Branches Have a Strong Future as Alternative Channels

by. Brett King

Back in 2008 I started talking about the BANK 2.0 concept and the consumer behavior shift that would result in the bulk of customers in developed economies abandoning branches over the coming decade. The pushback to this concept was fervent with most bankers calling it a ludicrous suggestion, others being not so kind. In 2011 when I wrote my second book BRANCH TODAY GONE TOMORROW I tried to quantify this shift in terms of branch closures in the US market and calculated that between 30-40% of all US branches would close in the coming decade.

Two recent research pieces, although not the first to highlight changing branch behavior, have started to quantify the speed of this change. The first, a report from Celent, was released this April and based on transactional activity estimates a 30-40% decline in US branches over the next decade. The second, a teller line series from FMSI tracks the rapid change in transactional activity and the decline in teller utilization down some 45.3% since 1992, or more importantly down 28% since just 2007. FMSI has been doing this teller line series for 20 years, and the change is as much as about the decline since 92 as the statistics that show a fairly clear indication of over-branching based on per capita data.

What reduction in transaction activity means

The primary reason in-branch transactional activity is declining is simply that retail consumers no longer need to visit branches for much of their day-to-day banking activity. The popularity of internet banking from the early noughties and the rapidly climbing popularity of smartphone based banking has shifted the epicenter of day-to-day banking. When customers don’t visit a branch as much, then we see a resultant decline not only in transactional activity, but cross-sell, up-sell and general revenue sourced through the branch.

While there is often the passionate assertion by bankers that while customers might stop visiting the branch for transactions, they’ll still come back to buy and seek advice, the data is showing a firm correlation between declines in transactional activity and specific product revenue. Once retail banks get better at sourcing revenue online and through mobile, then the current friction which often insists customers present themselves in the branch to execute revenue, will further dissipate, further reducing the need to frequently visit a bank space.

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