Bank branches still have a place in digital age

BANKING couldn't be simpler for customers these days: Just open an app on a mobile phone or log onto a website and you are all set, but banks themselves still see bricks and mortar as an opportunity to cash in.

Over the past 15 years, physical branches have gone from being the main conduit of banking activities to just one of many channels that customers can use. Still, Singapore lenders have been opening more branches and investing heavily in them.

OCBC has 56 branches, up on the 50 it had 15 years ago, and it has spent $88 million since 2007 to revamp them.

United Overseas Bank has 67, up from 54 in 1999, while DBS Bank had about 80 branches in 2011 and has added 10 more to its network since.

Citibank Singapore, locally incorporated in 2005, has gone from four branches then to 23 today.

This runs counter to the trend in many developed markets, where changing customer habits in the digital age coupled with the crippling effects of the 2008 financial crisis have forced banks to eliminate their physical branches.

In Europe and the United States, banks are shuttering branches at a rate of 1 to 2 per cent a year.

It may seem counter-intuitive that local lenders are going against the international trend.

After all, they have also been investing heavily in digital banking services. They have online portals and countless mobile apps for everything from redeeming credit card rewards to finding out how much a particular property might cost.

But DBS' head for its consumer banking group in Singapore, Mr Jeremy Soo, says that even though fewer customers now visit branches for simple tasks such as transferring cash or paying bills, increasing numbers are dropping by for other more complex needs.

"This is partly because of regulations - if you want to invest in a unit trust or take up an insurance plan or discuss mortgages, you would need to do it at a place with a registered banking licence. This reinforces the need for a branch to be there for customers."

OCBC's head of consumer financial services in Singapore, Mr Dennis Tan, adds that when online banking was in its early stages in the late 1990s and early 2000s, the industry thought it would spell the death of branches.

But over the years, many banks have come to realise that they still need branches, but that they also have to rethink the purpose of having them.

"Their role is now different, their offerings are different, and customer behaviour, what people look for from branches, is also different," says Mr Tan.

Using branches to drive business

SIMPLY put, the primary purpose of a branch in the digital age has to be bringing in money for the bank, analysts say.

"You want your expensive facilities to be used for value-added services, not simple transactions," says Mr Philippe Chassat, a partner at management consultancy Roland Berger.

In many developed markets, banks have had to redesign their branches so that tasks such as withdrawing cash or updating bank books, which do not bring in revenue for the bank, are all done at kiosks and machines in a separate area to the side, like an "ATM square", he adds.

"But the heart of the branch is for discussion and advice."

AT Kearney partner Henri Guedeney agrees, saying: "In the US and Europe and markets like Singapore, where bank profit margins are thin, branches are a heavy cost to support as rent is high.

"In some European banks, they are even removing ATMs and completely refocusing on advisory services."

While Singapore banks are not going to such extremes, they have had to adopt various strategies to ensure that their branches stay relevant and profitable.

One of them is simply by designing their branches differently.

As early as 1994, UOB realised that it had to have a fresh approach towards branches, because as Singaporeans were accumulating more wealth, increasing numbers of customers were becoming more sophisticated and expected the bank to provide tailored financial advice. This led to its Invest Shop, says head of group channels Wendy Teo.

The open-concept layout of the Invest Shop was a world away from the metal-barred banking counters of the past and the bank officers were trained financial advisers.

"This changed the way that our customers engaged with the bank. Customers in Singapore now understood that their bank was so much more than a place where they could keep their money but also their partner in managing their wealth," Ms Teo says.

Different branches for different folk

OVER the years, as Singapore became a financial and wealth management hub, banks had to take such concepts even further.

Today, it is all about segmentation - creating different types of branches to cater to different types of customers.

There are now branches meant just for small business owners and there is even one, run by DBS, solely for work permit holders.

Mr Michael Toh, managing director of furniture designer Air Division, says he appreciates having a dedicated branch to go to for his corporate needs.

It saves him time as he does not have to queue up with retail customers but he feels the banks could do more to provide that personal touch beyond the branch.

"The number one thing I would want from my bank is if my account manager would call me once in a while. As an SME we always need financing and other advice, and I think it would be good if they could reach out to us more regularly," he says.

Banks also run various types of branches to cater to different segments of retail customers.

At the highest end of the spectrum, there are private banking and wealth management branches for the wealthy, such as the Citigold private client centre at Paragon which caters to customers with investable assets of at least $1 million.

"The whole set-up conveys luxury, privacy and exclusivity," says Mr Umang Moondra, head of Citibank Singapore's retail bank.

The branch is hooked up with video-conferencing facilities so that clients can have conversations with research analysts or investment experts who may be overseas.

In short, it looks quite different from the ones that Citi operates in MRT stations, with their open, casual layout, where customers can apply for credit cards and do other banking activities on the go.

OCBC has a range of premier banking branches each designed and decorated in a different style. The Thomson branch looks like a New York loft apartment, complete with a wall-to-ceiling bookcase and a coffee bar.

And these premier banking branches look almost nothing like the bank's family-friendly Sunday banking branches or its Frank stores, targeted at tertiary students.

Mr Tan explains that segmentation helps to drive business. Take the Frank stores, which look just like regular shops in a mall.

"If it were a fuddy-duddy brick-and-mortar branch, we wouldn't have young people coming in. Young people like being able to browse, touch, ask questions, and the retail concept of the Frank stores allows that. And we see them coming in and opening accounts."

Starting specialised Sunday banking branches has also been big business for OCBC, which has seen nearly 50 per cent growth for its children's accounts over the past three years.

The average number of children's accounts opened on a Sunday is more than twice that on any weekday.

Technology and processes

THERE is a lot of thought that has to go into the design of a branch.

Customers are demanding better service and more knowledgeable staff. Most importantly, they no longer want to wait in line.

A Roland Berger survey in 2012 found that more than half of Singapore respondents felt that the one thing their banks should improve on was to cut waiting times in branches.

The answer, as banks have found, lies in technology, automation and innovation.

Citibank's newest branch in Woodlands features a novel way of keeping customers occupied while they wait.

"If you come to the bank and you have to wait to be served, you can tap your payWave card on the poster and get Citidollars rebates, go next door to Starbucks and use that rebate for coffee, then come back when you'll be served," says Mr Moondra.

DBS, long known for the long queues at its ATMs and branches, had to come up with a completely new layout and operational processes to slash waiting times.

Changes ranged from simple things like doing away with having a greeter at the door so there would be no queue at the entrance, to investing in automation to make the branch officers' work more efficient.

It applied these to its flagship branch at the Marina Bay Financial Centre (MBFC) and it seems to be working, says Mr Soo.

The bank is gradually renovating its other branches so that they can be run the same way.

"Our MBFC branch doesn't look crowded and people are often surprised that there's no queue, but the level of transactions it handles is the same as the level handled at Shenton Way, but that old Shenton Way branch was always swarming with people."

Now staff at the MBFC branch and other redesigned branches have more time to interact with customers and cross-sell products, he adds.

"If it's nearing the end of the year, they'll ask the customer if they're travelling, and if they are, why not buy some travel insurance while they're here?"

Those former greeters and DBS staff who have in the past performed mundane tasks such as counting cash have been trained to do more value-added jobs, like advising customers on simple housing loans or assisting with foreign exchange remittances.

As a result of all the changes, DBS has enjoyed a broad-based increase in new business, from simple remittance service to retirement planning and home loans, Mr Soo says.

Such innovations are putting Singapore banks ahead of the crowd, notes Mr Askari Brown, the Asia-Pacific manager of solution design at ACI Worldwide.

He says: "As an expat from the US, I personally see that Singapore is ahead of the US in terms of banking convenience and technology. This is true, based on the expansive use of mobile banking, transformed digital branches and secure authentication."

This story was first published in The Straits Times on April 1, 2014