Banks must rethink digital banking says Accenture

Consumers are defying predictions about the death of the branch

Surprising changes in customer behaviour suggests that banks need to revisit their approach to branch banking and digital services, according to a new study by Accenture.

Despite years of speeches, books and articles arguing that the digital bank is the future and that the decline of branch banking is irreversible, the Accenture figures report the opposite of what might have been expected: customers are using bank branches more often, with 52% of customers now using a branch monthly compared to just 43% three years ago.

Less surprising was the evidence that mobile banking is still increasing, with 27% of consumers now using mobile banking at least once a month compared to just 10% in 2011. Internet banking seems to have reached a plateau, with 80% banking online every month – a figure unchanged since 2011. Likewise, telephone banking has changed little, from 10% in 2011 to 12% in 2014.

“The rising use of branches presents a real opportunity for banks to connect with customers on a more personal level,” read the report. While self-service transactions now account for the majority of activity, Accenture notes that many customers making deposits prefer to do so through a customer advisor than an ATM. At least one customer in five performed a ‘value added’ transaction on their last visit, meaning that banks have a good opportunity to cross sell.

Surprisingly, it is younger consumers, especially 18 to 24-year olds that make the most use of branches. Of these, nearly half (48%) used their visit to make or set up a payment, 46% got information on a product or service, 52% changed their details and 46% opened an account or purchased/renewed a financial product.

Banks have long debated the best way to handle changing consumer behavious. It has been clear for a long time that mobile usage is in general increasing, while the branch had been in decline and branch numbers have fallen. In response, new ‘digital only’ banks such as Moven and Holvi have appeared, offering customers branch-free banking and opening accounts over the internet. Even long-established businesses such as Nationwide Building Society allow customers to sign up for an account without ever visiting a branch. However, the Accenture results appear to call into question how viable a digital-only strategy really is.

When customer responses were analysed by age range, those aged 25-34 were the most likely to react positively to a ‘purely digital’ bank with no branches – 33% of them were strongly in favour, while only 18% were strongly against the idea. However, younger consumers aged 18-24 did not agree, nor did older customers aged 35+. In both cases, the number strongly against digital-only banking was higher than those in favour (33% and 36% against, 22% and 24% in favour).

The Accenture report also considered customer responses to two other kinds of bank approach: the ‘everyday’ bank that offers both banking and non-banking services through partnerships with utility companies and retailers, and the ‘socially engaging’ bank, which encourages customers to share comments and feedback, engage with other customers and uses social media data to offer deals and services.

In response, customers delivered a stunning rejection of the socially engaging bank, with the strongest opposition coming from those aged 35+, of whom 72% were strongly against and just 6% strongly in favour. The highest level of support for the concept came from consumers aged 25-34, but even here far more of them (40%) were against than in favour (18%).

The idea of the ‘everyday’ bank received much less opposition, with a majority of young and young-ish consumers in both age ranges in favour (18% and 29% in favour, 11% and 13% against), although it was still not popular with the over 35s, who responded 34% against and 14% in favour.

Significantly, despite the assumed digital trend of the past few years the results also revealed that customers  are much less willing to interact through some virtual channels than they were two years ago, with instant message, video chat and kiosks declining in popularity. The fall was significant – for example the percentage of customers that would like to interact via instant messenger fell from 32% to 22%, and video chat fell from 21% to 16%. Video kiosk also fell from 19% to 11%.

Despite the reduction in support for these kind of services in the survey, they are increasingly being rolled out by financial institutions. For example, earlier this year Nationwide Building Society began rolling out video banking services across the UK. The society is not alone – similar services, especially video banking kiosks, have been rolled out by Citi and Standard Chartered in Asia, and video banking is also gaining ground in the US.

The report also noted the enthusiasm of customers to share their personal information with their bank in exchange for better value (44%), cheaper rates (40%), more efficient services (34%), and tailored services (23%).