Chris Skinner can see why people think bank branches aren’t necessary, but firmly believes they are, and here’s why.

For many years, we’ve had discussions about bank branches and a branchless future. I personally don’t believe in a branchless future, but many do. And yes, there are many branches disappearing, much to the annoyance of those who lose that physical store.

For example, America still has a large number of branches (32 per 100,000 people) and remaining fairly steady, while Europe has seen a near 20% reduction in bank branches from 2009 to 2015 (238,467 in 2009, falling 49,616 to 188,851 in 2015). That’s still a lot of branches.

So, what’s the outlook for the future? In my view, there’s always a role for a branch in banking, but not the branch as we once knew it. The old branch was all about transactions: pay in, pay out, cash a cheque, deposit some coins, and so on. All of that is going or has gone. But there are two to three elements to a branch.

One, it supports a community and specifically the business community in the area. Businesses have different needs to consumers, and do often need access to a human. People forget that. Two, money isn’t the same as a Facebook update. If you lose a post saying what a nice time you’re having, it’s not the same as losing a deposit of $10,000. In fact, I often state that if you woke up today and find your bank app confirms the balance you expected, then you’re happy. But how do you feel if the balance is -$10,000 short of what you expected? You’re just going to sit and ignore it? Of course not – you’ll call the bank or go to the branch to eyeball someone. This is because money is different; it’s far more emotional than other parts of our life, because it’s the controlling factor in our lives.

Three, I think a lot of pundits forget what it’s like to get your first job, first relationship, first car and first home. These are big moments in a young person’s life, and to imagine they would all be dealt with through an app is a little bit strange. I always hark back to Deutsche Bank, which opened an amazing branch in Berlin for its high net worth clients. Along with the mandatory cafe and shop areas, they designed two rooms nicknamed the iPod room and the Senator room. The iPod room was designed for young customers and was all white plastic and hip; the Senator room was for wealthy clients and was all oak and red leather, like a library. When the branch opened, it was therefore surprised when all its young customers wanted meetings in the Senator room, while its old customers wanted to meet in the iPod room. Think about it: old people want to be young and hip again, while young people felt that money was serious and important and demanded a serious and important room to talk about it in.

Four, building on the last point, money is serious, critical and central to most people’s lives, and needs a human interface. Sure, you can build the human interfaces into a Skype call, and we will, but removing the humanity and the human physical access from a service so fundamental to our lives is stupid. It demeans the role of the bank and banking, and is undermining the role this service has in people’s lives.


All in all, I can see why people think branches aren’t necessary, but I firmly believe they are necessary. Not for their old role of transactions or for the role of advice (though I believe this is quite important still), but mostly for their core role of trust.

Roberto Ferrari of digital bank startup CheBanca! in Italy articulated it most succinctly for me. When visiting his branch in Milan, I wondered why a digital bank had branches. He told me that it was for three reasons. The third is services, the second is trust, but the most important reason he gave me is marketing. His branch network was for marketing purposes.

Wow, that’s a surprise, but I can see why. He told me that where the bank had a physical presence, they received two-and-a-half times more deposits and assets than where they did not. In other words, the bank that has a branch has far more chances of getting people’s trust and money than those who do not.

Maybe this is best illustrated by Metro Bank, the first new retail bank in Britain since 1840. It has been followed by many other challengers, but is the one of the few new challenger banks with branches. I was at the launch in 2010, with the first store at Holborn, and now it has over 50 branches across the UK. In terms of profit, it announced a 77% increase in profits to £7.2m in the three months to the end of September 2017, up from £4m in the previous quarter. It also notched up record quarterly customer growth as 79,000 new accounts were opened, taking its total to 1.1 million. Surely that’s a testament to the branch, or rather store, strategy. (I also loved Vernon Hill’s quote: “We don’t have problems with bank robbers. Nowadays they don’t use guns to rob us by breaking safes – they use the keyboard.”)

Finally, I heard another great story recently. Apparently, Larry Page and Sergey Brin, the founders of Google, had a meeting when they started Google with a major investor. They had a great meeting and walked out with a cheque for $100,000. As they left the meeting, the first bank branch they encountered was Wells Fargo, and immediately went in to deposit the cheque. That’s the reason why Wells Fargo was (and still is) the bank behind Google. Now there’s a good reason for having a branch if ever I heard one.

READ NEXT: Why branch building (sometimes) makes sense

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: CheBanca!

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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