// . //  Insights //  Why Humans Are Critical To The Success Of Retail Banking

“The branch is dead,” they cried in 1980 as ATMs and telephone banking took off. “The branch is dead” they cried in 2000, when internet banking started. “The branch is dead” they cried in 2020 as COVID shut down in-person interactions. But like Mark Twain, reports of the bank branch’s death have been greatly exaggerated.

It is true that more and more people do more and more of their banking through self-service channels, such as ATMs or digital apps. It is true that customers go to branches less often than ever before. But it is also true that branches – and opportunities for human interaction in banking — still matter. According to research from the Oliver Wyman Forum, 43% of Gen Z members think branches are important — whether they use them or not. More generally, according to data from PayUK, the UK switching service, less than 0.1% of UK bank customers chose to switch their main checking account to a digital-only provider last year. Just as importantly, our analysis shows that when banks close local branches, customers leave and keep leaving — with attrition increasing by 30% for the following three years after closure.

Exhibit 1: Why people are an essential ingredient in your operations
of Gen Z say physical bank branches are important to them because they provide "peace of mind"
of UK bank customers switched main account to a digital-only bank in 2022
increase in customer attrition over the next three years when local branch closes
Source: Oliver Wyman analysis, Pay UK
In-person experience is three times more influential than digital for overall NPS
Oliver Wyman Analysis

Combining a seamless digital experience with a great set of person-to-person interactions can leverage the best of both and create greater value for the customer. However, most branches are not equipped for value-add engagements. Beyond a few shiny flagship outlets, branches are designed around volume interactions, and miss the opportunity to help customers with the moments that matter.

There are typically three main reasons why customers go to see someone in a branch: to get cash out or pay it in, to execute a specific requirement like paying a bill and, crucially, to receive support.

Exhibit 2: Why customers go to see someone in a branch

Depositing or withdrawing cash and executing a requirement make up 95% plus interactions, so it is unsurprising branches are designed and managed to provide this efficiently. Yet these needs are also declining at the fastest rate, leading to many banks closing their branches as customers rely on self-service for these elements of their banking. But customer support are the moments that really matter, and this is where access to expert, empathetic, and empowered people can make a difference. That engagement can be in a branch or over a video call. Getting it right can be a transformational moment in a customer’s relationship with their bank.

Leading banks all over the world are changing the way they position their people and branches to provide a better, distinctive experience for their customers. Not just for those customers who live close to a flagship branch, but for all customers and all contact-points. Examples include:

  • The Australian bank that recognized that it is the variance in customer service-level across the network — rather than the average service level — that really matters, investing in state-of-the-art technology to allow them to employ call-center discipline to their branch network.
  • The Dutch banks that realized that cash provision and distribution was an expensive distraction from where they could truly add value to their customers and effectively removed it from their branches, setting up a jointly owned utility instead.
  • The UK bank that identified empathy as the key difference between people and digital and is redefining its culture, the role of its people, and the shape of the network around that insight.
  • The French bank that understood that while customers valued personalized expertise, they could not always get to a branch to meet an adviser. The bank has developed a digitally enabled remote model to give customers universal face-to-face access to real experts at a fraction of the cost of a traditional model.
  • The Italian bank that embraced modular architecture. Each self-contained module fulfills a different customer need — and modules slot together across the network to optimize the footprint.

While each of these cases is different, they all fit into three basic categories: making cash and execution interactions painless both for customers and the bank; delivering a truly distinctive experience to all customers when they need support; and finally, making sure customers have access to the right people, infrastructure, and services in a way that is cost-effective for the bank.

Exhibit 3: Making the most of your people
Source: Oliver Wyman analysis

More broadly, they are all underpinned by a single guiding thought: your people are your difference. Leveraging them will create value, increase retention, and expand your customer base.