. Goldberg said, and given the relative novelty of online banking, it is not surprising the initial forays are the more mundane actions such as checking balances, paying bills and transferring funds. Close to or more than half of respondents from all bank usage patterns report they complete such tasks online.

Because the nature of what people need from their banks is narrowing, banks should re-envision their entire design, Mr. Goldberg suggested.

“They should consider becoming a more tactile, experiential branch like the Apple Store and others.”

In such an environment bank personnel teach people how to interact and engage with the product, Mr. Goldberg added.

Closely associated with this is service continuity, and banks may struggle with this on several fronts, Mr. Goldberg said. If someone speaks with Marge about their mortgage online or over the phone, it is Marge they are going to want when they stop by, or they risk the added friction of having to review material with the non-Marge.

The concept of service continuity extends to ensuring a seamless experience for the customer engaging in a process across multiple channels, Mr. Goldberg said.

“There’s still a gap between human interaction and being able to sustain that within the digital model and having that consistency.”

“It’s a challenge to integrate different experiences,” Mr. Goldberg continued. “Banks have, over time, cobbled together disparate systems to create an experience.”

A bank may have to integrate 10 different modules from six different providers, leaving them with a patchwork solution and opening the marketplace to frictionless solutions from alternative sources.

The branch of the future will undoubtedly have a smaller footprint while facilitating greater interactions between customers and staff, Mr. Goldberg said. At a minimum, mobile technology will help reduce the amount of paperwork by allowing for online authorizations before a visit as one method of maximizing that face-to-face time.

Do not expect mobile to hasten the branch decline anytime soon either, Mr. Goldberg said. While most consumers believe the EMV chip is more secure than the magnetic stripe, most will take the stripe over mobile. One in three feel mobile is much less secure than the magnetic stripe while an additional 30 percent see no difference.

“If 65 percent are either indifferent or believe it’s less secure that is a problem,” Mr. Goldberg said.

Something has to give, because as customers hit the malls this holiday season, retailers will learn EMV transactions take longer, and that added time will accumulate into a longer shopping experience, Mr. Goldberg suggested.

“EMV transactions take longer than those with the magnetic stripe. The human interaction with the reader, and the insertion and removal of the card, also takes longer.”

That, along with customers making mistakes as the EMV migration continues, will produce longer lines at a time when retailers want to move people as quickly as possible.

Take a longer view and the EMV era may be at most a moment in payment history, Mr. Goldberg suggested. Many EMV-enabled terminals are also NFC (near field communication) compatible, meaning they can seamlessly adapt to aisle, mobile and even wearable checkout options. Given the number of companies working on completely bypassing the checkout experience and with industry leaders like Vinod Khosla wondering why we are bothering with it at all, EMV’s days are numbered.

Biometrics are playing an interesting role in the payments space Mr. Goldberg said. Many thought the Apple thumbprint reader would have encountered more resistance, but it has been widely adopted. The key to adoption will be how consumers view potential privacy violations.

“MasterCard is testing ‘pay by selfie’ technology which is essentially facial recognition,” Mr. Goldberg said. “I think millennials will adopt that.”

Other options may raise suspicions until consumers realize they are already being used in society, Mr. Goldberg said. Iris scanning, for example, is widely used at border crossings.

“The question then becomes what is the security and where the information is being stored,” Mr. Goldberg explained.

The data also suggests women take a more conservative approach to mobile payments. Men are more likely to report using a mobile app to check balances and send money, Mr. Goldberg said, though both men and women engage in those behaviors at high rates.

But when it comes to making smartphone purchases, women are much more hesitant. While 61 percent of men in their twenties report using their smartphone to buy something in the past six months, only 36 percent of women did. That difference holds through the mid-thirties before declining slightly with older groups.

One consistent finding is that mobile use, while still significant, declines in the older age groups.


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