The Future of Retail Design and Real Estate Strategies in the Financial Industry
Acknowledging that the financial industry is undergoing dramatic changes is no longer a controversial statement. But addressing how these are having an impact in the physical world, through real estate and in an increasingly digitalized banking industry, remains a less-explored topic.
Regulators, on one hand, follow closely banks’ footprints in each country, concerned that drastic changes could spark panic and send mixed signals about the economy’s health. Banks, on the other hand, carefully balance their bottom and top lines, as branches can be costly, while being key to unlocking profitability by making a statement about their vision, value proposition and trustworthiness.
But as the future of finance grows increasingly digital and decentralized, there is an opportunity, more than ever before, for financial institutions to reimagine their branch networks and overall physical footprint.
Banks have been evolving their business strategies to catch the new trends by funding and acquiring fintechs, or financial/technology firms, that continuously pop into the market, bringing new and exciting ways to serve customers. The large and resilient banks are, in a way, “unscaling” toward nimbler, fast-paced, and niche-targeted fintechs, through their newly set investment arms. So how will their real estate footprints mimic these new business strategies that support their top and bottom lines?
Fun fact: The traditional branch model that we see today, with branches across cities and countries, is over 900 years old. This model was created by the Persians to help manage across the vast distances of their empire. More recently, in the early 20th century, it was popularized by Bank of America and operates based on two key principles: face-to-face transactions of physical assets (cash, documents, etc.) and development of in-person relations.
As the story of financial services will continue to evolve, we can make sensible assumptions about the key principles that will drive their real estate strategies in the future. These are:
1. Design as destination will be a key factor for differentiation, as it will speak to customers from an aesthetically pleasant and improved experience. Being considerate of how design can create a seamless transition between physical and digital channels will likely separate winners and losers. These design strategies will enable targeted awareness of specific products, company values and sustainable practices.
2. Prioritize experience over possession. Experience is everything a business and a brand can do to truly connect with the customer. Being driven by design strategies that prioritize such questions as, “How did the branch make me feel?” rather than, “What did I do in the branch?” will be key to achieving this. The largely unseen, word-of-mouth component when customers make decisions will remain present, and the growing number of younger customers entering the market will be more connected and more conscious of social validation than ever before.
3. The physical footprint will continue to change, driven mainly by the current pressures financial institutions have to improve their bottom lines. The answer may no longer lie in fewer and smaller branches, but rather in having many more; however, their look and feel, as well as their raison d’etre, would be different. There could be a counter multiplication of digital beacons or satellites across cities with the sole purpose of brand positioning, enabling versatility in product deployments through screens rather than traditional services such as cash transactions, which usually result in expensive design and regulatory considerations.
4. “One-size-fits-all” will evolve, differing from the rapid expansion banks had in the 1990s that led to this approach. Customers will increasingly have instant access to trends, as well as a higher cultural sensitivity, which will then be translated into rather kaleidoscopic design strategies, varying per location and cultural context. These spaces must be able to communicate with the communities in their locations, through their people, their art, and their digital services.
5. Beyond environmental factors, social aspects will increase in relevance. As strategies in the built environment have focused on energy performance and carbon footprint, which yet remains arguably reliable, it is expected that ESG goals will expand the conversation from building-centric to people centric objectives. Standards and guidelines such as WELL by IWBI already provide a clear path on how to design spaces and policies that prioritize the well-being of occupants. Above and beyond this, some novelties, such as plant-based leather and non-animal-tested materials in furniture and construction, will continue to grow as part of the strategies, following the example of industries like luxury vehicles.
6. We’ll see the birth of the digital real estate footprint. As the metaverse may be at risk of becoming a hated word before we can see it fully blooming, some large companies have begun acquiring real estate space there. As virtual-reality (VR) devices become lighter and cheaper, and as their market share grows, we may soon be living in a world where you decide to take a stroll in your metaverse’s city rather than scrolling through your two-dimensional Instagram feed. In this virtual world, you may interact with brands – and branches – from clothing to banking. In the metaverse, banks’ retail branches wouldn’t be subject to the physical and regulatory boundaries, thus opening a new dimension for unprecedented design and personalization. Imagine, the branch I see in my metaverse may be different from the one you see, as the design may speak closer to each of our individual preferences.
