Monday, 14 November 2011

Are those annoucing the death of the branch false prophets?

The death of the bank branch has been predicted more times than sightings of Elvis Presley have been announced since his death.  It started with the introduction of ATMs or cash machines, was reiterated with the arrival of call centres, declared to be inevitable with the emergence of the internet and the giant leap forward of Web 2.0 has been welcomed by many commentators and consultants as the final nail in the coffin. But as like in all the good horror movies since the pale, thin, mud strewn  hand of Sissy Spacek shoots up from the grave in ‘Carrie’  no sooner is the bank branch declared dead than it springs back to life, reinventing itself whether it is by becoming a coffee shop, a children’s nursery, an airline lounge or, more recently, an amusement arcade or, in the case of Metro Bank, a Las Vegas casino.
So are the soothsayers, the banking visionaries, correct that branches are dead and that anyone who suggests otherwise is either a dinosaur, very, very stupid or should be taken away by the men in white coats?
Sitting in New York writing this blog it would appear to be anything but true with so many shopfronts on so many streets being new or refurbished branches with their glistening self-service machines, their comfortable sofas, their bright colours and lighting these do not look like the last desperate gasps of an endangered species. Indeed there are also lots of unreformed branches with poor lighting and high screens, so the so-called death of the branch seems to have been prematurely called.
So why is there so much written about the fallacy of bank branches and the call for them to be assigned to a museum?
Certainly there are more and more ways that customers can interact and transact with banks than simply talking to a teller or an advisor in a physical branch.  The increasing ubiquity of devices that provide digital access  that has gone from dumb terminals through laptops, netbooks, mobile phones, smart phones, tablets, NFC-enabled cards and NFC-enabled phones can lead to the conclusion that digital channels will totally replace physical channels.
This perspective is further strengthened with the almost daily emergence and evolution of  different ways of connecting in the digital world whether it be using email, SMS, Facebook,  Twitter or some other increasingly enclosed environment.
However the reality is that, whilst the take up of these new ways of communicating and living our lives is accelerating, most of these have not  yet become mass market nor have they become a way of life for the majority of people.  On the other hand for many of  the people who  make a living out of predicting the future of banking the use of these tools has become second nature, as indeed it has for most of the people within their circles.  The reality is that they are not representative of the mass market and that, whilst they may quote figures that show that the take  up of new technology is faster than it has ever been before, they talk about banking as seen through their own lens and not necessarily that of the majority of customers.

Does this mean that these forecasters should be ignored? Absolutely not - for what they say makes a lot of sense and is highly appropriate challenges to the existing banking fraternity. It cannot be disputed that for a long time the most powerful voice in a retail bank has has been that  which belongs to the owner of the branch network. It is the branch network that has absorbed the majoirtiy of the discretionary investment funding for the banks. The agitators are arguing that this economic inbalance between branches and other voice and digital channels needs to be addressed and there needs to be a recognition that branches already are just one of the channels and ways for banks to service and transact with customers. That doesn't mean that branches will go completely away, because there will always be some customers that want to transact with a real person in a physical space that is private and away from distraction. For some segments this desire to transact in person is stronger than for others. For instance the branch-centric, locally empowered model that Handelsbanken operates in the UK focussed on SMEs and mid-corporates is highly successful both in profitability and customer satisfaction (see ).

These cries for revolution and major change in the distribution of economic power in retail banking should be listened to by branch-based banks, welcomed as a wake-up call and acted upon, whilst recognising that a balance between branches and digital for most main stream banks will be the right answer for some time to come.

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