Next-generation banking

Walk into Essex Bank’s new Deep Run branch and headquarters outside Richmond, and you’ll be immediately struck by the lack of institutional features.

There are no long teller lines and no loan officers sitting at desks. The atmosphere is bright and open, punctuated by semicircular “pods” outfitted with tablet computers and automated cash machines.

A cross-trained “financial services representative” wanders about and greets you on arrival, ready and able to assist with any banking functions, whether you need to open an account, cash a check, research an investment product, figure out how to use the bank’s mobile deposit service on your phone or apply for a loan.

The branch is designed to be high-touch, high-tech and one-stop, and it is only the latest tactic in Essex Bank’s larger strategy to attract the attention — and business — of  millennials, the burgeoning generation of young adults who by 2025 are expected to make up 75 percent of the workforce, according to the Brookings Institution.

Like other banks, Essex already  offers online services such as mobile banking and mobile deposit that customers can use at any time and from anywhere over their smartphones, and it heavily promotes the bank’s services through social media mainstays like Facebook and Twitter. It’s also exploring the development of new service and communication channels, including 24/7 help desks and call centers that offer help via phone, text messaging, email and live chat. In addition, the bank provides “smart” ATM machines that offer greater flexibility and more services, including face-to-face videoconferencing with a “virtual” representative.

“Millennials are people who just don’t like the old traditional structure of a bank,” says Rex Smith, CEO of Essex Bank. He notes its Annapolis branch, also a “techbar” like Deep Run, took in more than $18 million in deposits in less than five months, a sum that usually takes more than a year to accumulate in new branches. “And so we’re trying to make banking a more positive experience for them, something they feel comfortable with and that meets their needs and expectations.”

Young and old
For banks, the effort to attract members of the millennial generation — typically defined as the more than 80 million U.S. citizens born between the early 1980s and late 1990s — is drastically changing the way they do business. It requires ongoing investments in modernization, of course, but it’s not a challenge that can be addressed by simply checking the technology box.

That’s because, unlike baby boomers and customers from other generations, millennials don’t simply find banking and its conservative conventions to be boring.
According to a survey by Scratch, an in-house unit of Viacom, the vast majority of millennials believe that banks are irrelevant in the 21st century. What’s more, nearly half are counting on tech startups to overhaul the way banks work, and 73 percent say they would rather bank with Apple, Google, Amazon or PayPal, if they offered financial services.

“Millennials are actually quite leery of banks and are really cautious about their interactions with them,” admits Alec Hughes, millennial segment manager for Wells Fargo’s Enterprise Marketing Group. “And a lot of that is because they came of age and were entering the job market at the peak of the Great Recession. Fundamentally, they’re not really sure that banks are on their side.”

For this reason, banks that want to earn the trust of millennials have to meet them where they are — and take the long view, says Bruce Whitehurst, president and CEO of the Virginia Bankers Association.

The first step is providing all the technology-enabled channels that millennials expect. These include online bill pay, the ability to bank and make deposits using smartphones and tablets, and access to smart ATMs that, among other things, “remember” how much money a customer withdraws each week (and in what denominations) and offers a shortcut to that transaction on the first screen.

“Millennials are not the only bank customers that want this stuff, but they are digital natives who are totally comfortable with technology because they’ve grown up with it, and so they have an absolute expectation that it should be available to them,” Whitehurst explains. “They also want a lot more of it than other generations. They want it to be available for everything.”

Five years ago, the 162-year-old Burke & Herbert Bank, Virginia’s oldest continuously operated bank, came face to face with this reality. “We did some research within the community and found that younger people had a perception of us as ‘a bank for my parents and grandparents, but not for me,’ mainly because of all the personal service, the in-branch banking, that has always been the bank’s strength,” recalls Terry Cole, senior vice president and director of products, marketing and sales for the Alexandria-based bank.

That finding explained why the bank’s rate of new account openings was historically light. “Our thought at that point was: ‘Where are we going to find the bank’s customer base of the future?’” she states. “It certainly heightened our sense of urgency.”

Burke & Herbert quickly created a strategy to modernize the bank’s products, services and delivery systems — revamping its website, adding the latest in online bill pay, mobile banking and deposit capabilities, and upgrading its ATM network. But it also developed new products that feed millennials’ need for convenience and value, such as a creating a new checking account with unlimited, fee-free ATM use, with the bank picking up any surcharges levied by other banks. The bank also upped its service game. New account holders, for example, always get a personal call from the branch manager.

“That was never done exclusively for the millennials, but we feel like we are definitely getting their attention,” says Cole, pointing to the fact that since 2010, the bank’s personal checking account portfolio nearly doubled to almost 44,000, with the majority of those new account holders skewing to a much younger audience.

All service, all the time
As much as millennials love their technology, they are better characterized by their need for “omni-channel” service, according to Hughes. “They are used to and expect to engage with a brand through multiple channels,” he says, noting that besides online and mobile, they also want to be able to reach someone via text, chat, on the phone and in-person.

“They want those experiences to be seamless across all those channels and they want the process and the experience to be consistent and they don’t want to have to restate who they are and what their issue is,” Hughes explains. “We’re doing a lot of work right now to tie all of those channels together, recognizing that millennials really do want to engage with a financial services company when and where they want it and how they want it.”

In fact, one of the biggest misconceptions about millennials is the belief that they will always choose technology to the exclusion of traditional interaction, says Gary Shook, CEO of Middleburg Bank. They will come into the bank for assistance and advice — if they’ve got a good enough reason.

“What we find is that millennials are going to spend a lot of time upfront doing research online to learn about your bank and your products, and they’ll use online and mobile technology to do the transaction-type stuff, like paying bills or transferring money or even opening a checking account, but when they actually need to take care of some major type of business like a mortgage or loan or investment, they still prefer to come in,” he says. “And when they do come in, you have to have top people because they want to talk to someone who knows what they’re talking about and can answer their very detailed, sophisticated questions.”

In fact, Wells Fargo research has found that millennials seek out face-to-face assistance at a greater frequency than older generations, according to Hughes. In recognition of that fact, the bank is now offering 24/7 access to call center representatives. It also recently introduced an online automated scheduler called “My Appointment” so millennials can set up a face-to-face meeting at the time and branch of their choice.

Changing role of branches
A key challenge for banks, says Cole, is “figuring out the role of the branch and how best to meet the broader financial needs of customers when we don’t see them as often.”
Like Essex Bank, many financial institutions are redesigning  branches to make them more inviting to millennials. For example, McLean-based Capital One Financial Corp. offers Capital One 360 “cafés” where millennials can enjoy WiFi and a cup of coffee while chatting with  bank employees, a concept that emanated from its acquisition of online bank ING Direct USA in 2012.

Wells Fargo recently opened a few new “stores,” as its branches are now known, that are one-third of the size of a traditional bank office and are completely paperless. They provide customers with online banking stations, WiFi hotspots and 24/7 access to “smart” ATMs.

Whitehurst notes that banks need to always be prepared for the fact that, in an electronic age, the rarity of personal interaction only serves to make those encounters that much more valuable. For this reason, he says, banks need to invest just as much in personnel and customer service training as they do in technology infrastructure.

“Just like other businesses that are trying to reach millennials, banks have really got to figure out how to take full advantage of every face-to-face opportunity they have so when the millennials do come in to ask questions or open an account or seek advice, they make it a really positive experience,” Whitehurst states. “And then even if you don’t see that customer for another six months, you’re staying in touch with them through electronic means, and they know that they can come see you or call you or email you, and you’re going to be there to help in whatever way they need.”

Banks also are trying to make sure that when millennials show up in person, they are not inconvenienced by long waits or the need to discuss their issue with different specialists.

Some banks are doing away with traditional structured roles, like tellers and loan officers, and cross-training staff to handle just about any transaction or question. “It costs a little more in the beginning because the quality of your people has to be higher, but you can staff the branch with fewer people because they’re all qualified to do just about anything,” says Smith.

Finally, banks also are changing the way they promote themselves, and new media represent a key tactic because they enable two-way communication. “The trick is to get in front of millennials, engage them in conversation, answer their questions and subtly but constantly remind them that we have different products and services that can meet their needs,” says Cole. “So we’re using all kinds of online channels and social media, like Facebook and Twitter, to really keep the bank’s name in the conversation and help assure them that we want to be where our customers are.”

It’s also critical to get the attention and trust of millennials when their financial needs are in their infancy, says Shook, noting that Middleburg Bank makes it a point to locate branches, support staff and fee-free or low-cost ATMs near colleges and universities. It also is active during orientation week when students are opening accounts and have questions about banking.

“If you can grab millennials early, attend to their needs and then gradually introduce them to more of your services as they begin to accumulate wealth, and you make it a point to have the right mix of technology and in-person service so you’re always accessible and available to meet their needs, then we think they’re very likely to end up being loyal, long-term customers,” he says. “Millennials may have some unique views and ways, but I think if you can do those things for them, a community bank or a locally based financial services company will be able to continue to differentiate itself and earn and keep their business.”