The Modern Mutual: What is your Branch Strategy?

Britain’s Battle with The Branches

2024 kicked off with several banks announcing branch closures, contributing to the ongoing decline of bank branches, down from nearly 15,000 branches in 1986 to fewer than 6,000 as of 2023. This situation has presented several challenges, particularly for local communities where the dwindling presence of branches has left those who depend on in-person services, including the digitally unbanked or underbanked, more vulnerable. Amidst branch closures, small businesses who depend on branches for cash deposits are challenged with managing their finances effectively. That being said, the current economic climate and considerable uptake in digital banking means branch closures are closing with some reason. However, insights drawn from Woodhurst’s recent report ‘The Modern Mutual: What’s your strategy?’ highlights how Building Societies are committed to keeping their branches open. As called out by the BSA, maintaining a branch network is no doubt visible evidence of a ‘tangible commitment’ to communities, and can help renew the sector’s community-driven purpose (BSA Winter 2023 Society Matters). So, how are we going to ensure that Building Societies continue to play a vital role in their communities in a sustainable way?

Opportunity Awaits

Building Societies have a clear opportunity; the digital age has witnessed Building Societies embrace digital transformation and harness an improved omni-channel experience for their customers – utilising branch strategy and in-person interaction is a key USP for Building Societies. Improving their omni-channel experience, Societies nowadays are adding digital channels with relative ease. This enhanced offering, coupled with maintaining their traditional branches, offers them an even stronger USP. We have already seen the sector share of branch footprint increase from 17% to 38% since 2014, and this is expected to continue on an upward trajectory.

Optimising your Branch Strategy

A successful branch strategy for Building Societies is founded on member-first, purpose led delivery. As transformation goes, it is not about closing branches altogether, but instead innovating the branch into a modern physical entity – one that engages with its members, aided by new technology to bring the member-first, mutual ethos to life.

Some of the key ingredients for a tech-enhanced branch strategy include:

• Considering the core mission and purpose of the Building Society; asking “what do our values and what we stand for mean for the branch?”
• Serving increasingly diverse customer needs, such as being able to pay cash into multiple accounts with different providers
• Adapting to and incorporating technological trends that enhance the branch experience for both colleagues and members. Embracing new technologies (such as self-service teller systems) to improve the overall branch experience for both colleagues and members, with greater convenience and efficiency at each touchpoint

“We are committed to the branch network, I believe it will be a differentiator. We are open to finding ways to achieve a sustainable branch strategy, focusing on flexibility and adaptability” – Steve Fletcher, CEO of Vernon Building Society

However, implementing new technology into the branch and the affected workforce is easier said than done. Building Societies cannot just leap into the market and pluck new technology vendors out of thin air. Upfront investment should be made to really understand the customer journeys and processes that need to be enhanced. Following this, Societies can pick technologies with confidence and not end up with a ‘spaghetti’ IT estate that costs way more than it should.

Meanwhile, it is important to note that the branch strategy should not reduce itself to a technology-only approach. We should view branches as tech-enhanced so that members can benefit from an improved, smoother experience, without losing the human touch.

“Building Societies can thrive in the next 10 years by embracing digital transformation, forming strategic collaborations, and retaining their focus on serving members and communities. Building Societies need to adapt to the changing preferences of customers while maintaining trust and reliability.” – Will Carroll, CEO of Monmouthshire Building Society

With these ingredients, there is a recipe in the making for optimal branch strategy. To accomplish this success, at the very least as a Building Society you must:

Know Your Members: A mapped out, ‘best in practice’ experience for members based on your product set and current capabilities, focusing on what members want from their branch experience. This ‘optimum’ prioritises convenience in ways that preserve the human touch to continue delighting members. Note that new and unique branch experiences can offer this. Branches are more than simply executing transactions. They can be community hubs, places for collaboration and fostering social initiatives. The branch and digital experiences should be fully integrated and feel like an extension of one another, so that digitisation can assist existing services.

Automate in the background, humanise in the foreground: Automation is often viewed as the dirty word of modernisation, but it doesn’t need to be. By automating low-value tasks, colleagues have more time for dealing with their members’ needs, satisfying an increasing demand for more attention and less friction.

Adopt a unified customer view underpinning all channels: A single and complete view of the customer depends on:

• Simplified product onboarding across channels that helps to minimise and streamline data entry
• Seamless identity verification and authentication approaches that are connected across channels, blending the physical and digital experience for members
• Instant product access and journey parity across channels – this is no longer discretionary for customers; the ability for your members to access and manage their products consistently across all channels is an expectation.

How do we continue to deliver a personal service if we’re encouraging more people to use our app?

This is a common question asked in boardrooms. As new technologies are introduced (through an app or in-branch), Building Societies must be conscious of the dangers of losing sight of the human element of customer service. The challenge for Building Societies is attracting customers who expect modern digital experiences, whilst retaining those who value an in-person experience. Yet, this ‘recipe’ for branch strategy can ensure your Society is future-proofed, meaning this key boardroom question is not left hanging.

“We’re invested in branches because we’re not driven by profit, we are driven by social purpose to offer choice to our members. We’re attracting new members by opening new branches based on detailed analysis of how to serve the social purpose and remain profitable.”- Simon Taylor, CEO of Melton Building Society

Despite the changing scenery on the high streets, Building Societies can execute a branch strategy that continues to embed community activities into its core ethos. There are many examples now of the opportunities to introduce innovative approaches into a branch strategy: from the alternative ‘branch pods’ trialled by larger banks, to several Building Societies embracing a OneBanx style solution and exploring the shared banking solutions that could be especially crucial for remote areas with minimal remaining branch presence. Indeed, branch closures could prompt high street bank ‘hubs’ that provide multi-bank services.

In the face of change, it is readily apparent that a successful branch strategy is not just an opportunity, but a duty of all Building Societies to serve their community, members and society at large.

At Woodhurst, we believe that everyone should have access to better financial solutions, and we recognise the integral role that the Building Society sector plays in delivering this in the UK.

Read our latest report, ‘The Modern Mutual: What’s your strategy?’ where we highlight how Building Societies can maximise their role in the financial services sector, throughout their transformation journey.