Quality not Quantity for Retail Banks

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The banking sector is operating in a VUCA (Volatile, Uncertain, Complex and Ambiguous) environment; structurally, economically, technologically, and sociologically. With Ulster Bank’s and KBC’s impending departure from the market and the simultaneous rise of challengers in the Home Lending space such as Avant Money and the growth of payment platforms for day-to-day banking, the World of banking in Ireland is changing.

And of course, the sector is at the coalface of the unparalleled “black swan” event that is the Covid-19 pandemic. Some of the legacy of this period will persist beyond the end of the public health crisis, including the continuation of cashless payments and the diminution of the physical banking infrastructure on our high streets.

A pandemic-induced decline in customer demand for branch banking is often cited as the rationale for the recent spate of branch closures in Ireland by all the main banks.

The banks will naturally manage these closures to minimise negative effects on customers and will use technology to mitigate its consequences, but it will nonetheless have an impact.

The World Retail Banking Report 2021 from Capgemini and Efma, indicates that there is still demand for branches with almost 4 in 10 (37%) of global respondents claiming that branches are a significant channel and only 14% stating that branches are no longer relevant to them. Indeed, for complex, involved financial decisions the human touch is a must for most customers.

Despite this, evolving customer behaviour and commercial realties will mean that retail banks have less traditional brick and mortar stores. In this adjustment there is a great opportunity to reimagine the purpose of their remaining physical stores and to leverage them as brand beacons for differentiation and visibility as well as providing opportunities to allow customers to experience the brand, not just transact business. Are there other human needs these spaces can be adapted to serve? Are there other human problems that can be profitably resolved in these prime sites?

Banco Galicia in Argentina have remodelled their flagship branches as community connection spaces with public lounges. ImaginCafe by Caixa Bank in Barcelona has gone a step further with food and drink on offer in a high-tech social space. And AIB have been flying the flag for Ireland winning global recognition and awards for its Lab in Dundrum which represents a truly customer-centric branch experience.

But this branch re-think can undoubtedly go further, faster. Applying the principles of Design Thinking to do this places customer empathy at the heart of the remodelling process to redefine problems, so that strategies and solutions may be developed, prototyped, and tested that solve problems and deliver against customer’s needs.

This approach is particularly suitable for challenges like this one that have high levels of complexity and ambiguity and a significant human factor. The approach has been successfully deployed in the banking and financial sectors previously, but now as the sector seeks to re-imagine its retail proposition and its overall banking experience, the principles of Design thinking have the potential to make a real impact.

To find out more about how this approach can be applied to your most difficult business and innovation challenges, please contact richard@opinions.ie.

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