Are Retailers Outperforming Banks with Transformation?

By: Glory and NewGround

In today’s fast-paced society, retailers are making strides and banks need to take notes. Although these are two completely different industries, banks can learn a thing or two from retailers that are creating amazing in-store experiences. “Back from the Dead: What Retailers Can Learn from Toys R Us’ Comeback,” discussed a very important “epidemic” in the retail industry called the Retail Apocalypse. Retailers who are unable to keep up with the demands of today’s shoppers are forced to close their doors for good. The same can be said about the banking industry – let’s call it the Banking Apocalypse.

According to the European Banking Federation, the number of branches has fallen by 21% since 2007, or by almost 50,000. Since 2007, this branch network contraction was led by three countries: Spain (down by 18,020 units), Germany (down 8,769), and Italy (down 5,800). Banks across the U.S. have closed nearly 9,000 branches this decade. After the financial crisis and after several mergers & acquisitions, a real rationalization of branch networks took place. Financial institutions tried to focus on the profitable branches while maintaining ongoing investments in digital banking, reducing the number of employees significantly. Nicholas Comfort, from Bloomberg highlighted last December: “Banks face biggest job cuts around the world, 77,780 culled in 2019. Banks in Europe, which face the added burden of negative interest rates for years to come, account for almost 82% of the total. The 2019 cuts bring the total for the last six years to more than 425,000.”

In the latest Glory Podcast Episode, “Ready for Transformation?” Kevin Blair, President and CEO at NewGround, offers insight on why banks need to level up and focus on transformation, and explains how to tackle the banking apocalypse. Kevin believes the worldwide financial services industry is struggling to evolve their retail delivery strategies as rapidly as the consumers are evolving, and says there are a couple key primary drivers setting the stage for why any financial institution needs to change.

Evolving Within a Digital Society

Consumers and businesses communicate a lot differently now than they did several years ago. There are many factors influencing this change in communication, which is primarily driven by the emergence of new technology. Regardless of the industry, technology has driven changes in consumer behavior and expectation dramatically in the last couple years.

In the retail industry, businesses have seen a rapid change in consumer purchase behavior just in the last year alone. A survey from the National Retail Federation found that 189.6 million U.S. consumers shopped online for the holidays in 2019, which was a 14% increase from 2018.  

And banks are not off the hook with this. A study from U.K. Finance found that over two-thirds of British adults are banking online. Forecasts from the same study predict 71% of banking customers will use mobile apps to bank, amounting to a 55% decrease in branch visits.

Consumers are beginning to migrate their same expectations for retail to their shopping behaviors for products and services of their bank.

Consumers are now expecting to have state-of-the-art technology built into their banking experience, such as automation and omni-channel integration. It is up to banks to strategically implement new technology and innovative branch designs to entice their customers to visit their branch more often. The bigger issue here is, how quickly can banks do this?

“Bank Speed” vs. “Retail Speed”

One of the larger issues is that most financial service companies have not transformed and are moving too slow. Banks, credit unions, and financial service industries are moving at “bank speed,” while consumers are moving at “retail speed.” This has created a gap between what consumers expect and demand versus what banks are able to provide.

Now, just like retail, consumers still like to experience and receive the benefits of being in-store, such as face-to-face interaction. According to a 2018 study from Celent on the future of banking, 77% of consumers look to head into their branch to resolve complex issues and to discuss financial topics in-depth. Due to these preferences, it’s apparent that bank branches are an important pillar in any financial institution’s strategy.

Whether banks like it or not, this consumer demand is creating a need for change in the banking industry. The harsh reality is that banks are not moving fast enough. Kevin believes that it is those banks who implement heavy transformation strategies that are going to create a significant competitive advantage in the future.

For example, banks such as Santander are changing the game with their innovative Santander Work Café, which allows customers to receive personal banking services like they would at their branch, but with a twist – they can enjoy a fresh cup of coffee while they speak with a banking representative. Alongside state-of-the-art banking facilities, the Work Café offers free co-working spaces and meeting rooms for local businesses and entrepreneurs, as well fast and secure free-Wi-Fi. It aims to create a vibrant hub for nurturing new business ideas and fostering collaboration in a relaxed atmosphere.

Now, how can you get started with transformation as a bank?

Transformation begins with a strategic plan. Banks, who tend to focus more on internal operations, need to branch out and establish strategic partners with other entities who understand the vision and can assist with implementing that vision quickly. By doing this, banks can keep up with consumer expectations without falling short. This is just one of the many tips from Kevin Blair. To find out more, listen to Glory’s newest podcast episode! There, Kevin dives into more detail on the need for change and offers tips and advice to bankers who are looking to invest in transformation.