Having made the claim many times that banks are not great at multichannel but excel in a single channel, I got into an interesting debate last night with the CEO of one UK bank.
He was asking whether branch-based banking had a future.
I said branches have a limited future, with the megastore branch being the modus operandi and then automated satellite stations for transaction servicing.
He disagreed and reckoned that the only need for branches today is purely down to our culture and background.
That’s why boomers, Gen X and Gen Y like branches as they were raised with the idea that that’s where you went to do banking.
Even then, most adults move towards self-service after age 35, and the branch is therefore only relevant for the 18 to 35 year old generation.
With millennials growing up in a world of mobile internet, he believed that the next generation of customer would not understand why a branch was needed at all.
Maybe, although I replied that branches are required for complex product sales, like mortgages and pensions.
He disagreed and said that video servicing would take over much of the human contact that currently takes place in a branch for advisory services and complex product sales. So branches will not be needed.
I actually concurred, as I’ve said this before, although we both then could not work out whether branches are purely required by most people as a reassurance of a physical place to go to get money out in a crisis.
The most interesting aspect of the debate was the idea that rather than having multichannel banks, we should consider multibrand banks that brand by channel.
Some banks have already started such process – HSBC with first direct, albeit that was by accident due to the acquisition of first direct through Midland Bank; Cahoot! with Abbey (now Santander); and Smile with Cooperative Bank.
Lloyds is a multiplicity of brands – Scottish Widows, Cheltenham & Gloucester, Halifax, Bank of Scotland, Clerical Medical, Birmingham Midshires … – but most of these are the result of acquisitions.
But the idea of a bank that brands by channel is not yet a clear strategic market move, and maybe it should be.
A bank that has a branch based bank brand (HSBC); a call centre based bank brand (first direct); an internet based bank brand (Smile); and a mobile based bank brand (mobank).
Now that flies directly in the face of a previous assertion on this blog, that there is no channel separations just digitally augmented realities.
The challenge with that assertion is that each bank brand is launched at a different moment of time: branches (pre-1970s); call centres (1980s); internet (1990s); and mobile (2000s).
Each launch therefore has a layer of legacy, which is the challenge of the traditional branch based bank to keep up.
The pre-1970s branch based bank is hamstrung by heritage. Even the 1990s internet based bank is challenged by mobile, as their existence is not designed for that channel.
Branding by design for channel is possibly a way to ensure that banks can keep up with innovations, as each iteration of the bank will be launched with fresh infrastructure and a fresh start.
The downside is obviously that the cost overhead of new brands and new banks is onerous, but at least it means: (a) each bank is fit for the future; and (b) if the bank fails, it can close down the failing parts far more easily.