Back in 2013, JP Morgan announced it would be closing 300 of their bank branches — 5% of their overall footprint — over four years. That deadline has now arrived and in the interim, branch visits in the UK and US have seen downward trend. In response, several other banks have taken a page from JP Morgan’s playbook. US banks collectively shut down 869 branches during the first half of 2017. In the UK, the number is a slightly lower, but still sits at a record-breaking 762.
Industry analysts CACI predict that the average consumer will only make four visits a year by 2022. Meanwhile, the number of regular mobile banking users will more than double.
More tellingly, the quality of a bank’s digital offering is now a bigger priority than branch proximity for a majority of consumers. That’s a far cry from the days when ease of access to a branch could be a deal-breaker.
But does this mean bank branches are slowly heading toward extinction? Or, will they still have a part to play in our financial lives in five, ten, twenty, or fifty years from now?
Customers love mobile banking because it’s fast and convenient. In the past, we’d have to take time off work or use valuable personal time to wait in a queue at a branch simply to make a deposit or withdrawal. By contrast, mobile allows us to bank at any time and place —in bed at night or on the morning commute.
But that doesn’t mean we no longer value face-to-face interaction. According to Wells Fargo, even digital natives visit branches a lot more than everyone seems to think. And, more importantly, those that have a positive experience during their visit report feeling more loyal to their bank.
This seems to be a trend across the board. In TimeTrade’s 2017 State of Banking Report, 67.8% of customers with a positive in-branch experience said they’re likely to stick with their bank and engage in revenue-generating behaviours. Similarly, in the 2016 North America Consumer Digital Banking Survey, most respondents said they trust their bank more and feel they receive more value when they speak to someone in person.
But there’s more to branches than just customer loyalty. Arguably, they also give traditional banks a competitive advantage.
Fintechs typically position themselves as being faster, cheaper and, therefore, better. The initial on-boarding and compliance process is usually much faster and slicker. This appeals to a growing section of consumers who don’t want to be forced offline and get frustrated if it happens. Atom Bank, one of the more prominent UK-based neobanks, openly admit this. Their ideal, most satisfied customers feel confident about managing their finances, and therefore don’t need to visit branches.
However, there’s also a flipside. Mobile-only banking forces customers to take on greater responsibility for their finances, even when it comes to major planning or decision-making.
Not everyone is comfortable or savvy enough to handle every aspect of their finances by themselves. For these people, going to a branch and getting advice from a friendly advisor can be reassuring for a trepidacious customer.
To date, it looks as if the ideal mobile bank customers are still a minority. In the UK, only 32% of consumers would consider using a branchless bank as their main provider of financial services. Similarly, 87% of respondents in the 2016 North America Consumer Digital Banking Survey, including 86% of Millennials, said they’ll continue to visit branches in future.
Research shows that most people prefer to visit a branch when making a big financial decision, such as taking out a mortgage, refinancing or starting a new business. Branches are also especially critical for younger customers who are just learning to get to grips with financial literacy. This customer segment, have typically never invested or had a mortgage, at this life stage, they may have just landed their first full-time jobs or perhaps are just starting to pay off their student debt.
However, expert guidance is valued across the board. UK bank TSB says that 86% of its mortgage applications happen in branch. Similarly, 51% of respondents in the Balancing Brics and Clicks report said that this is where they prefer getting financial advice.
This holds true even in the US, despite the fact that consumers tend to be more receptive to robo-advice.
Sometimes, visiting a branch may be the only practical option. In rural communities, access to smartphones may be limited and internet connections can be spotty at best. In these regional contexts, branches aren’t just about loyalty and an enhanced customer experience. They also have the critical function of serving those who would otherwise be shut out of the financial system.
Outside of the UK and US, branch openings are bucking the trend, they’re actually increasing in number. In India, for instance, several retail banks announced plans to open a staggering total of 1,500 branches. Similarly, in China, banks are also expanding their branch networks, even though 70% of Chinese consumers say they’re receptive to branchless banking.
Clearly, until mobile banking becomes widely available on a global scale, branches will continue to play an essential role in underserved communities.
That said, even in regions where mobile banking is now the first choice for most consumers, it’s safe to say that the death of branches has been largely exaggerated.
As consumers increasingly turn to mobile for their day-to-day banking needs: deposits, withdrawals and bill payments, a decline in branch visits — and a consequent reduction in branch numbers — is inevitable. But this doesn’t mean branches will become obsolete. It simply means that their role will change.
We’re already seeing branches re-imagined in all sorts of different ways. Capital One, for instance, has opened a string of coffee shop cafes — branches where you can hang out, have a snack and get free financial coaching. Similarly, Umpqua Bank, a regional entity based in the Western US, offers cake, pop-up shops and even yoga classes.
Customers still value face-to-face interaction, to have this option means facilitating both digital and physical customer engagement. As branches continue to spend less time handling day-to-day transactions, it makes perfect sense for them to turn their attention to value added services that enhance the customer experience.