'Phygital banking’: the new normal in a post-COVID world?
‘Digital first’ has become increasingly embedded within society – and banking is no different. But while many customers will be unaffected by bank closures, branch rationalisation in the digital era must not leave those who are unable or unwilling to use other channels behind.
‘Digital first’ has become increasingly embedded within society – and banking is no different. But while many customers will be unaffected by bank closures, branch rationalisation in the digital era must not leave those who are unable or unwilling to use other channels behind.
Professor Markos Zachariadis, Greensill Chair in FinTech and Information Systems at Alliance Manchester Business School, believes the physical branch network can be designed to complement a digital banking core. “There is still value to be added by offering a physical branch and a personal interaction. The physical interaction can, however, be much enhanced by technology,” he says
Digitising bank branches themselves is one good option. If a branch can be presented as an attractive space that provides one-to-one connection, as well video conferencing and other self-service options then people are more likely to use it.
Specialist branches are another. The Bank of Scotland opened a state-of-the-art ‘flagship’ branch in Glasgow in late 2019. The branch has a business hub for small business owners to access expertise and network. There is also an on-demand home buying service and regular events run in partnership with companies including Google and Microsoft to share expertise on other topics such as digital skills for children.
Hailfax also launched a specialist home buying branch in 2019 in London, which hosts lunchtime and before/after work events on a range of topics. It also offers food and coffee within an informal space to encourage social interactions as well as professional ones.
Thirdly, Barclays Eagle Labs is building a platform to connect the UK’s entrepreneurial ecosystem and drive digital skills development. The idea is to build a local community in each branch that can benefit from a collaborative co-working and office space, structured mentoring and a curated events programme.
Post-pandemic, bank branches could not only offer their space to specialist services, but also site themselves within other community areas such as coffee shops, libraries, post offices, gyms and more. Banks would share the cost of the space as well as increasing visitor numbers to the branch – driving satisfaction, loyalty and long-term revenue for the bank.
Zachariadis comments: “Embedding a bank branch within another physical location where there is footfall and where people are likely to need banking services is a good idea, but banks need to work out where such locations would be.”
Another option is for banks to pool resources and instead benefit themselves and customers by creating ‘white label’ branches. One such offering is OneBanks, currently in pilot form. The idea is to provide a kiosk within a community space – initially Co-op stores. The kiosk offers the interface which then connects to the underlying bank brand. Much like paying in a cheque at a post office that it then redirected to the customer’s own branch.
It works for customers in that they can carry out day to day banking within their community and for banks it works as it provides a means to provide a service on a cost-efficient basis.
Clearly there are lots of potential options to be looked at in more detail and assessed for viability.
“Although the phygital strategy has yet to be fleshed out, it is clear that there will be a role for banks branches alongside digital,” Zachariadis concludes.