This Month in Retail Banking: Customers Drive Industry Changes

This issue of This Month in Retail Banking clearly shows that customers are driving many of today’s changes in the banking industry. We all know that change is difficult and that banks are typically slow to adapt, but the good news here is that a wave of innovation is upon us. That said, banks still have a lot of work to do to meet the changing demands and needs of their customers.

We start with some details from new research based on a survey of small business owners that we conducted last month. Branches no longer drive the relationship between bankers and client, so banks must figure out different ways to connect with and assist these important clients.

Next, we take a look at the latest branch data from the FDIC that show the pace of branch closures has doubled in the past year. Curinos believes that there is more to come in this space. As we have said before, the low-hanging fruit has been snipped. Banks must tap deep analytics of customers behavior to find the next set of closure candidates.

We wrap up the issue by exploring one new technology that is gaining traction in banking and one tried-but-true strategy to help figure out what customers want and need. A growing number of banks are embedding QR codes into their functionality as a secure way to log in to a mobile app or make a person-to-person payment. While new technology is exciting, that doesn’t mean banks should ignore traditional metrics that can be found through mystery shopping.


Small Business | Branches | QR Codes | Mystery Shopping

New Research Shows Small Businesses Want More Relationships, Fewer Branches

Not surprisingly, the definition of convenience for small businesses has evolved over the last several years, especially as COVID-19 has drastically changed the way in which they interact with their banks.

In an effort to gain a better understanding of these changes, Curinos recently conducted a national survey of 2,390 small business leaders whose companies have annual sales of $100,000 to $50 million. Some highlights of the survey, which was conducted in October and examined respondent attitudes toward banks, include:

  • “Strong digital capabilities” is now the largest convenience driver overall (See Figure 1.)
  • “Branch near me” dropped from the top convenience driver to the fifth spot and is now considered on the same level of importance as being “easy to reach by phone”
  • Having a dedicated business banker assigned to the company was the second most convenient factor and most critical for the $2-5MM in sales revenue segment (See Figure 2.)

Figure 1: A bank’s digital capabilities are the most important convenience driver for small businesses

Source: Curinos Research | 2018 US Business Banking’ Base: Total Respondents (N=2,414) | 2021 US Business Banking Base: Total Respondents (N=2390)

*samples weighted by sales size

Question: “Please rank up to three things a bank or financial services provider could offer to be the most convenient bank for your company’s financial needs.”

Figure 2: A dedicated business banker becomes the most important convenience driver for companies with sales >$2MM

Source: Curinos Research | 2021 US Business Banking’ Base: Total respondents in each revenue bucket ($100K to less than $2MM: n=1124, $2MM to less than $5MM: n=326, $5MM to less than $10MM: n=326, $10MM to less than $20MM: n = 326, $20MM to $50MM: n=288) |

Question: “Please rank up to three things a bank or financial services provider could offer to be the most convenient bank for your company’s financial needs.”

This all reinforces the need to transform the business banking model. Simply having branches will no longer drive the relationship that banks want to have with their customers. That means it will be critical to identify new models for connecting with customers through dedicated business bankers (whether in person or remotely), accessible servicing and advice by phone. Some branch presence will be required as well, though not at traditional levels. Investing in digital capabilities will also be critical, especially since banks have typically underinvested in this area.

Branch Closures Accelerate, More Likely Needed

While we have all known that banks were continuing to close branches at a rapid pace, an analysis of annual FDIC Share of Deposits reporting further illustrates the dramatic change in branch counts across the U.S. After years of steady declines of less than 2%, the pace of net change doubled to 3.8% between June 2020 and June 2021. (See Figure 3.)

Figure 3: U.S. Retail Bank Branches, 2015-2021

Source: FDIC Jun 30, 2021, Curinos BranchScape, Does not include Credit Unions

While this pace of change still doesn’t seem particularly large, the pace of industry consolidation is constrained by community and small regional banks that don’t have the scale to move as aggressively as larger institutions. Indeed, the pace of consolidation has been far higher for many of the largest banks in the country. (See Figure 4.)

Figure 4: Branch Count Changes – Top 15 Banks

Source: FDIC Jun 30, 2021, Curinos BranchScape

Furthermore, the net change hasn’t been evenly distributed across states, with some of the largest states seeing branch count changes well above the industry trend. (See Figure 5.)

Figure 5: Closures by State – Top 15

Source: FDIC Jun 30, 2021, Curinos BranchScape

Since the end of June, upon which FDIC reporting is based, consolidation activity has slowed as banks have “finished” much of their announced network rationalization programs. Unfortunately, this isn’t a “one-and-done” exercise. Teller transaction volumes have declined more than 20% since the start of the pandemic and aren’t rebounding. More than 10% of new customer acquisition activity has shifted from the branch to digital channels.

In addition to consolidation activity spurred by recent M&A activity, we believe there is a continued workout needed in branch capacity. Far from being “finished,” we are merely entering the next stage in which precision analytics are necessary to make the right decisions for the future of the franchise.

QR Codes Becoming Embedded in Digital Finance

They certainly don’t look like the most innovative tool, but QR codes are increasingly finding their place in consumer finance.

The increasing reliance on smartphones and touch-free solutions during the pandemic has accelerated the widespread use of quick response (QR) codes. In the U.S., the total number of scans increased from 9.76 million in 2018 to just over 11 million in 2020, with consumers using QR codes for everything from browsing restaurant menus to unlocking bicycles.

Leading banks and financial institutions are jumping on the bandwagon by adding them to payments functionality. PNC and US Bank, for example, have recently launched Zelle QR codes that allow people to send money to someone without typing in the recipient’s email or mobile number. Others are expected to follow.

QR codes are as easily generated as standard product barcodes, cheap to implement and widely available. But like many technologies within digital banking, adoption rates vary across the globe. China is the world leader, with QR code-based payments popular among all demographics thanks to platforms like Alipay and WeChat Pay.

Similarly, a number of India’s leading providers such as HDFC and ICICI have incorporated QR codes into their mobile P2P interfaces. The country’s rule makers are looking to establish a QR standard, which may prompt more providers to follow.

While financial providers in other countries have embedded QR codes either as a supplementary tool or the main organ within the app or online, most brands in the U.S., rely on contactless cards or digital wallets.

Citi recently added a QR code to its public site homepage that allows users to sign on using the Citi mobile app. This type of authentication can assist users who may have difficulty remembering a user ID and password. Other providers, like Chase, offer QR codes at ATMs to withdraw money.

While QR codes have proven to be reliable, Curinos has only observed a very gradual implementation in the U.S. But consumers who are accustomed to using QR codes elsewhere may soon embrace the technology in banking.

Solving the Mystery

The pandemic and associated shifts in customer behavior have wreaked havoc on the retail branch network. Despite teller transaction volumes decreasing by more than 20%, many banks are struggling to retain and replace staff to keep up with the (reduced) workload. Front-line associates in banking, like many industries, are weary given the demands placed on them over the last 18 months.

Adding to the challenges, banks are introducing new products and services to maintain competitive parity with the neobank challengers. At the same time, banks have ratcheted up branch sales goals after months of focusing on service, creating additional pressure on branch teams.

All of this change may leave bank executives wondering what exactly is happening in the branch right now. Customer satisfaction scores are strong as consumers are generally rewarding banks for taking care of them through the pandemic. Customers also are empathetic to the challenges of the branch staff, buoying the evaluations. But do these scores accurately reflect how the branch is really operating?

Curinos believes that mystery shopping can provide a strong complement to the customer experience measurement programs in place at most institutions. Mystery shoppers are trained to objectively evaluate the experience in ways that a consumer can’t. We believe there are a number of use cases where mystery shopping can be deployed:

  • Evaluate the ongoing sales and service experience, focused on associate behaviors and environmental factors (e.g., wait time)
  • Support new product launches, understanding if associates are describing new features and benefits as designed and trained
  • Monitor sales compliance, ensuring appropriate sales practices
  • Evaluate omni-channel journeys (e.g., digital appointment setting/in-branch meeting)


There’s little doubt that mystery shopping is one tool that can help solve the mystery of your customer experience.

  • Author
  • Want to go further?

    Contact us to learn more about how Curinos can help you navigate today and prepare for tomorrow.