Branch vs. Digital Banking in Illinois

By Steve Bruyn, Foresight Research

Overheard from the fly on the wall, “We can save a lot of money by closing branches so let’s make sure that we run this bank as efficiently as we can.” Then the branch folks added, “No, no, our business still relies on the personal touch with our customers.” Financial folks respond, “All the customers want is digital banking and the fintech’s are coming to meet that need – big time.” Branches respond, “Our advantage is our branches, and you want to give that up?” So, the argument continues with no facts from the customer – the ultimate judge. So, who is right? Foresight Research surveyed 700 banking consumers to measure the banking habits of consumers in Illinois.

Users of Branch and Digital Banking in Illinois

Online banking, followed closely by mobile apps, is the predominant mode of banking access across Illinois. While branch banking is used at least occasionally by 4 out of 5 customers or members, only 16% are frequent branch users. Gen X and Millennial customers/members most often access banking services via mobile apps or online banking, and nearly half are frequent users of peer- to- peer payment apps. Baby Boomer customers/members are most likely to use online banking services with mobile apps a distant second place. High income customers and members are more likely to use digital (both online and mobile), and over half are frequent users of peer- to- peer payment apps. So, overall, score one for the finance types who point to the diminished use of branches.

Respondents were asked about switching their financial institution if a branch was no longer conveniently located. 23% reported that they would switch to another financial institution.

Expectations and Satisfaction with Branch and Digital Access

Frequent users of digital often have significantly higher expectations than frequent users of branch banking. This is particularity true when it comes to fees (including credit card fees), and savings interest rates. Interestingly a good reputation is also more important perhaps reflecting a less frequent personal interaction with their financial institution and a greater reliance on brand image.

Almost 80% of banking consumers over 57 are extremely or very satisfied, while Gen Z and Millennials are significantly less satisfied. Additionally, downstate customers are significantly more satisfied than Chicagoland customers. In addition, overall satisfaction among customers/members is about the same for large bank customers, community bank customers and credit union members. However, overall satisfaction among digital only banks is significantly less. Satisfaction levels are equivalent among frequent users of digital compared to frequent users of branch banking. Frequent users of branch banking are somewhat more often satisfied on “offers good financial advice” and “friendly courteous personnel,” but not enough to place a higher value on the banking relationship.

More than 80% of frequent users of branch banking also are extremely or very satisfied overall with their financial institution. Additionally, satisfaction generally meets or exceeds expectations. So, with a few exceptions, frequent users of digital and frequent users of branch banking are equally satisfied with their primary financial institution.

Closing Branches

Now let’s turn to the possible penalties for branch closings. With the infrequent use of branches and the high cost of maintaining branches it is tempting to close some branches.

Respondents were asked about switching their financial institution if a branch was no longer conveniently located. 23% reported that they would switch to another financial institution. Big bank customers were less likely to switch compared to community bank, or credit union customers or members. Additionally, frequent digital users (often with high incomes) were just as likely to switch as frequent users of branches. It seems that high digital use does not result in significantly reduced intended switching. The reason - 8 out of 10 frequent digital users say that a conveniently located branch is extremely or very important. Handling problems easily or offering financial advice, two very highlevel expectations, are not as well served with digital or the call center. So, branches still matter but they may be reimagined in the future.

About the Author: Steve Bruyn is CEO of Foresight Research, an IBA Associate Member. Foresight Research is a marketing research firm and a leader in cost effective syndicated reports. Foresight Research has been working with many Fortune 500 companies for over 20 years and annually surveys about 15,000 banking consumers in 60 markets. Give them a call to find out more.