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Proof that the branch (of old) is dead

The Finanser’s mate Brett King – Chris Skinner “taught me everything I know” - was in a webinar yesterday, talking about the future of banking with some good stats to back up ideas.

A key one is that the average number of in-branch transactions has declined by a quarter in the last four years, from around 11,400 transactions per day on average in 2006 to 8,550 in 2010.

This is a theme I’ve talked about over and over and over and over again.

In fact, if you missed it, I had a huge spat about this and explored it fully in depth on the blog back in 2007:

And it comes up again and again and again, most recently when Brett blogged about same subject in March this year (it’s one of his favourite hobby horses too).

Finally it’s happening: bank branches are disappearing.

In some cases, they are disappearing fast – like Iceland and Denmark – whilst in other countries it’s a slow burn still – like the UK.

In the latter link, I was quoted by the BBC as saying: “four out of five branches will just disappear” … and I do.

After all, you want service centres for branches in future – like Apple stores – not old transaction centres with tellers.

I should also stress that this is true for all developed economies – branches are dead … as transaction centres – although this does not apply to emerging markets in the same way.

The point is that for economies living in the Web 2.0 world, customers self-serve so they don’t need branches.  They need online electronic services.

As paper disappears too – cheques, paper orders, passports and driving licences as identities (yes, we will move to e-identity) – then the decline will be even faster.

And emerging markets are in Web 1.0 and will soon be in Web 2.0 over time.

The Web 1.0 world wiped out any goods that were being distributed physically as products that customers sought to consume – such as books, records and movies – and electronified these markets.

This is why Borders, Tower Records, Blockbuster Video and more struggled through the first decade of the 21st century.  Trying desperately to hold onto a 20th century business model, these businesses are going bankrupt or have already done so.

Now, in the second decade, Web 2.0 is doing the same to any services companies, where transactions that historically had to be done physically can now be self-served electronically.

Already, most monetary movements, orders for new functionality and processes enabling financial transactions, are being served by the consumer.

But the biggest transformation is in how we think.

We used to click-to-order, now we click-to-serve.

We used to have to push companies to send us stuff; now we expect companies to pull us in.

We used to have transactions and then interactions, now we want experiences and soon augmented realities.

Web 1.0 was all about product.

Web 2.0 is all about service.

This is why it’s revolutionising service businesses like banking, and why we are seeing so many big changes in the banking world.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Interesting. I agree that the conventional bank and branches will change but not nessecarily dissappear – branches also offer other services other than cashing of cheques – such as safe custody boxes, foreign currency services, issuing of debit and credit cards and associated PINS, etc, etc. As the branches dissappear the more inconvenience to the user when using these services.

  • Chris Skinner

    As I mentioned Brett, it will vary by market and, as I also say, branches won’t disappear completely … just most of them.
    Issuing of debit and credit cards, PINs, etc take place centrally in most banks here for example, rather than in branch (Metro Bank being the exception), and FX and more can be provided via the web easily.
    So the branch of the future is an Apple Store style operation in central city areas, whilst the old town main street branch doing transactions disappears.

  • Graham

    Why is the average number of branch transactions important? By that logic, if more accounts are being opened in the branch today than there were 20 years ago, we should be investing more in branches. But this would lose the context of all of the other changes in the last 20-30 years and the perspective to other channels.
    The cost, revenue and profit of the transaction by channel is a better input to a decision about contracting of eradicating the branch network. Removing branches from a certain area and analyzing the change in consumer behavior would also provide more useful data. Anecdotal evidence is that consumers are more likely to open an account in a bank with branches even if there do not use the branch channel, it would be good to have statistics on this.

  • Chris Skinner

    Good point Graham
    I focus on transactions as most branches exist to support last century transaction needs. There’s no service, sales, advisory, just low-paid tellers doing admin.
    If they were opening new accounts, generating cross-sale and improving cost-income ratio, then obviously branches would be worth having.
    And keep noting that I’m not saying branches are dead. Those that sell should be kept. These are the Apple Store branches and note that Apple, a tech firm, need branches to sell to for example.
    But how many Apple Store branches do you need, is the question?
    Far fewer than the thousands of branches there are out there today.

  • Chris Skinner

    It’s a matter of definition John
    By “emerging” I was thinking of M-PESA and Kenya, whereas I think you are referring to “developing” economies, which are halfway between the extremes I outline and, in the richest cities of these tiger economies, reflect what you describe well.

  • Bank branches are as obsolete as brick & mortar stores for any other information retailer, guys. Porn, music, books, you name it The information retail revolution is hitting every sector along the same lines. I just published a book about it. Gave it the stimulating title Porn for Bankers…. Look up at pornforbankers.com why I think so. Hans Eysink Smeets.

  • In reference to Brett’s comment, I see absolutely no reason why branches should not disappear. In SA, Investec Private Bank operates out of two offices and provides all of the services that Brett lists as a requirement for branches such as “foreign currency services, issuing of debit and credit cards and associated PINS, etc, etc.” via telephone, internet and courier services. There is absolutely no inconvenience in this system for the account holder, because all physical documents, cards and foreign currency are hand delivered to you within about 48hrs or ordering it. Which would you rather do, go to a branch and stand in a queue or have something delivered to you in person wherever you happen to be?