How retail banks can successfully navigate competition in the coming year
With bank of choice competition rising all around, one of the biggest pressures on financial institutions of all sizes is customer acquisition. That’s why the most recent BAI Banking Outlook survey found that attracting customers and growing deposits rank as banks’ highest concerns this year. “New customer acquisition has moved to the top of financial institutions’ priorities because we have a lot of competition for new customers,” says Mark Riddle, BAI’s director of research intelligence. Looking for a better offer, the low rate environment has banking customers ready for change, especially Gen Y and Gen Z who are more open to switching.
For any growth-oriented financial institution, customer acquisition is at the center of their strategy. But banks and credit unions must compete on something more enduring than higher rates for deposit accounts or low APRs for credit cards. Acquiring new customers requires banks and credit unions to increase awareness with new audiences and that often means expanding to new markets, as consumers have made their preference for the branch quite clear. Even when consumers have digital and mobile apps at their fingertips, they continue to choose the branch for core banking functions, according to EPAM’s 2024 Consumer Banking Report.
For financial institutions, community presence is a primary driver of customer acquisition, as 72% of new-to-bank sales happen at the branch, according to McKinsey & Company. The bank branch is such a powerful platform for acquisition, because banks can’t cross-sell through an app. Financial institutions can only truly maximize a customer’s potential business at the branch. And while a customer may be able to begin account opening online, they often finish at the branch, because they know they get more value from a visit – with local banking experts and customized advice to help.
While there is nothing necessarily new with retail being the prime channel for acquisition, what is new is the demand on the branch for new and better banking experiences. As younger generations demand different services from their primary banking relationship, branches must transform to meet their needs. That means becoming connection centers, where experts and advice make a meaningful difference for customers. In fact, Curinos data finds that 47% of customers say the ability to satisfy all of their banking needs – from simple transactions to complex advice – is an essential attribute for their bank or credit union.
Banks understand the value of the branch for growth. That’s why investment in the branch is surging with an estimated spend on new branches surpassing $2B in the last year alone, and notable banking brands like Chase piloting new formats. While consumer demand for branches remains high, most retail locations are still designed for transactions that no longer occur in them. That’s why leading financial institutions have prioritized optimizing their networks and transforming their branches – recognizing the critical role the physical network plays in defending against customer attrition and amplifying new customer appeal.
Not only is an updated experience essential, it’s vital to have a presence in markets with potential. Whether through M&A or organic expansion, having the right format in the right market is how banks achieve greater market share and critical mass. Building effective strategies that leverage the branch is one of banking’s biggest challenges and biggest opportunities. Data-driven decision making is inherent to the process – defining where to go and what to build (or renovate). Balancing branch expansion with network optimization frees up funds that can be reinvested back into the bank’s growth initiatives.
For more insights about optimized retail planning and network expansion, banking leaders can attend the upcoming Curinos-Adrenaline webinar Driving Customer Growth Through Strategic Retail Planning. In this can’t-miss webinar, attendees will learn: how to prioritize markets and submarkets to maximize growth potential; strategies to select the right submarkets and streetcorners for new branches; and how to map branch archetypes to investment opportunities.
To learn more about branch optimization and network transformation for financial institutions, or to speak with one of Adrenaline’s brand-to-branch experts, contact us today.
Adrenaline is an end-to-end brand experience company serving the financial industry. We move brands and businesses ahead by delivering on every aspect of their experience across digital and physical channels, from strategy through implementation. Our multi-disciplinary team works with leadership to advise on purpose, position, culture, and retail growth strategies. We create brands people love and engage audiences from employees to customers with story-led design and insights-driven marketing; and we design and build transformative brand experiences across branch networks, leading the construction and implementation of physical spaces that drive business advantage and make the brand experience real.
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