Author: Charlie Tizard, Researcher, Leathwaite. 

Depending on which of the numerous studies one might read, somewhere between 70-90% of banking customers value having access to a branch. Furthermore, research from Statista, the statistics portal, shows monthly branch usage increased from 43% in 2011 to 52% in 2014. To savvy online bankers these numbers may seem high, and leads us to the question of why people attach such value to branches in this digital age. Is this a temporary effect or will these reasons stand the test of time?

Digital limitations

Currently we are unable to perform all banking functions we may want to online; paying in cheques for example, still accounts for a large amount of the footfall in branches. Barclays and Lloyds are both close to launching a system that will allow individuals to deposit cheques via your mobile, something JPMorgan has been doing in the US for a number of years.  Granted, the option exists to pay in cheques via the post and various ATMs, however many people still find it more practical to do so in branch. Enabling this via a mobile platform will be significantly more practical. 

Branches are still a necessity for other services such as depositing and withdrawing significant sums of cash. This is a crucial service for small retailers. Again, this will not continue indefinitely. With digital payments now more popular than cash, we are well on our way to becoming a cashless society. For those who are failing to acknowledge the sizeable shift, take a look at the Nordics. Denmark is close to allowing retailers to stop accepting cash altogether.

Living in a cashless society will not arrest the need for physical currency exchange, which is still often completed via branches. However, with the amount of viable and convenient alternatives increasing, this alone will not justify the cost of a branch. 

As the functionality and quality of digital products continue to rapidly improve and cash becomes increasingly obsolete, those who wish to do all their banking online will be able to do so with ease. Digital limitations are very much a temporary barrier to a branchless world.

Personal attachment 

The vast majority of current banking customers will have started banking before going online was even an option. We all have memories of going into a branch to open our first account, paying in birthday cheques or applying for a mortgage. We associate our financial milestones with being in a bank branch and therefore create a notional attachment to the physical bank as a home for our money. This goes someway to explaining why internet banking usage is at similar levels for 18-24 year olds as over 65s. Both generations will still have had their defining banking experiences in branches. Will this still apply to the next generation of bank customers? Parents will open their children’s first accounts online, the child will pay in his/her birthday cheques by taking a photo, and will apply for a mortgage by using a comparison site. Will the youth of tomorrow still see the physical bank as the face of their money and thus wholly necessary? It seems unlikely.

A human touch

To the banking initiated, familiar with products, terminology and their own personal finances, the thought of going online to purchase and manage the best credit card may not feel daunting. Unfortunately not everyone is so lucky. This is where branches still come into their own. They can offer reassurance and support to those less assured, such as people opening their first account or who have arrived in debt. There is no online UX score which can compensate for our desire to interact with another empathetic human in such situations. Furthermore, consumers venturing into digital banking for the first time may find comfort in the knowledge they have a branch on which to fall back should their tablet fail or they forget their password. These interactions supply the bank with the ideal platform to build long term personal relationships and effectively cross-sell other products. 

So what about telephone banking? Much of the consultative advice provided in store can be imparted over the phone at a fraction of the cost. However, a face-to-face interaction will always be a preference for many customers and offers the bank a better foundation from which to build relationships.

As we move towards a digital, cashless society there is little doubt that the market share of fully competent digital bankers, who are happy to interact exclusively online, will grow. As such the percentage of people valuing access to bank branches will drop. Digital-only banks, such as Atom Bank, will be well placed to access that market with their lower costs enabling them to develop cheaper tailored products. However the decline will not be continuous; there will always be a market for those who want the soothing blanket of human interaction.

Will this market remain large enough to outweigh the cost of running a branch network? It is hard to say. Undoubtedly the number of rural branches will remain in decline. Banks will focus on strategic locations to service larger populations. For smaller banks, such as TSB and Metro Bank, this allows scope for them to grow their networks.

The integration of branches, ATMs, online, mobile and call centres is essential to allowing customers to seamlessly switch between services, to recreate the success of retailers in creating an omni-channel customer experience. To achieve this, banks must integrate divisions internally and therefore the apposite personnel are crucial. Banks should strive to recruit leaders with omni-channel experience from differing industries in order to complement the wealth of banking knowledge already in place. Successful implementation of this strategy will serve to ensure the continued existence of banking branches has a true and sustained purpose as the digital revolution marches on.