Danske Bank believes maintaining a branch network of 225 across 13 countries gives it a valuable way to connect with customers – just not in the way it used to, says First Vice President Line Munkholm Haukrogh
The oldest form of retail banking is under unprecedented pressure in an increasingly digital age when customers want to carry out their everyday financial transactions at the touch of a button. Added to the mix is the intense competition from digital-only challenger banks, such as Starling, Monzo and Tandem in the UK.
The net result is that, in recent years, there have been wholesale reductions in the size of branch networks by many of the world’s banking giants, who cite shrinking footfalls as the primary reason for the cull. Yet, evidence abounds as to the importance of maintaining a bricks and mortar presence, even at a time when other significant overheads, particularly compliance costs, put the squeeze on profitability.
The industry knows only too well that branch closures are often met by hue and cry in affected communities, prompting negative headlines with the potential for reputational damage at a time when public trust is hard won. Just look at TSB’s recent decision to close 82 branches in the UK this year. But when it comes to predicting future demand, have they got it right?
A recent survey by Adobe Analytics in the US found that 72 per cent of Generation Z consumers (those born from 1997 onwards) visited a physical branch at least once a month – astonishingly, the highest of any age group. The same survey also found all age groups overwhelmingly agreed that bricks and mortar branches were an important part of the ‘banking experience’.
So what’s the answer? The truth is that there appears to be no ‘one size fits all’ solution – a point readily conceded by Line Munkholm Haukrogh, first vice president at Denmark’s Danske Bank.
The bank maintains a network of 225 branches across 13 countries and, despite a promise to drive down its cost-to-income ratio to the low 50s by 2023, it hasn’t taken the axe to branches in its pursuit of savings.
In fact, Munkholm Haukrogh believes their presence in the community makes them important flag wavers for the Danske brand right now.
“We understand that the image of our branches needs to reflect the modern company we are today, so it’s all about balancing the relationship we want to build, with the impression we want to give,” she says.
It’s also about finding where they fit into the digital architecture of a 21st century bank like Danske. It began its digital transformation some time ago, introducing its MobilePay app, which made payment transfers as simple as texting, as early as 2013. MobilePay has subsequently become one of the most successful mobile wallets in Denmark, Norway and Finland after Danske sealed partnership deals with other banks. With four million users familiar with the now trademarked ‘pling, pling. pling’ that accompanies every transfer, there’s less reason than you might think for those Danske customers to bother visiting a bank branch.
“Looking at the Nordic countries, where Danske Bank is mainly situated, due to a very good infrastructure and high digitisation, the role of the branch is not necessarily focussed on the daily banking interactions typical of elsewhere in the world, but much more on the harder, complex conversations,” says Munkholm Haukrogh.
They are, in fact, used more – but not in the way they were before. Danske, for instance, has been introducing open spaces in some of its branches, including its newly revamped flagship branch in Belfast, where businesses and community groups are invited to events.
“We arrange evenings where either somebody from within Danske Bank, or one of our partners or relevant speakers, comes to use the location to facilitate a dialogue. It could be around kids’ savings or the understanding of money in a cashless society. It’s not actually supporting daily banking, as the branch used to do, but it’s still facilitating and helping where that is what’s needed.”
One of the difficulties facing global banks is the complex variety of consumer demands in different territories. Wherever they are, branches in their design and services must embody the spirit of a bank, albeit adapted for the particular expectations and demands of the areas in which they are situated, says Munkholm Haukrogh.
One of the current buzzwords in banking is colocating, with some banks adding retail elements like coffee shop concessions to provide greater appeal, and others, like digital bank Starling in the UK, piggy backing on an existing retail network, in its case the Post Office, to give them a physical presence.
Munkholm Haukrogh is cautious about the trend, questioning whether Danske’s customers would trust co-locations to offer the same level of integrity in dealing with super-personal financial issues.
She also believes the current size of Dankse’s network offers the right balance for its customer base, and sees the future as better understanding the interaction points between physical and digital services, be those the bank’s own or a third-party fintech.
“We are looking at what the great use cases are, where we could take a role. Again, this needs to fit into the trust and integrity of who we are. But what we do see is that younger generations expect everything to be digital and interconnected, so financial services could be interconnected to, say, public services, such as health.
“The branch could a be where you go to get not only information on investments and other banking-related products, but also perhaps about what happens when you stop owning things in a subscription economy, or about the cashless society, for example. It’s about us taking a responsible role in those dialogues. And we know the branch, and the advice people receive there, bring a huge sense of value to the customer relationship.
“We need to act as a trusted advisor, and part of that is actually also being present. So, having a branch in a smaller city has a cost attached to it, yes, but it allows us to be close to our customers,” adds Munkholm Haukrogh.
“It’s about keeping that open dialogue with customers and really understanding what the role of the branch network is for them now and what they expect of it in the future.”