As banking becomes increasingly digital, the banks that operate a combined 90,000 U.S. branches are asking: Do we still need branches? But while some see branch banking as an anachronism in the digital age, many banking experts believe a well-designed and properly staffed branch provides essential strategic value.

The financial industry has evolved tremendously to satisfy consumer banking preferences, and omnichannel strategies have given customers many choices for how and where they bank. Digital banking provides unprecedented convenience, but financial institutions must understand the nuances of customer preference.

Branches as an Engagement Tool

Contrary to expectations, branches continue to be the strongest engagement tool for banks. The importance of branches becomes clear when financial institutions understand that transaction is not the same as engagement, and that customers expect a great in-person experience for many services.

A recent Celent study shows that more than half of U.S. adults (55 percent) prefer in-person interactions with their banks when a conversation is needed and only a small minority (six percent) are looking for a fully digital banking experience. The study further shows that customers may still go to branches even when they only have a quick question.

Predictably, the study shows that customers over 60 are the most branch-centric (84 percent). More surprising, however, is the finding that younger customers, including millennials, are widely (70 percent) using bank branches and in-person interaction for substantive matters as well, including loans, financial advice and opening a new account.

Many banking experts believed that branches would disappear due to the digital nature of younger generations, considering their daily digital habits, but millennials instead appear to place high value in face-to-face consultations for important decisions such as investment portfolios, financial goal-setting, and account origination.

Furthermore, an interesting correlation exists between branch visits and bank profits: The operations and products that normally drive higher profitability are the ones most likely to be performed at the branch. For example, 63 percent of U.S. adults have reported going to a branch for investment advice, and 52 percent have set up financial goals or a budget in a bank office.

Many of these operations are for life’s bigger moments, where customers find in-person interactions meaningful, not only because they’re dealing with large sums of money, but because they recognize the value of expert, personalized advice over algorithmic targeting. While many of these decisions may begin digitally, they’re likely to be concluded in the flesh, which makes branches — and well-prepared associates — more important than ever.

The Importance of a Hybrid Approach

Although mobile banking usage has accelerated significantly for routine transactions, it doesn’t deepen or strengthen the bank-customer relationship, because current digital channels don’t accommodate the advice-based approach that’s essential to enhance customer loyalty. Banking platforms that provide holistic advice through digital or mobile frameworks may be a natural evolution, but moving customers to digital channels as a primary engagement strategy and shutting down branches would be a risky choice for any financial institution. Research shows that digital-only customers are the least satisfied ones, while those that use a combination of physical and digital channels have the highest satisfaction rate. That means that bank branches are the key to driving engagement higher, and banks should utilize branches as relationship servicing centers in an omnichannel strategy.

The future of banking involves the successful merging of associates and technology. Branch automation benefits go beyond increasing cost savings and enhancing efficiency, to providing tools that enable associates to improve customer experience. Mobility, for example, can streamline customer decision-making processes regarding products through fast simulations and interactivity, and even enabling bank associates to serve customers remotely.

It’s undeniable that customers are adopting mobile and digital banking at a pace that the financial industry has never seen before, but the importance of making branches into technologically augmented service hubs is critical. Investments in technology and mobility shouldn’t be aimed only at cost reduction, but should address consumer experience through agility, interactivity and engaging services. Technology and mobility investments need to follow a long-term branch strategy of building a compelling in-branch sales and service experience for customers.

The math is simple: there won’t be a good digital banking journey without a physical bank branch experience.

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