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Is your bank ready to meet the challenges and demands of the digital revolution? Only two in five millennials believe bank branches are “essential” to their financial lives. The “digital native” generations that follow millennials are even less likely to value the traditional retail banking model. Instead, consumers of all age groups increasingly crave a “multi-channel” experience. This doesn’t mean the end of bank branches as we know them, but it does require a strong digital presence to complement and support physical bank locations.
For example, before a homebuyer steps into your branch to sign the mortgage paperwork, she probably started the customer journey online. From researching different types of mortgages to comparing interest rates, the more our prospective homebuyer can do online, the better.
If you don’t believe in the power of the digital customer journey, check out these insights from McKinsey & Company: “leading banks know that digital must be extended to the overall client experience” because “customers are increasingly able to compare service among banks, especially by contrasting their experience in the most important customer ‘journeys’–the process of opening an account…or obtaining a mortgage.”
Of course, a customer might also talk to a mortgage lender while at the branch to deposit a check. Then he goes home and researches his loan options on your website, reads a local home buying guide on your blog, and finally clicks the “Apply Online” button to formally begin the mortgage application process. The overall point is that you need to meet your customers where they are, which is everywhere, 24/7. Investing in your website (aka your 24/7 bank branch) should be a key part of your customer acquisition strategy.
For decades, new branch openings have been the foundation of banks’ customer acquisition strategy. This still makes sense in some markets. For example, in 2019 J.P. Morgan Chase decided to open branches in nine new markets across the country while also closing redundant and underperforming branches.
However, community banks may have more to gain from investing in their online presence than opening new physical branches. According to a 2016 branch survey from Bancology, the cost of land alone for building a new branch ranges from $300,000 to $2 million depending on regional real estate values. Add to that the average construction cost of $1.5 million for a freestanding branch and you can see that a new branch requires an investment of millions of dollars just to buy the land and build it, not to mention the operating costs associated with staff, equipment, and utilities.
In contrast, investing in your 24/7 digital bank branch is significantly less expensive overall. Typical services and costs include:
