The role of branches in the omnichannel bank experience - Interview with Mark Aldred of Auriga
To better understand today's challenges in the omnichannel bank experience, we spoke to Mark Aldred, VP of International Sales at our Corporate Member Auriga. He explained to us the role that technology plays in future-proofing a bank's branch network and how all this interacts with digital channels. Also he shared a few insights about their collaboration in Belgium with Batopin, an initiative of the 4 leading banks Belfius, BNPPF, ING and KBC, to rightsize access to cash in Belgium with a new infrastructure of bank-neutral ATMs.
Hello Mark. Could you please tell us who Auriga is and what contributions you make to the banking industry?
Hi, Rik. Auriga is a specialist provider of innovative solutions for the omnichannel approach to financial services.
In Europe, we're running more than 10% of the region's self-service and assisted self-service devices. We operate worldwide with about 400 brands using our technologies to deliver their services through our flagship product, WinWebServer (WWS). It's an independent multivendor modular software solution that provides a complete set of functionalities delivered through customer-operated financial services terminals and customer-owned devices.
Our infrastructure brings digital and physical together and has them run over common rails, so a common infrastructure, a common technology for all services across all channels with specialist security solutions. It's about giving customers a consistent but personalised and cutting-edge experience on the devices they choose to access financial services.
Our mission is to empower anybody who provides banking services to face the change that the banking industry is experiencing right now and continually. Our job is to deliver the proper infrastructure to respond to and pre-empt customers’ changing behaviours. We think that by doing all of that, we have a reasonable chance of achieving our goal of revolutionising the way direct banking channels operate.
Finally, our customers and we are transforming the bank branch in a digital era. And we're preserving and reimagining relationships between customers, businesses, and banks, as their behaviours and needs evolve. That's pretty much what we do.
Clearly, bank branches are the most important channel that can benefit from your solution portfolio. Before I share my views on this, I'd like to ask you: is there a future for branches?
Well, I'm certainly happy to tell you my view before hearing yours. Our clients use our solutions to improve their customer's experiences across all channels, including the branch. So yes, we're about the branch and channels that operate outside the branch, anything that our customers operate.
As I said before, we've got a common infrastructure for all of the channels, run across the same rails giving the customer access to the same set of business services. That means we are in a good position to think about the future of branches and how they might look. We believe that they've got a future.
What's more, we believe the branch should be at the heart of a bank channel strategy. Many banks are adopting the position that closing branches is the only way to reduce costs and remain competitive against the pressures of digital adoption. This thinking is led by a reduction in customers using branches.
For example, in Belgium, research by Febelfin shows that while nearly 60% of Belgians never make a physical appointment with a bank employee, there are still 30% who choose to make a physical appointment when seeking advice on their personal financial situation. In that market, branch numbers are forecast to fall from around 4,200 to 3,100 between 2020 and the end of 2026, according to the RBR research "Global ATM Market & Forecast to 2026".
However, although there's a growing number of customers who use digital services regularly, we don't think the large-scale closure of branches is the only answer. The growing usage of digital services doesn't necessarily mean that the behavioural changes we saw during the pandemic are permanent. They may be temporary, the jury's out, but we should not assume anything about it, and we will know more as normality returns.
We know that increased digital adoption does not mean that digital adopters only want to be digital, that they will never visit a branch or wish to visit a branch. In light of recent events where technology or networks have failed, banks and their customers have a continuing need to use the branches, which is the only available channel occasionally. So against all of that context, rethinking branches, we believe in a model that should be lean and smart, and it should be innovative.
I agree with you. We will see fewer branches, but in many banks, they will remain a cornerstone in their offering. Some countries are more advanced than others, but overall the level of digital inclusion is simply insufficient to have a branchless banking industry.
Question is: how can banks keep supporting them in a financially sustainable way?
We believe there is an opportunity to look at branches as lower cost, increased efficiency spaces, which will improve customer satisfaction, or at least maintain it and can reverse the trend of branch closures so that banks can maintain local presences. We think this local presence is critical to the service they give to communities, businesses, and of course, consumers.
We're seeing more voices calling out to identify the potential of shared branches of white-label branches, spaces where technology is shared between banks, and potentially other providers. This will lower (and share) costs, generate additional revenues, and prevent reputational damage.
We think those branches will undoubtedly have a future.
Furthermore, we believe smaller, leaner, remote smart branches should be part of the future. In those branches, we'll see, and we're already seeing it in our customers' implementations, traditional teller transactions migrated onto devices which are operated by customers. They support it either locally in person or remotely by video, sometimes using co-browsing.
So what's the future? Yes: fewer branches, different locations off the high street, they might be pop-up, they might be mobile, they might be shared, and in general, they will be smaller, and they'll certainly operate at a lower cost. They'll potentially operate 24 hours a day. And it won't just be about access to cash but all financial services and potentially complementary products provided by other parties.
Auriga supports the idea that the future of branches is a matter of cost savings and creative thinking to improve a bank's revenues by building stronger relations with clients. Can you share a bit more about that?
Sure. Banks absolutely have to be more imaginative when building these next-gen branches. They should consider sustainability, comfort, security, and building a space where relationships can be forged. You can only get that right with the right balance of technology and people.
So, branches oriented around the customers using technology can rapidly and efficiently meet customers' needs and meet them 24 hours. We also see the potential of self-service and customer-activated assisted self-service devices. Being central to that, our customers are using co-browsing, the ability for the bank to provide support to its customers remotely, therefore, at a lower cost. Such channels will differ from today's accepted definition of a branch.
Customers can access all of the services needed to be onboarded, pass through AML and KYC to become a customer of the bank and engage with the bank in any of the ways they wish to. This can happen in the smaller branch or "financial shop". Those financial shops cost something like 40% less to run than a small bank branch in the same location, and the technology could be deployed 24/7 to build an even stronger business case for their adoption.
How can branch activities be better linked to bank clients' overall digital experience, according to you?
Ironically, branches are not considered digital, even though many of the technologies inside the branch are digital channels. The ATM was arguably the first digital channel. It's not information technology in the accepted sense as it includes mechanical capability, so “mechatronics" or "Operational Technology". That said, you must have a common infrastructure to bring these channels together.
Our common infrastructure supports mobile, tablet, and online. It supports ATM, self-service, assisted self-service, kiosk, digital signage, and all of the channels. All of those come together in this new branch experience where somebody might stage a transaction on their mobile in their home, and then arrive in the branch with an appointment with a piece of technology or with an individual to complete that transaction.
Now, many people assume that the way to try and achieve that is to automate them into digital or mobile channels. But this is at least a stepping stone and probably a destination where in a smart branch of the kind that we're talking all of these digital channels can provide all of these services.
We don't think it's an alternative to a traditional branch. It's an alternative where they can't be financially sustained, where the demand in the community isn't high enough, and costs need to be reduced. But they're also an opportunity to offer services that the banks don't currently offer and to work with partners in various ways.
In Belgium, you are mostly known as one of the partners of Batopin, the Belgian ATM Optimization Initiative. How is that project going?
Batopin is a story of a country and an initiative designed to ensure the right number of cash points in the right place to safeguard access to cash for citizens. So their objective at the moment is to have around +2200 ATMs across different sites. Their website is a great source of information about how they are adapting and progressing against their plans.
And that will deliver the optimum cash availability across a country which historically had ATMs competing with one another in high footfall areas and absent from rural areas. The four largest banks are together in this white-label initiative.
The big challenge for Batopin isn't technological but it is identifying the physical spaces where they will deploy this infrastructure. In part, that is based on old branch locations and also on demand.
The banks are still offering their direct service while Batopin ramps up and rolls out. So Belgium is in this transitional phase where the technology is delivering new benefits and cost savings, where the consumers will have better access to cash and a better experience. Numerically, more than a quarter of the network is deployed, with nearly half of the locations identified. The physical challenge is to identify those additional.
It's a really good model to be considered worldwide alongside other similar models in other geographies. Certainly, it allows the banks to manage their costs while providing the appropriate level of service. And it's a long way distant from other geographies where we see branch closures and ATM closures, like in the UK, doing enormous reputational damage to banks, leaving consumers and vulnerable people without access to cash, changing the nature of communities, leaving small businesses behind.
So the Batopin project is something we're very proud of. We are on the road to optimising cash access for Belgian citizens by supporting Batopin in its admirable objective.