All change: How digital is changing the High Street bank branch
Digital banking probably won’t kill off physical bank branches – but the role of branches is certainly changing. We spoke with Nationwide and Handelsbanken about the future of the High Street branch.
Handelsbanken branches aren’t like the other UK High Street bank branches. This is immediately clear as I arrive to visit the bank’s Holborn location: 77 Kingsway has no exterior sign revealing what’s inside. Reassured by the receptionist, I sign the visitors’ log and make my way to the first floor, where branch manager Toni Virtanen comes to the door, alerted by the doorbell. Most customers make appointments before visiting the branch, Virtanen confirms, but they do get some walk-ins, and he’s always happy to show people around.
This branch, covering the area around London’s Holborn, is in a classic office building, but around the country you’ll get all sorts – some branches are even in Victorian houses. The otherness of Handelsbanken’s take on branches continues inside: there are no cashiers here, nor any queues; instead the Holborn branch is fully open-plan with bankers to the left, and a welcoming Scandinavian-style kitchen to the right. This is one of several nods to the Swedish mothership – Handelsbanken is a proud Swedish institution from 1871 – although the UK operations are run as a fully British bank.
If you’re not familiar with Handelsbanken, it’s possibly because they don’t advertise. But those who’ve heard of them will often know they’re lauded as one of the few UK retail banks currently opening branches, as opposed to closing them. Handelsbanken now has about 200 branches in the UK, after three years of having opened about 20 every year. Because as far as Handelsbanken is concerned, reports of the death of the physical bank branch have been greatly exaggerated:
“The industry seems to believe that customers either want digital, or they want physical banking. That, in my experience, isn’t the case at all,” says Virtanen. “People will want the convenience of a good digital offering, but that doesn’t mean customers don’t want to be able to speak to somebody who can make a decision.” In other words, the Handelsbanken app is for when you want to do things like make transfers, but if you lose your card, need a mortgage, get married, or someone has died, you have the branch: “That’s when you want to have a bank that knows you and that you can have a conversation with, as opposed to ending up in a call centre somewhere,” says Virtanen. “I don’t think the digital channel in any way takes away from the type of physical offering we have.”
Back to personal banking
The idea behind the Handelsbanken approach is that the bank branch is far from dying – but its function is changing. The fact that Handelsbanken doesn’t handle cash (they have arrangements with other banks for your occasional piggy bank pay-in needs) is a big hint: these branches are meant to be places for meeting bankers to talk about financial decisions. “Our branches tend to have experienced bankers with the ability to give advice if you want a mortgage, or if you’ve inherited some money and want to have a conversation about what to do with it,” says Virtanen. “The day-to-day payments, that’s very well taken care of by the digital channel. But when making the biggest financial decisions, people tend to want to have a conversation.”
Handelsbanken has carved out a niche for itself in the UK by offering something of a return to the old-school personal banking relationship. Each branch of Handelsbanken operates under the so-called Church Spire principle, meaning its manager has the autonomy to make lending decisions and set pricing, within a set framework. “We believe the manager closest to the customer is the one who best understands the risk. I don’t think somebody sitting in an ivory tower will understand my customer better than I do,” says Virtanen, who tries to meet and speak with all the branch’s customers personally.
“Part of what I love about our small patch is that I can walk across it in about half an hour,” says Virtanen. He points to the map on the wall, outlining the branch’s coverage area: east to west from Charing Cross Road to Farringdon Road, and then north to south from Euston Road to the Embankment. “We had a visitor from Sweden a few months ago. Normally when we have visitors we walk the patch, to show them the area we cover from the top of our Church Spire. That day we bumped into four customers on the way!” Because we might be in the middle of London, but for Handelsbanken, this is still genuinely local banking.
Nationwide’s digital branches
For Nationwide, knowing the face of each customer may be a stretch; as the second-largest provider of mortgages and savings products, the Building Society has a relationship with one in four adults in the UK. But the changing role of the bank branch is very much a hot topic, as Nationwide recently announced plans to invest £500 million into its 700-strong branch network over the next five years. This will mean better customer access through new locations and opening hours, more welcoming branch layout, plus new technology tools:
“We’ve looked at the services we traditionally provide and at how that’s evolving. Clearly, customers’ own technology is increasingly doing the heavy lifting of traditional transactions that were previously processed by people. Talking to both colleagues and customers, [we’ve found there’s] quite clearly a growing need for what we’re calling help, guidance and advice,” says Barnaby Davis, Divisional Director of Group Retail Strategy at Nationwide.
Branch transactions across all banks fell by 6% last year, according to the British Bankers’ Association, as the availability of digital tools mean people don’t walk into their High Street banks to make payments quite as often as they used to anymore. But what people very much still do, says Davis, is drop into branches and ask to speak to advisors about things like mortgages and investments. Often, though, advisors are busy and people are asked to make an appointment or come back later – this is the kind of thing Nationwide wants to fix in its new “help, guidance and advice” approach to branches:
“We’ve been investing heavily in video technology. We’re the first financial organisation to do this at scale, and we’ve just gone live at our 250th site,” says Davis. This means the customer who walks in without an appointment is increasingly likely to be able to speak to an advisor right away, via the high definition video link. The goal is to connect all the branches, so a customer in Barnstaple may speak to an available advisor in Brighton: “You’re fulfilling a need the customer has, which is to talk to somebody instantly.” Asked if this video connection could be made from home too, Davis says this is something they’re looking into, but the branches have better technology: “We want to make sure we create the highest quality experience. … If you’re providing high-quality and ease, the customer very quickly puts the fact that it’s video behind them and relaxes into the dialogue.”
The human element
Nationwide is also working on creating a more informal atmosphere for its in-person branch interactions: “Customers don’t always want to be in the office. They might find it claustrophobic, almost too private. They’re happy to have many of their discussions in a more casual way, on a settee or over a lunch table. It turns into a nice informality, from something that’s previously been very formal. We’re seeing a huge customer reaction to that.”
Because there’s a human element to banking that’s being ignored in the so-called death-of-the-branch dialogue, says Davis: “Nobody talks about the social and ritualistic side of banking. A lot of people equate borrowing money with seeing somebody face-to-face, for reassurance.” Davis cites himself as an example of this: he’s a prolific user of digital banking, but he also has a financial advisor and uses branch services. “Even the tech-savvy digital native often looks for face-to-face advice over important financial matters, and reassurance particularly around affordability and borrowing money.”
The conversation around the future of branches is often pegged as a competition between physical and digital space. But if Handelsbanken and Nationwide are to be believed, the future of the two are intrinsically linked, as each side compliments the other to provide a full service. Davis’ job description as Divisional Director of Group Retail Strategy is a nod to this fact: he’s charged with branch design and branch technology, as well as digital and mobile banking. This is a deliberate mo ve by Nationwide: “The development and transformation of the branch and digital go hand-in-hand. If you separate those [jobs] in two different people, you’re instantly going to get a disconnect,” asserts Davis. “By orchestrating the strategy, and having the ability to improve the development of both branch and digital, we can develop [both] services much more coherently.”