The industry gossip about bank branch closures is different now. S&P Global reports that US banks and savings banks closed more than 3,300 branches in 2020 and opened just over 1,000. The number of branches has been declining since 2013, it’s true, but COVID branch restrictions have led to an increase in digital adoption of banking services, further reducing branch visits.
But you’re not reading this to get a branch swan song overhaul. The industry adapted to this decline long before the start of the pandemic. And yet, the habits of bank branch customers die hard. The digital revolution, even during a pandemic, has not been universal. Digital banking newcomer Oxygen conducted a study that found that nearly 70% of Americans visited a bank branch in the past 12 months. (Dig deeper.)
No wonder bank branch closures can still lead to significant attrition rates of accounts and balances.
Retention can’t be an afterthought
The banking industry therefore faces an interesting dilemma: Branches are disappearing, but banks and credit unions have not been entirely successful in getting customers to adopt all the digital channels that allow them to skip the branch. The inability to retain customers at closing branches indicates they are failing this “digital adoption” test.
Retention has important ramifications for small financial institutions in particular. Reduced liquidity coverage and loan-to-deposit ratios can compromise an institution’s ability to grow and ultimately remain independent.
While my experience working with some of the largest US banks is representative of the larger landscape, most financial institutions struggle to retain their customers when they close a branch. Although the industry allocates millions of dollars to attract customers each year – estimates put the cost of acquiring a single new customer in the hundreds of dollars – the marketing department often doesn’t view loyalty as their concern. They see it as an operational / customer service issue.
This is not true when a branch closes, however.
Notifying customers of the location of the next nearest office is not a retention strategy.
Yes, some financial institutions are deploying resources to rescue priority customers, but there is usually no comprehensive retention manual. Marketing and operations often operate in silos, and that doesn’t magically change when a branch closes. But you have to.
Design a successful branch closure campaign
Previously, closing a branch inevitably forced a certain percentage of customers to cross the street – proverbially or literally – and bank with a nearby competitor. However, as more and more institutions close sites, this scenario is less threatening. Many financial institutions now have fewer branches. And so, more and more consumers will wonder: if I have to drive further to get to a branch, it doesn’t matter where I do my bank, which offers the best digital experience so that I can completely ignore the branch (or as much as possible) ? The financial institution that successfully answers this question, while also cross-selling, is positioning itself to retain customers and win in the market.
Ideally, financial institutions should start planning their loyalty campaign months before the required 90-day branch closure notice is sent out.
Regulators require banks to notify customers 90 days before a branch closes, and marketing departments must design loyalty campaigns around that timeframe. Analyzing branch data and developing content and other marketing materials can take eight weeks or more, so it’s critical that operations communicate bank closings to marketing as soon as possible.
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5 questions to ask well before a branch closes
A multi-touch, cross-channel engagement campaign is the most effective way to engage customers in both digital services and so-called sticky products. But that requires having the right analyzes. Have your data team review the branch that is scheduled to close and answer these five questions:
- Which clients visit the agency the most? Separate them by the number of times they’ve visited in the past 30, 60, and 90 days.
- Among the most visited customers, which services did they use in the branch?
- Among clients who have often visited branches and used services that could also be performed digitally, what is the estimated share of the bank’s portfolio for this client?
- Which of these customers does not use mobile banking and / or online bill payment?
- What is the value of the lifetime relationship of each client who has visited the agency in the last 30 days? (If your bank calculates this for customers.)
Answering these questions will help prioritize the target list. For institutions with limited budgets, more effort should be made to reach the customers who visit often and provide the greatest relationship value. Customers who visit branches less often and use less banking services would rank higher on the priority list.
When the budget is available, using a data solution that can provide detailed segmentation of customer value will be helpful. As an example, it is now possible to accurately estimate portfolio potential at the client level, creating an opportunity to assign each client a current and future revenue opportunity.
Focus on digital and loyalty products
Once the target list is identified and prioritized, it is important to reach customers multiple times through multiple channels, including direct mail, email, online banking prompts, ATM screens, and even calls from a banker. .
Campaigns should be designed to encourage adoption of digital services such as mobile banking, mobile check deposit and text alerts, as well as cross-selling services that build loyalty, such as direct deposit, personal loans or a reward credit card.
Bank marketing departments have a unique opportunity to get involved in the agency closure process, if they are not already involved, and to raise awareness of all available digital services. They can deliver analytics-driven mission-critical programs that drive digital adoption and cross-selling while improving retention.