The Future of Bank Branches
For 5 years, we have witnessed a dramatic reduction in the number of bank branches. Globally, banks are facing disruption from multiple directions as bank branches have declined:
- Business and economic developments have reduced the total number of US bank branches by 3,000 between 2009 and 2012, a decrease of 3% during the 3-year period.
- Spain saw more than 12,000 branches close between 2008 and 2013.
- The Campaign for Community Banking Services estimates about 3,000 branches have been shut across the UK in the last decade, with 1,700 of those closures happening in the last 5 years.
Will traditional banking and branches disappear completely?
Many banks are closing their branches. Customers are adapting to available technology by connecting with banks via other channels, like mobile banking. What we will see in the coming years is banks will need to identify the optimum number of offices that will be suitable in maintaining customer loyalty and value.
So far, no one knows what the future model of commercial banking office will look like exactly, but there are differentiating trends.
Related article by Ted Bissell, Banks Learn to Innovate…or Die
Some banks will follow the Apple model, with specialized bankers that have a tablet in hand. Deutsche Bank has launched a branch with a reading lounge, playground and design shop. BBVA Compass in the US uses a “virtual banker” who interacts with customers via video conference with a specialized branch agent. ASB Bank in New Zealand has created a virtual office that operates only through Facebook. Metrobank in the UK has opened a shop-branch with extended hours.
As transformation continues, branches will have more specialized agents for complex product, smart ATMs, extended hours and interconnection between smartphones and social networks, and touch screens installed in supermarkets or other points, responding to the simplest operations of customers with limited access to mobile banking.
Bank branches as we know it today will no longer exist in the future. In this context, the challenge for banks is to increase their profitability by considering the need to integrate the various channels and adjust their operating models to develop processes that do not compromise their customers’ relationships and loyalty.
Related article: The Digital Transformation of BBVA
Callum Russell is a Senior Consultant at Axis Corporate.