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The physical branch network is not dead, but to ensure its viability banks need to get serious about trimming it down and combining branches with digital channels.
January 14 -
Despite the rise of digital banking, most people still look to physical channels when opening accounts. That's partly due to consumer preference, but banks have a long way to go to make the digital sales experience smooth.
February 17 -
A fintech startup is hoping that a pop-up branch approach will inspire consumers to replace check-cashing services and checking accounts with a mobile app that connects to a prepaid account.
January 11 -
The transformation of brick-and-mortar offices into high-tech sales centers has become an urgent matter as consumers increasingly transact through digital alternatives, yet branches still generate more sales than any other channel.
October 30 -
Lead Bank in Kansas City, Mo., is poised to open a special branch designed for millennial entrepreneurs. Not only can these commercial customers bank in the techie, garage-like space, but they can actually work there, too.
September 2
Many fintech startups talk about a revolution in banking, wax on about how online and mobile banking transactions are soaring, and claim a branch is already in most consumers' pockets or purses. Often, the branch is compared — in the age of streaming — to the near-extinction of movie rental outlets and retail music stores.
But in the case of bank delivery channels, age does not beckon death's door. Claiming branches are almost extinct exaggerates the decline in the channel's transactions, ignores the effect that strategic errors — such as too many branches in a region — have had on branch performance and is ultimately a misleading story. Not all bank visits can be replaced with a swipe across a smartphone. Furthermore, a closer look at consumer preferences and behaviors indicates that “branch vs. mobile” is not an either-or scenario: A brick-and-mortar presence will remain a core element of financial services delivery for decades to come.
Over the past five years, teller transactions at bank branches have decreased by only 1.9% on average, compared with a 12.2% decline at credit union branches, according to FMSI's 2015
Some of the steady decline in transaction volume at banking facilities — down 45.3% overall since 1992 — may be attributable to the introduction of online and mobile services. But overbranching — building too many branches in the first place — is also very likely a factor. The brick-and-mortar infrastructure of U.S. financial institutions nearly tripled from 1970 to 2014. Over that period, the ratio of population per branch fell from 9,340 to 2,970.
Some branch consolidation is in order, but bank customers still value convenient access to a full-service
Sure, industry pundits forecasting the demise of the branch point to
But while some pastimes are going digital, the choice of remote versus in-person access is not mutually exclusive. Even with the rise of online shopping, e-commerce represents only 10% of all retail sales, for example. Similarly, consumers do and will appreciate online and mobile options, but they will also prefer to conduct some financial business in person.
That's not to say technology won't play a bigger role in the branch over the next two decades. Smart ATMs, video tellers and cash recyclers will streamline routine transactions so associates can focus on higher-quality interactions with customers. Sharper business analytics will also likely steer banks away from a one-size-fits-all branch approach in favor of designing each office to better serve the demographics and socioeconomics of its market. Some branches will support a greater investment in self-directed technology, while others will thrive by offering an upscale personalized experience for customers accustomed to white-glove treatment.
Evolution in branch delivery is likely. Extinction is not.
Meredith Deen is president of Financial Management Solutions.