Bank branches- have they become obsolete ? Has the digital age and the changing way we do our banking evolved such that the bricks and mortar ‘place’ for banks no longer have a raison d’etre ?
In my exploration of the issue, I have discovered that although the closure of bank branches has been an indisputable trend, I argue that bank branches are still strategically relevant and has its role in the multichanelling facet of banking- ie to supplement online banking.
The statistics are clear – bank branches have been reducing and the trend will continue.
From a high of 7064 branches in 1993, the number of branches have declined at a rate of 4% per annum to 4858 in 2003.
This trend,has slowed in recent years,however we can still see annual decline rate of 2% year on year. (NB APRA uses a different definition of branch-however the trend is the key point).
It is of no coincidence, that this is partly driven by the increase in online payments and transactions,which recent trends suggests is growing at 9 to 10.9% per annum.
When was the last time YOU went to a bank branch ?
I struggle to tell you when was the last time I went to a bank branch. I don’t write cheques, I take cash out from the ATM, and I pay via PayPal or Direct transfer.
I hate the queues .Do I really want to spend 20 minutes of my lunch hour waiting to be summoned up – “next please” ? Makes me cringe…
A branch for me has little utilitarian relevance….
Here is where I rectify my earlier statement, what I intended to say was in this age, a ‘traditional‘ branch is of little utilitarian relevance.
When I mean traditional – the one where you hand over your cash to be counted…
Or the ones with high barriers in case angry masked men burst in with terrifying demands of cash ( a hacker is more dangerous in this digital age where our cash sits in bits of 1 & 0 in a digital vault.)
A branch is still relevant, but not as we know it as before.
Branches are still relevant as a place where ‘person to person’ selling needs to take place. Financial products such as home loans,insurances,personal investments are at best complicated and at worst needs to be tailored to fit in the individual customer’s situation.
You have no doubt seen that every brochure or pamphlet or even TV ad of a financial products carries the following disclaimer:
“The information in this PDS is of a general nature only and does not take into account any investor’spersonal objectives, financial situation or needs”
Thus to sell financial products as above, which are by nature complicated and need to be very tailored, Iacobucci (2013 p 165) states that personal selling is the best form of promotional sell. This sentiment is echoed in Yeates (2015) who quotes Gerard Du Toit, Head of Banking in Bain & Co “branches still have a viable future helping customers with complex problems or providing advice”.
Welcome to the new look branch
I would argue that because face to face selling of financial products still needs to take place – the strategic place to do so is still in physical branches, and that means branches will (have to) evolve – to not look like the ones picture B above!
Instead,the look and feel of the future branch is that of Bank of Queensland’s branch at Macquarie Centre NSW ! – see picture on the right below.
Gone are the pop up anti robbery barriers, gone are the queue lines and waiting for “next please”…
According to the Bank of Queensland’s blog – it describes the philosophy of the new look branch as
- side by side seating to simulate a partnership, removing a barrier and abstaining from any ‘across the counter’ type atmosphere
- that the customers are the ones in control about how the interact with the bank and chooses as such, not a “next please” waiting to be summoned
- It’s not about a ‘sell’ nor is it about ‘banking’ per se, its about conversations with the customers
Do you think BoQ’s new branch look and feel above is a welcome change ?
Its a Yes for me.Invite me in, give me a cup of coffee and we can talk about my financial goals in detail. Financial products are daunting (even for myself as a CPA) – thus by inviting me as a customer in a relaxed atmosphere -at the very least my resistance to comprehend financial matters is slightly removed.
In fact, trust the Virgin brand to make a bank not feel like a bank with its Money Lounge.
Banks which still think branches should look like picture B above, take note-your days are numbered.
It used to be that online banking was to supplement the physical retail banking, I would argue that now it is the other way around.
Online banking is omnipresent for the transactional and mundane stuff – it is the physical branch which needs to evolve to serve a more tailored,comprehensive product mix and for building complex partnerships with the customers.
In short, the physical presence is to complement the online channel and to do so, the look and positioning of the place to do banking needs to evolve.
The video below sums it – a branch is a ‘lounge’ where – complex relationships are built over complex products, and the selling process is in the background, not foreground.
•Iacobucci, D. 2013 Marketing Management , South-Western, Mason, OH
• Yeates, C. 2015 Australia leads the world in mobile banking , Sydney Morning Herald June 15 ,2015, Accessed 14 May 2016
•Australian Prudential Regulation Authority, Points of Presence Workbook June 2015, Acessed 14 May 2016
•Bank of Queensland Introducing the new look BoQ, Accessed 14 May 2016
•Parliament of Australia, Completed Inquiries 2002-04, Chapter 2 – Bank branch closures in rural,regional and remote Australia, Accessed 14 May 2016
•Reserve Bank of Australia, Payments System Board Annual Report 2013, Accessed 14 May 2016