Digital banking at Bank of America and Wells Fargo - don't forget the branches

Yesterday’s look at how Barclays CEO Jes Staley is trying to rebuild the UK bank around services and technology prompted a look at how US financial institutions are tackling the same sort of issues.

When I lived in the US many years ago, I found the US retail banking process to be unwieldy and far from customer-friendly. It’s a complaint that I still hear from friend and colleagues Stateside.

So is technology and digitisation making any difference? According to the 2017 Omni-Channel Shopper Study, published by Novantas, retail banking customers in the US are increasingly stating that they either don’t use bank branches or do use them but without much enthusiasm.

Is that because the in-branch experience still sucks? Or is it more a case that the digital options are just preferable?

At Bank of America, CEO Brian Moynihan points to some impressive digital stats:

A billion digital interactions [over the past] quarter, $22.9 million active digital mobile customers, 30 million active digital customers, more and more capabilities there and becoming more and more embedded in everything that the consumer does.

This quarter we broke through the 1 billion interactions digitally with our customers. That's 1 billion in a new quarter When you look at deposit transactions you can see the 21% of our deposits are made through mobile devices today. That's the equivalent of what a thousand financial centers does. That's important for client satisfaction. It is also important because those costs one-tenth of what it cost to do it over the counter.

It hasn’t been an overnight revolution, but rather a gradual evolution to get to this stage, he adds:

This change really began around 2009, when we had more than 6,000 financial centers, 100,000 associates and about one-third less deposits. At the time, we had some digital banking capabilities but nothing near what we had now.

Getting customers to engage with digital innovation has been key to adoption:

Once customers got used to transacting, we're now using devices in a broader sense. You can see [that] in the core of 370,000 accounts were set up on a mobile device to come to the branch. When they come to the financial center, we're in better shape to serve them because they know what they're coming for and we know what they need.

There are also back-office gains for the bank itself, adds Moynihan:

The team has worked hard over an extended period to produce the result you see today. Not only have they significantly reduced headcount, we’ve done that while adding more and more sales and relationship teammates. We can't emphasize enough of the positive impacts of all these investments especially in mobile and digital have made an improvement.

But none of this is to say that there isn’t still a role for the branches, he emphasises:

People focus on all the digital activity, but the same time, we have 100,000 customers today come into our financial centers. These financial centers serve those customers well, not only helping them transact when they need too, but more importantly, help pay for their financial needs and by serving where the products and capabilities that we have with a face-to-face specialized professional.

We're continuing to invest in that branch structure and that's all on the run rate you see today. We have now built or refurbished 290 centers over the past 12 months, and expect to have completed more than 1500 by the year end 2019. In addition, we have upgraded our ATMs or are planning to upgrade all ATMs and we'll finish that by the end of 2019 as well. That's 16,000 new teams over three or four years. All that has led to customer satisfaction levels which has reached the highest level in our history.

So for the end of the day, our consumer business is an example of driving responsible growth, growing with no excuses, doing it on a right way the customer, doing it and managing risk well and importantly doing on a sustainable investment basis investing in the future or producing great returns in the current.

The Wells Fargo experience

Over at Wells Fargo it’s a similar story - and some equally impressive digital credentials being rolled out.

There are now 27.9 million digitally active customers with digital secure sessions up 5% from a year-ago. For the first time recently, there were more mobile active customers than online active customers.

Against that backdrop, CEO Tim Sloan makes technology investment a priority:

While we are focused on reducing expenses and improving efficiency, we are continuing to invest in our businesses and in particular technologies that make it easier for our commercial and consumer customers to manage their finances.

He cites a number of recent developments over the past few months to illustrate his point:

We rolled out Zelle, a P2P payment platform for 28 million digital customers, provided enhancements for our Treasury Management customers to streamline and automate accounts receivable, launched a chatbot pilot for Facebook Messenger, began the rollout of new streamlined mobile checking account openings experiences for our customers, and launched a new service for commercial card customers that allows them to upload and manage receipts with their mobile device. At the end of the first quarter, we were the first large bank in the US to offer card-free access to all of our ATMs and our customers are excited about this added convenience. As of [this month] our customers had used the new card-free ATM access code over 1 million times.

There is still work to be done, says Sloan, citing the mortage and credit card businesses as examples:

We're working on our own online capabilities. Right now, we're piloting it for our team members and so far the response for our team members who are taking mortgage has been very good. In fact has been much better than what our expectations were.

Our plan is to end to pilot that for non-team member customers later in the year and roll it out next year and we think it will be a step above anybody else in the market. On the small business side, if you're a Wells Fargo customer, you can go online and you can open up or apply for a loan and will give an answer in 45 seconds or 60 seconds or something like that.

We have more work to do from a credit card standpoint. But our goal over the next couple years is to make sure that on the consumer side, all of our products and services are available online and as many as possible on mobile, probably less likely mortgage is going to be on mobile, but we're going to improve the capabilities across the board.

As with Moynihan, Sloan seeks to play up the benefits of a hybrid model of mobile, digital and in-branch banking:

I think the branch interactions are as reflective of what's going on in terms of customer choice moving more to mobile than anything else. And so when you think about our customer interactions what I would do is step back and not only look at branch interactions, but also look at the number of online and mobile interactions.

We had a total of 1.9 billion customer interactions in the second quarter. And that's why it's important for example to make sure that we're investing in technologies. So a customer can open account on their mobile device set. And if they want to or they can come into one of our branches, that’s fine.

My take

Digital transformation of legacy banking institutiations is a challenge with global commonalities despite localised commerical practices.