Branches: are they losing relevance or just numbers?

There was a time when ensuring prompt service to customers walking into the branch was the only measure of good customer service in retail banking. This changed with the advent of digital channels and this began to overhaul the very fundamentals of the banking industry.

There was a time when ensuring prompt service to customers walking into the branch was the only measure of good customer service in retail banking. Of course revenue and profitability were important, but it was widely believed that if a bank branch wasn’t crowded, it just wasn’t doing good business.

That changed with the advent of digital channels and this began to overhaul the very fundamentals of the banking industry.

As banks realised that new channels provided a low cost alternative, channel migration became the name of the game. The target was not just to enroll customers for different channels but also to ensure that they actually used them. And then, if a bank branch was crowded, it just wasn’t doing smart business. Reduced footfall put a question mark on the sustainability of branches. (Check out: From 17,000 to 7,000: the decline of Britain's branch network and US branch networks set for steep decline – Celent).

So, can we conclude that branches have lost their prominence and a reduction of branch networks is the best option for banks looking for increased profitability?

The 2013 Financial Services Consumer Insight Survey by Datamonitor found that 61% of UK consumers chose their bank based on how onveniently its branch was located. Some banks are still opening new branches – TSB Bank, which markets itself as the ‘local bank for Britain’ is planning to open 30 new branches shortly. Branches also remain TSB’s most used service channel with 72% of customers who use any channel using a branch in the past three months and, 36% solely using branches to access their accounts. (Check out: TSB Bank still sees value in branches ). Additionally according to the Accenture report, “Winning the race for relevance with banking customers”,more than half of bank customers use a branch every month despite the digital options available to them, while 21% use a branch at least once a week.

This gap will undoubtedly shrink as digital banking adoption increases and banks are able to promote their products and services better through digital devices: smartphones, smartwatches etc. But until then, consumers will still visit the bank branch – and that visit must be a smooth, helpful experience. So how can banks ensure their branches continue as valuable and relevant channels, working alongside and complementing other channels?

Branches for customer acquisition: Banks still consider branches as a pre-eminent channel for the acquisition of new customers. As a result, they want to be ‘nearer’ to their target customers. As per the Bancography which examined the state of branch banking in the United States, while average branch transaction volumes declined by 25% during the past five years, more than 95% of new accounts were still opened in the traditional branch channel. (Check out:

The dilemma is that the convenient branch locations are important when customers choose a bank. Yet after opening an account they will rarely visit the branch, and instead prefer transacting through digital channels.

The branch showroom: Some banks are looking for that "wow" factor to keep their branches relevant. They are turning branches into innovation showrooms: 

Human touch:  There are several reasons behind the enduring popularity of branch banking, not the least of which is a need for personal interaction. Branches still have wider service capabilities than digital channels, and the availability of financial advisors draws in customers looking to complete a high value or otherwise complex transaction. Customers even today identify with their banks through their branches and the people working inside them.

PwC in its article “Retail Banking 2020 Evolution or Revolution?”brought up a very interesting analysis. It cited that 60% of great experiences are due to great staff. 25% percent of customers rely on staff to do research, 46% to select products and 63% to resolve their problems. Hence though the future of banking is through click, swipe and touch, it will always have a place for the ‘human touch’.

So while banks invest in setting up next generation digital channels, there is no getting away from the value of branches.

Though the number of branches may be curtailed in future, they are not going to

Success in future will belong to banks that are able to achieve the right blend of branch and digital. Banks should aim to be omni-channel service providers with branches playing a pivotal – albeit new – role.

When customers visit branches now, they look for quality interactions, service consistency and prompt problem resolution. Future branches hence will have to be far more efficiently run. Banks should equip themselves with solutions that streamline customer service: easy customer identification, a holistic customer view, queue management and prompt transaction processing. They should showcase their innovation in the branch: demonstrate the simplicity of digital banking, and sign up customers there and then.

While one cannot be sure of what’s in store for banking during the next decade, but for the time being branches matter.