Future-Proofing Financial Services

As industry conferences return live and in-person, we’re back on the speaking circuit and learning anew what’s on the minds of banking leaders. In this episode, Sean and Gina discuss themes coming out of major banking conferences like Future Branches and how the war for talent is presenting real challenges for banks and credit unions in our new pandemic normal. They dig into recent data on branches and find that the numbers of closures don’t tell the full story of institutions rationalizing and reinvesting in their overall network – where a decrease in branches can actually create a net increase in experience. Armed with real-world examples, they discuss innovative ways that institutions are getting more efficient while upgrading the service to their clients at the same time and discuss how banks embrace innovations like digital solutions and ITMs to future-proof their organizations.   

Text Transcript

Intro: This is Believe in Banking, a podcast series for decision makers, influencers and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.

Sean Keathley: Welcome. This is our podcast for Believe in Banking. I am Sean Keathley, CEO of Adrenaline.

Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline.

Sean Keathley: Gina to talk about this conversation here today. You’ve been busy, for sure, been on stage. It feels like the in-person conference is largely back and we’ve met a lot of people that even said it was the first time they had been in an event since before Covid. But I think it’d be good for our listeners to maybe hear, since we are back in the market listening to what’s on banker’s minds, what are the themes? And one of the ones you just did in Boston was Future Branches, which was well attended. What we’re bankers talking about?

Gina Bleedorn: Yeah, there’s definitely a spirit of gratefulness among people to be back together in person. That void of collaboration, mostly between the bankers themselves, between institutions, you can just tell it was palpable that they love being in each other’s company, learning from each other. And there was a lot of themes that came out, some of which we didn’t realize were as big of themes as they were. The number one ongoing problem that really no one has a great answer for, but seems to be affecting everyone, as just challenge, keeping me up at night thing number one is the talent war, the idea of attracting and retaining.

I’m hearing, from banks and credit unions alike, big and small, that people are getting interviews they don’t show up for, getting jobs they never come to on day one. That was unheard of and is now common, not to mention just incredible amounts of turnover, especially at the branch, frontline staff, but really throughout the organization and the challenge of balancing remote and in-person. Everyone is in a different stage of hybrid, but it seems that everyone is in some kind of hybrid, and it also seems to wildly vary across the country as to who is mostly remote versus who is mostly in person and everything in between. So, that was definitely theme one, the war for attracting and retaining talent, and the cultural challenges and implications, started by Covid, that are just a real tough thing to navigate now.

Sean Keathley: Well, and Gina, that probably leads us down two different paths that are subsequent hot topics. One is just the branch network, the strategy they’re within, et cetera. And the second is automation and ITMs and the efficiencies that brings. And certainly, that’s something we’re hearing a lot about. Maybe we’ll take those one at a time. And let’s think about the branch network. And it’s interesting, you can kind of get a wide variety of opinions. There was a recent article talking about you’ve got a grow or die and there’s predictions around net branch closures, and even in one case trying to predict through 2080 how many branches are going to be. I think we’re pretty smart at financial services. I’m not here to tell you I have a sense of what’s going to be happening in 2082, but it is interesting when you just dig into some of the quick facts, and I think there’s some underlying pieces there that maybe not everyone’s thinking about.

So, one of the quick facts, in 2020, 3,324 branches were closed total. There was 1,040 opened, meaning only 2,284 actually closed. But one example we know well, because of the work we did and the proximity to the business, in the SunTrust BB&T merger, they are looking to close 800 locations as a result of that consolidation, so that could be 800 of the 2,284 in just one bank. And so we just take that one case study and we think about, okay, and why are they closing 800? Well, there was quite a bit of overlap of their markets. In many cases, there was a bank on each side of the street. One was BB&T, one was SunTrust. And even more examples, those were banks they had both bought at one point and maybe weren’t the best manifestation of the brand or the latest use of a physical branch.

And so they’ve made a decision to close one of those and reinvest in what we think of as a receiver branch. And so the report says net down one, but the community says, “Wow, we have a nicer location.” Now, they’re not two across the street from each other, but we’ve got a combined organization serving the community. And I can think of dozens of examples where closures actually created a net increase in experience. And I don’t think that’s really in the headline of bank branches are closing.

Gina Bleedorn: That idea, Sean, is one we’ve started to help more and more clients with as they’re thinking about network rationalization and making some of these hard decisions to become more efficient. How can you, in a way, reduce and take out operating costs but appear, in action and in service model, to be reinvesting in the communities and to your members or your customers? And it is very possible, especially in those scenarios you just described. The two branches are really close together anyway, so I may be driving almost identical of a distance. And if I’m closing to an opening one new, or I’m closing one and enhancing the other one, I’ve made everything better with probably half of the operational expense.

Sean Keathley: Well, exactly. And Gina, you’ve talked on stage and thought leadership before about the idea of the network effect. And so the other thing that’s truly here is the idea of all branches aren’t equal, and the idea that you can use different size formats. And often in those examples, where maybe there was two branches that became one, and it was the receiver branch and it is a bit of the flagship of that market, it can actually be supported by smaller formats, or even just ITM only, ITM drive up only that are completely disconnected from a branch. And so that really kind of brings up two more themes here. One, we can talk about ITMs, but we can also tie back the talent war for the condition of the branch. And so I want to do that one first maybe, and then you can tee up the ITM conversation in all the ways that helps solve all these problems.

Back to the talent war, we have a client east of Dallas, Community Bank, that’s grown rapidly since we’ve known them. They’re now 4 billion, so they’re a good size community bank, but there’s a story I’ll never forget from their head of retail. They were moving to a universal banker model. They were trying to get more efficient while upgrading the service to their clients, especially as transactions were not just in the branch channel.

Sean Keathley: They were moving to ITMs and digital, and the role of the branch was move to advice and account opening, but they were having a really hard time at one of their offices hiring people. They got people interested. But when they came to the branch location, ultimately, one of the votes was, “I don’t want to work here.” And we now know that when that was renovated, that location, did a extreme makeover, although it was only about a $500,000 investment, it was much easier to hold interviews and hire staff in that beautifully redone building.

And so I think there is a tie to the experience, let’s focus on the employee for a minute, that they’re going to have in your location. Can you recruit, attract, and inspire them to do great things for your customer when they walk in? And it can be very hard in those situations when there’s two or three branches in terrible conditions. I’d argue, just give me one that is a great experience for the staff and the customer. And we’re still, in those cases, down in OpEx, probably down in CapEx and OpEx, but the experience has been elevated. So Gina, a part of these upgraded facilities, they’re including more and more technology these days. And we’ve mentioned it, and I think you should maybe talk about ITMs and smaller formats, not only what we think, and we’ve got a great research paper out there, what our clients and everyone’s saying, but certainly, this was a hot topic at Future Branches.

Gina Bleedorn: Yes, it was. It was probably the most talked about topic, ITMs, and the biggest, both, in a way, the biggest question and challenge in determining how to address them and what to do right after the people factor and the talent where we just discussed. And everyone seems to be in varying stages of either their actual experience with ITMs or in an initial pilot stage trying to figure out what to do. Everyone knows they need to be at least thinking about them as an option. And actually, the research we conducted recently published in our white paper on ITMs revealed really two-thirds of institutions are in either partial or full adoption, and those that are even in initial stages of adoption are planning to move to full adoption over the next three years or so. So, it does seem to be something that’s taken off. And really, what we have learned is a few things about ITMs. One commonality among really anyone that’s deployed them is that they are taking longer to be adopted. Most notably, training is more extensive than anticipated training of staff to help customers adopt.

However, once they are adopted, and I heard one financial institution at the event say “You have to force them,” meaning customers, but once you have them experience it, then they like it, and the experience is largely favorable. And our consumer research revealed that as well. Even though awareness of ITMs as a thing and understanding of what they can do is not very high among consumers, the ones that have used them and experience them do like that experience. That said, we also found there was a bit of a gap between how well financial institutions think the experience is and how much consumers like it. So, there is room for improvement. However, they will keep using it once they begin to adopt it, and that seems to be the case throughout different size institutions and different ages of consumers.

Sean Keathley: Gina, I agree with all those comments. I will say, however, I don’t think the curve is going to be maybe as steep as technology adoption has been in the past, when ATMs entered the market. Much, much different. This is not pre-internet, pre-iPhone. And now Millennials are middle aged, so you’ve got people in the prime of their careers that have grown up with technology in their hand. And I do think that once the idea of convenience, when you learn that there is a big set of things from the teller line that can be accomplished, and especially as people deploy these, not just next to a branch, but in spokes, it’s going to raise the awareness. And I think there’s best practice. And we know very well, like a lot of things, you need to market, you need to train. And just one little example, one Community Bank. Now, they’ve always done cookouts at their branches.

They’ve got a big barbecue trailer and they drive it around on Saturdays. Maybe there’s college football games. But what they’re doing is as those roll through the communities, they’re inviting those ITM bankers from the call center, and they show up. So, there’s a human component. So now, Sean is introducing, “Hey Jerry, I see you on the video every Thursday,” and it humanizes. So, I think there are a lot of things people can do to make these deployments more successful. I think though, with all the things we’ve talked about, efficiency, convenience, the talent war problem, the ITM strategy, if deployed correctly, can be game-changing. And we’re seeing that in the interest from organizations.

Gina Bleedorn: And you touched on this, Sean, but the name of the game is that idea of perceived convenience, and really as you’re thinking about optimization and how to take cost out, but still be present, not unlike what we talked about with consolidations and closing two and opening a better one. Perceived convenience is the number one driver of acquisition, as well as advocacy, loyalty, and preventing customer attrition. ITMs are kind of a beautiful way to do that. You can get smaller. You can even go to staff-less in some cases, with remote ITMs. You can project outwards, kind of like a super ATM, and do so for a fraction of the cost of larger facilities and get more than a fraction of mind share of perceived convenience for what it is portraying outwards to the community and to customers.

Sean Keathley: We’ve long talked about this trend of smaller branches and bigger signs. Perhaps no better example of how to execute that than an ITM canopy that’s a remote spoke.

Gina Bleedorn: Yes, exactly. And in fact, Sean and I are about to go out doing across the country a series of workshops about this very thing, about what to do with the network, how to grow and expand while optimizing and considering even your name and your brand along with that. So, we’re really looking forward to this one-on-one time.

Sean Keathley: Well, Gina, exactly. We’re excited for those workshops with those CEOs. We are organizing those by asset size, so it’ll be interesting to see the themes as we talk to the different groups in terms of their overall assets, their budgets, their branch networks, and how much the trends are similar or different as you look at different size organizations. And looking forward to bringing those curated insights back to the podcast.

Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision-makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site, believeinbanking.com.