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Seeing the wood for the tree branches (again)

We had a discussion last night about branchless banking, with two retail bank leaders telling me I was wrong about the idea.

The argument was not actually about the concept of branchless banking, but less branch banking.  Even so, these retail bankers feel adamantly that the average human being wants a branch to bank.

I argued that mobile, internet, call centres and such like would eradicate the need for most branches.

They disagreed.

I said that the idea of walking into a branch and queuing for a transaction was ridiculous in the 21st century.

They disagreed.

I argued that a teller who is paid under $20,000 asking me if I wanted mortgage advice was not something I would even contemplate discussing.

They disagreed.

I argued that the cost of having transaction centres was an unsustainable overhead when far more efficient systems were in play.

They disagreed.

Their core argument is that the average customer in most countries wants to touch someone, talk with someone, visit somewhere and be with people.

They like branches, branch people, talking with people about money and being assured they are doing the right thing.

They argued that the average person is afraid of money; they don’t like thinking about it; they want someone to tell them they are doing the right thing and to give them support and help.

They argued that I am not the atypical customer; that I am far more educated and assured in my dealings with money and technology; that I am not the typical person in a branch and that branches are there to provide advice and support.

Old TSB branch

Interestingly, there was an outspoken discussion about how banks got it so wrong in the 2000s, that branches were referred to as ‘stores’, that banks became retailers and that this was wrong.

Banks are not retailers, they are advisers.

They shouldn’t sell credit, but they should provide credit where credit is due.

If loans and mortgages are affordable they should be available to that customer, but they shouldn’t be pushed like a drug on every person whether they can afford such credit or not.

Bank Store

The latter part we all agreed with; the former we didn’t.

I disagree that every human wants human contact and service for banking.

That human contact and service for banking should be available is important, but not on every high street corner.

That most people are happy to use technology for self-serving and don’t need to go to a human for transaction processing.

This last piece was the most debatable point of all for me, as the retail bankers argued that technology can never replace human service for more complex processing.

Like the idea of doing investment services on an ATM, it just won’t work.

That last comment is where these guys shot themselves in the foot.

My argument is nothing to do with mixing transactions with advice; self-service with service; administration with sales.

Transactions and administration is where self-service is key.

Customers – whether educated or not – will perform the majority of their transactions and administration through self-service in the near future.

Like the ATM got rid of cash dispensing tellers, the mobile internet will get rid of the transactional branch.

That leaves advice and sales, where service with humans is required.

Complex products like mortgages and investment services will still be serviced by humans in branches.

Just, as I’ve argued for a long time, the non-transactional sales branch of the future will demand far less of a footprint than today’s transactional administration branch.

That’s the point.

The future branch will be limited in number – about a tenth of today's number – but unlimited in comfort, branding, service and advice.

And it will avoid having humans employed to do administration of customer's transactions.

Will they ever get it?

  Barclays future branch


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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  • Keith

    The only time I have interaction with my branch is when they don’t offer an automated service for something that I think should be automated. Perhaps I’m not the typical consumer either, but then maybe the typical consumer has shifted a long way from that B&W picture featured in your post.
    Generation X,Y, and Z probably just want things to be quick and easy. Going to a branch is neither of these things.
    As for your comment; Complex products like mortgages and investment services will still be serviced by humans in branches.
    I have to disagree. The amount of people using branches for these services will still be much higher than people using branches for transactions, but I think plotting time against “in branch mortgage advice” will reveal a negative gradient. With google recently teaming up with LoanSifter, the days of getting mortgage advice from a branch are numbered (in my opinion). Personally, when I need to get a mortgage I won’t be visiting the bank. In fact, I’d like to do the whole thing from my laptop with access to plenty of good data in an easy to use format. Am I being ridiculous? Or am I just very far away from the typical consumer?

  • Ron

    The cynic might put their disagreement down to the fact that until the banks (RBS, Lloyds etc) sell their surplus branches then of course “branches are central to banking (Ahem – well today anyway)”

  • I agree wholeheartedly with your argument. I have advised on hundreds of bank openings and almost as many closings, but they still don’t get it. I live in a town of 60,000 that has over 35 bank and credit union branches and only ONE post office (with 4 clerk stations-usually only 2 manned).
    It’s a well contained market on a peninsula consisting of 4 Zip codes (98332-98335).I told a local banker’s convention that I feel like Wiley Coyote holding up a sign to stop the oncoming train They were not amused

  • Sretko

    I found your article very amusing. I was a management consultant in retail FS in the late 90s and recall every bank declaring then end of branches. The world was going electronic; branches became trendy wine bars. Despite protestations to the contrary they could not be convinced. Funny how we humans are destined to repeat history.

  • Peter Miller

    I agree with you, the Banks still don’t get it,despite the technology revolution going on around them. They should change their marketing advisors and get some real market research done on what their customers really want ?

  • Keep telling the story Chris. After my Economist event on Tuesday I’m firmly convinced the leadership are still shutting their ears to this message, the impact of which is that the time is right for massive disruption around this complete underestimation of behavioral shift.
    Brett King
    BANK 2.0

  • Chris and Keith, I agree with both of you. Yesterday at a local peer group, we were discussing the marketing plan for a new local bank. One of the strengths of the bank is their one, centrally-located, highly-recognized location. Because they do not have to spend overhead on other branches, they are able to install more ATMs and focus on additional self-service channels, such as their new website. As you said, banks do need branches, they just need less of them. They are important for consumers who want to open accounts while talking to a person, but because of self-service channels, they do not need to be as prevalent as they once were.
    That said, customers like the comfort/security of a nearby branch and they freak when you close a branch. But the issue isn’t the need for a branch. The problem is a lack of trust in the bank. The branch is a proxy for the trust they should feel. You might enjoy this article about building consumer trust with customer advocacy.

  • Turkeys don’t vote for Christmas. Just don’t buy shares in any traditional / incumbent bank. Let history do the rest…

  • As you rightly point out Chris, the role of the traditional branch is changing and this has been exacerbated by the financial crisis. Customers immediately equate the physical branch presence with comfort and security, as opposed to something that only exists in the virtual world. However there are certain banking transactions, as you say, which don’t need to take place within the branch. Withdrawing cash or transferring money are examples which can be easily accessed through self-service channels.
    That said, the branch will always serve as a strategic channel for advice. With the help of the right technology, advisers enhance the human banking experience and offer tailored products and services to meet customer needs.
    It’s also critical for banks to weave this personalised branch experience into their cross channel strategy. Consumers expect their bank to know what they have been doing in all channels. If a customer starts an account opening application online, but then pauses and enters the branch for advice on the account type, the staff should be able to recommend the best one and retrieve the customer’s information from the paused online application.
    So how do banks incorporate this strategy into the branch of the future? There isn’t a single answer – it depends on the institution and the channel strategies implemented. Regardless of the bank model, two things are certain; the branch of the future will look different and technology is an enabler for the branch to meet the needs of the customers being served.