Bank branches in the UAE come back from the dead

Bank branches are back in favour as lenders seek to rebuild trust after the global financial crisis. But now technology is making the branches smarter.

Banks are evolving with the digital age to complement the customer experience. Above, a London branch of Midland Bank in 1940. AP Photo
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Those of us of a certain age will remember the weekend or lunchtime trip to our local bank to get our financial house in order. It was an essential part of our weekly calendar - for deposits, withdrawals, balance checks or any other business. We had to set aside time to visit a bank branch, queue patiently then deal with the teller.

For some people this was inconvenient, but for banks it was hugely expensive. Rent, equipment and staffing costs made maintaining a branch a significant financial outlay. That was why banks, in the Middle East and beyond, turned their focus to call centres, online and mobile banking channels.

While there might have been questions as to whether this improved service, there is no doubt that banks were able to lower many of their transaction costs and get customers out of the branch.

So against this backdrop, why is the bank branch now making a comeback? One simple reason: trust. The global financial crisis has hit many people hard and, fairly or unfairly, the banks have shouldered a large portion of the blame.

This has eroded trust in banks and reinvigorated the need for face-to-face customer service and consumer banking relationships.

Research carried out by SunGard and Celent has shown that, in the Middle East, one of the top three factors for people in selecting a bank was branch location, despite the uptake of digital banking.

So the simple reality is that a majority of bank customers still want human interaction and as far as their banking and finances are concerned, they still need that physical reassurance that their money is safe - especially in a world where trust in banks has declined sharply. The invisibility that comes with virtual worlds makes this trust all the more important.

One Middle East bank recently tested this theory by giving customers access to tellers only through a hallway that was kitted out with touchscreen ATMs, kiosks and other digital banking devices.

There were still queues for the teller, even though the electronic devices could fulfil this same role. It is clear that customers still look to the branch as the human face of their banking relationship.

And from a bank's perspective, the branch is still a vital source in driving revenue from customers. Online and mobile are largely used as transactional channels, whereas face-to-face time is responsible for about 80 per cent of new product bank sales.

So despite prior claims that the bank branch had had its day, there is now growing evidence that branch networks are, once more, increasing in importance. This growth is very much taking place in the Middle East, with new branches and more modern and technological redesigns taking place across the region.

This leads us to the main challenge facing Middle East bank branch networks today; how do they upgrade their facilities, which have been, in some cases, neglected for many years, to meet the requirements of the 21st century and its increasingly more tech-savvy customers? Today's customers - and crucially, today's bank employees under the age of 45 - have kept pace with the astonishing technological advances of the past few years, whereas the infrastructure of the bank branch has not. Customers now self-educate a lot more and this is now exposing flaws in the old branch model, as customers go into the branch often better informed than branch staff themselves, thus negatively impacting the branch customer experience.

Banks are increasingly starting to recognise that this channel needs to evolve with the digital age to complement the customer experience across all other channels. With that, the digitalisation of the bank branch is born.

Banks are now breathing life back into the branch by getting more creative and using innovative technologies to boost the customer branch experience and complement digital channels.

In the Middle East, you can see this tech wave now creeping into the branch as many bank walls are now decorated with touchscreens and their staff "enabled" with tablets and other mobile devices aimed at making the branch experience more efficient and more enjoyable.

For example, a leading Islamic bank in Abu Dhabi is transforming its branch network using new front-office solutions to help mobilise staff by providing them with real-time access to the bank's transaction processing system and serve clients while away from physical counters. This is helping to enhance staff productivity and boost branch efficiency to improve customer service levels, respond better to customer demand and increase revenue opportunities.

Linked to this is the need to safeguard a branch's role as a sustainable source of income for the bank.

A PricewaterhouseCoopers study from December shows that the cost of a branch transaction is about 20 times higher than a mobile transaction and more than 40 times higher than an online transaction.

Faced with this kind of disparity, it is imperative that banks re-evaluate their branch strategy to improve cost efficiency. One Middle East bank has invested in technology to cut its front-office system infrastructure from 12 applications to one, a good example of how clever IT rationalisation through new technology can generate significant cost savings for the branch.

Once at the centre of a debate over their very future, it seems that banks cannot now live without branches. The physical and trusted interaction they offer to customers is still in demand and it plays a vital role in helping banks to regain trust and generate sustainable sources of income.

But banks cannot rely on the bank branch of old and must revitalise this channel to bring it in line with the digitalised world that customers now expect across all aspects of their banking relationship.

Wissam Khoury is the managing director of SunGard Financial Systems, Middle East