As we discussed this week, the writing is on the wall for bank branches, and more will be closed in the months ahead as the digital revolution continues. You can read our latest research in our “Quiet Revolution” report.
Bankwest announced the closure of a significant number of branches on the east coast, as discussed in this segment.
But there was a timely article published by McKinsey “A bank branch for the digital age“.
In it, they argue that digital technology could be harnessed within the branch to enhance customer experience there, and that there is still a role for bank real estate. We are less convinced, as in Australia at least, the digital revolution is well advanced, and brokers provide an alternative face to face sales channel. But in-branch tech may give branches some extra utility, for a short while.
Far from rendering the bank branch obsolete, digital technology holds the key to the branch of the future.
The bank branch as we know it, with tellers behind windows and bankers huddled in cubicles with desktop computers, needs reinvention. Most customers now carry a bank in their pockets in the form of a smartphone and only visit an actual branch to get cash or, occasionally, advice. Globally, financial institutions now process far more transactions digitally than in branches, and since the financial crisis of the late 2000s, more than 10,000 US bank branches have closed—an average of three a day.1
Despite such systemic changes, branches remain an essential part of banks’ operations and customer-advisory functions. Brick-and-mortar locations are still one of the leading sales channels. Even in digitally advanced European nations, between 30 and 60 percent of customers prefer doing at least some of their banking at branches, according to McKinsey research.
Changing customer behavior and the emergence of new technologies spell not the end of the branch but rather the advent of the “smart branch.” Smart branches use technology to boost sales and improve customer experience significantly. When done right, applying the concept transforms the way a bank branch operates (reduced staffing), significantly lowers real-estate requirements, and alters customer interaction (targeted, relevant sales and service-to-sales programs)—with a resulting 60 to 70 percent improvement in branch effectiveness, as measured by cost savings and increased sales.
Our research shows that although many banks have started to adopt elements of the smart-branch model, most are not extracting the full value potential. Making branches smart is not a matter of simply installing new machines or buying a suite of tablet computers. Smart-branch transformation builds on three pillars: the seamless integration of cutting-edge branch technology, which has become cheaper, more reliable, and more accessible; the adoption of radically new, teller- and desk-free branch formats at every location; and the use of digital technology and advanced analytics to improve the operating model in branches, including personalized, data-driven sales and real-time performance management and skill development.
