You will notice things are subtly different when you go into a bank branch, just like Alice in Wonderland did when she entered a strange new world.
Knowing when the bank changed will be hard to discern, but you will recall how it used to be, and see how it is now.
I recently passed through the looking glass when I entered a bank branch to pay in a check. I was met by an assistant who directed me to the right machine to use. She also offered to help in case I had any challenges using it. Yet it was not that long ago that, in a similar branch, upon entering a machine guided me – by flashing a red LED number – to a bank teller who was free to handle my request.
We have all taken a very small step into this new world. Online and mobile banking are normal and branch automation is in various stages of advancement. The reversal of roles between teller and machine tells us several things. The first is that jobs in branches – like those in other parts of the finance business – will become far more supervisory as automation kicks in. Costs will fall and standards of service will become more consistent.
For example, we just saw Lloyds Bank announcing plans to shrink hundreds of its branches in size, even boarding up some teller counters. The new ‘micro branches’ will be staffed by just two people, who will help customers to use machines, according to BBC News. Lloyds said the reason was "a profound change in customer behaviour," which has seen more transactions move online.
A second is that automation is a gradual process and that firms will need to manage their evolution carefully. Imbalances will occur as certain parts of the transaction lifecycle become more automated than others, and those points are where operational challenges can occur.
The third is that we as an industry have come far by taking small steps. In the UK, online banking surpassed branch banking as the most common interaction point in about 2013. That is just over a decade since online banking began in earnest, a point at which many banks tried to close branches, thinking they would become irrelevant overnight.
Next step forward
The state of the branch today speaks of “faster horses,” to borrow Henry Ford’s apocryphal comment. Its role is the same as it was in the days of fully manual branches and while many of the processes have been automated, banking has not changed, just the methods applied to making it happen.
The analogy with the fast horse versus motor car is apt. Many firms are still making their existing business models go faster instead of applying a digital mindset to technology and the business. I believe it the major jump to “building cars” is still to really take place. Yet we should not underestimate the change that high street banks and institutional businesses have achieved so far.
For senior management there is a lesson from the branch closures of the early 2000s, their subsequent reversal, and the state of the branch today. Change cannot happen without the customer. The digital bank has already been conceived in their minds; keeping pace with their ideas can guide a bank’s own speed of change and innovation.