Is there a future for bank branches?

Will bank branches disappear or will they transform themselves?

Will bank branches disappear or will they transform themselves from transaction-processing hubs to sales and advice centers? Auke Douwe Veenstra finds out.

I was recently invited to participate in a panel discussion on the future of banking at the Economic Forum in Poland. The head of retail for a major retail bank predicted that, within five years, his bank wouldn’t have any branches left. This was a remarkable statement considering that in his country, 29% of banking customers still visit a branch once a month. In Warsaw, there’s a bank branch on every street corner. Across Europe, however, these numbers vary. Forrester’s recent research shows that only 7% of banking customers in the Netherlands visit a bank branch at least once a month, down from 9% in 2011, while in Spain, 49% of banking customers still visit a branch once a month.

So, what’s going on here? Will bank branches disappear or will they transform themselves from transaction-processing hubs to sales and advice centers? We think the latter because:

  • Branches are expensive. The elevated cost structure of branches, including their increasing staff expenses (ie hiring, training, and retaining them) and the security costs related to cash dispensing, is putting pressure on the cost/income ratio of many retail banks. This is the main reason why SNS Bank moved the cash-dispensing function out of its branches and replaced them with ATMs. But there are more examples as stated by my colleague Benjamin Ensor in his blog about digital banking innovation in Turkey.
  • The popularity of self-service channels is growing. Online banking is still growing, but it’s now incorporating personal financial management tools to provide a new interface for customers, providing greater insight into their financial affairs. In addition, the use of next-generation ATMs is growing.
  • Mobile banking is taking off. Our research shows that usage of mobile banking at least once a month for routine tasks more than doubled in the Netherlands this year, climbing to 14% from 6% last year. In our report The State of Mobile Banking 2012, we explained that consumers are progressing from simply checking their account balances or locating an ATM to making bill payments or transferring money to other accounts via their mobile phones.

Why branches will still exist

There are two reasons why Forrester thinks that branches will still be around in years to come:

  1. You still have to visit them on occasion. In many countries, the pace of development of new legislation is not in sync with customer adoption of new technology. For example, to open a bank account in many countries, you’re still legally obliged to show up in person to prove your identification, despite any online onboarding functionality that may exist.
  2. You still want to visit them. This also varies according to country and cultural habits, but in general, face-to-face appointments still matter for specific ‘big ticket’ banking matters such as mortgage advice or investment decisions. At Forrester, we think branches will continue to play an important role in these services.

Start digitalizing branches?

Despite the rise of digital self-service channels, branches will continue to play an important (albeit smaller) role in the near future. However, you should think about what would happen to your current distribution model if the Dutch situation became a reality for you – are you ready? Your digital agenda should create a sense of urgency in your firm and encourage it to make the necessary investments, just as Australian bank ANZ did recently by investing $1.5bn in a complete distribution overhaul. This involves not only redesigning the branches, including videoconferencing equipment, but also making them more ‘digital’ by equipping them with devices to handle contactless or cardless transactions and investing in next-generation ATMs. Digital banking executives should lead the transition from a branch-centric to a more digitally focused approach. This means creating great customer experiences across multiple touchpoints, including those good ol’ (or should I say brand new) digitally enabled branches.

I would love to hear your thoughts on the future of branches, so let me know. We don’t have much time to lose.

This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.

About the author

Auke Douwe Veenstra

Auke Douwe Veenstra is an independent observer of financial markets and the fintech industry. He is head of Europe and South America at Cloud Lending Solutions, a SaaS lending platform provider. For more than 25 years, he worked in the retail financial services industry. He has a track record in business development, general management, and digital business strategy in executive roles at a range of financial services companies in the US, Mexico, and continental Europe.


  • Auke, I agree with your reasons on why branches will still
    exist. Like you stated, there are still certain banking transactions that do
    not make sense to do over your mobile phone. Banks should look at mobile
    banking as a way to compliment their branch interactions with their customers. They
    could encouraging customers to use their mobile phone and computers to check their
    balances and transfer money (transactions that are costly to do at the branch)
    but should still keep branches open for high touch interactions (applying for a
    mortgage, applying for a car loan or discussing a retirement plan). As far as I
    am concerned, branch banking will be around for many years, especially for high
    touch interactions.

  • Auke,
    I totally agree with you on the fact that branches will stay. In Turkey for example, banking was much more traditional and branch-based. However, as internet penetration increases, new banking models like direct banking are also evolving. Even if penetration reaches 100%, I totally agree that customers may need to visit the branches for issues like signing a loan contract, ID card approval etc.
    In my opinion, since the pricing in different channels are different and transactions done through the branches are more expensive, customers make their channel preferation accordingly and do not prefer branches if that transaction can be done through online channels.

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