Financing For customers, the physical branch is critical

Will the digital channel, with the help of artificial intelligence, replace physical branches? Not for now. According to a report by Cetif (a Center of theCattolica Università of Milan specializing in the financial, banking and insurance sectors), "The analysis of distribution channels highlights the importance of the branch: despite increasing digitalization, 75 percent of customers still consider the branch an indispensable channel for credit." A fact, which according to Cetif, is reflected in the use of the different channels by product type: for personal loans, the branch maintains a high utilization index in the product knowledge and inquiry phases, while digital channels show a high index in the management and monitoring phases. So full-digital lending works for simple products, but for more complex ones, such as mortgage, medium- to long-term financing for businesses, the expertise of the person remains at the center. "At the moment, algorithms do not yet have the ability to understand in depth all the needs of the customer, understand their attitudes, negotiate," explains Chiara Frigerio, of Cetif . "Therefore, they cannot replace the person. So it is not difficult to understand that the client still wants the branch, because there he can discuss, talk,explain the situation that concerns him and the investment he needs to make in more detail." In addition to understanding, however, the customer also wants advice because, for example, there are so many mortgages, so some guidance and help in selecting what best meets his needs is a much appreciated added value. Frigerio then adds, "The desertification of bank branches, can be a risk first of all for the customer, because he needs to be followed in accessing credit, because lending products must be parameterized to his ability to meet his commitments, that is, to be solvent. It is also necessary to remember that we are in a period when economic and social situations change rapidly. Advice must be given to the customer so that he or she chooses the correct product based on current and future capacity." The risk, however, is also there for the bank, because, as Frigerio explains, "Even though the models, the algorithms are very advanced, human contact and the branch, physical or virtual, are fundamental to assessing the customer and his or her creditworthiness." For this reason, from what Cetif 's data shows, financial institutions' investments are moving toward a hybrid model of digital channel and physical branch, with the adoption of a sophisticated omnichannel approach, where digital and physical channels integrate to create a smooth and personalized experience. Thus, it is reported that spaces are being redesigned according to the "smart branch" concept, with self-service areas for routine operations, specialized advisory zones, and spaces dedicated to fnancial education. Alongside this model, innovative formats are emerging such as "financial stores"-smaller, flexible spaces with 4-5 specialized advisors-and fully digital branches offering remote assistance. We are thus seeing an increasingly articulated interweaving of physical and digital channels with experimentation with new possibilities. As the report explains, "The ability to access customer financial data through standardized APIs allows institutions to customize offerings and optimize the credit process. Advisors can access a more comprehensive view of a client's financial situation, offering more targeted advice and more appropriate products." "More and more banks and financiers have digital products," Frigerio continues, "the volumes of credit disbursed are also growing. In addition, these products also make it possible to acquire new customers. Until some time ago it was the current account that was the first acquisition product on the digital channel, now digital lending is also added." In addition, the development of identity verification tools contributes to this development: "In the onboarding process, the analysis of identification tools shows significant variations by product: Spid dominates in personal loans with 57 percent use, while for mortgages 83 percent of practices use traditional systems. Video interviewing maintains a limited presence (14 percent) mainly in digital finalized financing."