Home / Opinion / Forget cashless and branchless, it’ll never happen

Forget cashless and branchless, it’ll never happen

There are regular discussions at the Financial Services Club, conferences and meetings about the cashless, branchless future.

Visa and MasterCard are huge advocates of a war on cash, as are the mobile wallet providers.

Brett King and the Bank 2.0 crowd talk lots about a branchless world of banking and how branches are all irrelevant to future bank operations.

Let’s be clear, it won't happen.

There is no such thing as a branchless world, and a cashless future will not happen in my lifetime.

Much as I would love to see this future of a branchless, cashless future – don’t get me wrong, I’m a huge advocate of getting rid of bricks, mortar and paper – the reason it will never happen is that these forms of commerce and finance are important.

Branches are required for advice, sales and service but, more importantly, trust.

Regardless of how irrelevant branches may be in terms of distribution, any bank that wants to get new account openings has to have a branch.

That’s why:

  • Santander purchased Abbey, Bradford & Bingley and Alliance & Leicester’s branches to become one of Britain’s largest branch-based bank networks behind Lloyds and Royal Bank of Scotland (NatWest);
  • Virgin purchased Northern Rock’s branches to get some form of physical footprint in the UK;
  • The Co-operative Bank is buying the 632 branches Lloyds has been forced to sell due to the European Commission’s verdict on UK bank competition after the HBOS merger; and
  • Metro Bank is opening their tenth UK branch in High Wycombe, with a plan to achieve 24 branches by the end of this year, and then organically grow to over 200 branches by the end of the decade.

Some people argue that branches are irrelevant but, if they were, why are all of these new and expanding banks opening or acquiring branches?

Because they create trust and because it is regularly shown that anyone, including and especially young folks, want a branch locally if they open an account.

Even HSBC’s branchless bank, First Direct, has the backing of HSBC and its ATM network to rely upon if things go wrong; as do Cahoot! (Santander) and Smile (Co-operative), our internet-only banks.

Branches are a core part of community and relating to people with a human touch.

This is why branches will always exist.

So we talk about a branchless future, but should be talking about a less branch future.

The same with cash.

We will never be cashless, just less cash.

This has been shown in many economies, specifically in Iceland, Sweden and other economies.

They get to certain level of cashlessness and then the cashless process ends.

This is because there is no substitute for cash today: cash is anonymous, immediately recognising a value exchange, fuels the shadow economy and is totally trusted.

No other form of currency exchange has the same capabilities.

Not yet anyway.

We can talk about a branchless, cashless future, but it’s a dream and will not be reality for years to come.

So I’d rather talk about a less branch, less cash future, and see what that means.

How far can we push the less branch, less cash world?

What is the minimum number of branches to be effective (in the UK, they say about 250).

What is the minimum level of cash that can be in play to run an economy effectively (in Sweden, they say about 3.5% of the value of GDP, which would equate to about a fifth of the volume of transactions).

Can we push this any further?

If so, by when and how?

Something that will be debated for years to come, I’m sure.


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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  • It is perfectly understandable that Visa/Mastercard would like to apply their 3% take on all cash transactions. However if cash is dematerialised we would be in a terrible mess in the event of a major banking collapse. I’m sure there’s no risk of a banking collapse, is there?

  • Yesterday, I made a very rare trip to a bank branch. I was paying in a cheque. The cheque was in USD and my business account is in Sterling so I had no alternative but to go into the branch and fill out a form.
    I was handed a pretty complicated form and was told to go away and fill it out. Now I’m not stupid but some of the questions on the form were beyond me so I took the form back to the counter saying I’d completed the form as far as I was able. I was handed the forms back and was told to read the notes on the back.
    I protested. I was in a hurry and didn’t have the time to learn how to complete a form I’ll probably never have to fill in again. With great reluctance, the clerk spend all of 2 seconds finalizing the form.
    There were two things about this experience that were noteworthy quite apart from the poor customer service I received.
    1. I was the only customer in the branch. I was outnumbered by staff 5 to 1. Despite this, the clerk preferred to chat to her colleague than help me with the form filling.
    2. The irony that the cheque was issued by The Silicon Valley Bank in California. The world hottest technology companies still don’t get electronic payments. Can you believe it?
    Will there be branches and cash in the future? I don’t know and I don’t care. I just know that I won’t be using them as long as I can avoid them.

  • Couldn’t agree more and even more so for the SME sector. You only have to look at the customer satisfaction and profitability of Handelsbanken in the UK to see the argument for branches.

  • I tend to side with the article’s author. It is going to be a long tiome before there is anything approachin a branchless, cashless society. It took 20 years after people were excitedly talking about the checkless society in the early 1980’s before the rate of growth reversed. Only in the last few years has the number of checks actually started to come down.
    Perhaps in talking about “less branch” the subject should be smaller reconfigured branches whose provide sales and consulting more that transaction handling, as opposed to less meaning fewer.
    As to the nightmare story posted by Pete, bad customer service can happen with any channel. Talking first to an AVR then, if I’m lucky, a human in a call center is really not my favorite activity. How many of us had not had an internet page bomb out after completing a dozen fields?
    By the same token good customer service can occur with any channel. Our local branch in the U.S. takes care of anything and everything. We do not call the call center. We call any of several people in the branch who know us by first name and they take care of it.

  • Is Branchless Banking Fantasy or Reality? In US the ‘fantasy’ is alive and well, and is practiced by nearly 1,000 Banks and Credit Unions (read more: http://bankblog.optirate.com/branchless-banking-fantasy-or-reality).

  • Chris Skinner

    Good debate guys, keep it up … and, for the record, sure there are branchless banks out there … but they wouldn’t survive if branch-based banks didn’t exist.

  • I believe it was Peter Ustinov who said that the last voice heard in the darkness when we’ve finally blown up the world, will be the man saying “it couldn’t be done”.  
    Today, ‘less’ really does mean less, but first direct proves that sometimes less is actually more. It’s true that our customers can, and do, make use of HSBC branches and ATMs, but this is not why they choose to bank with us. They choose first direct because we usually get it right first time, and when we don’t, we rectify quickly! In return, we don’t ask them to give up their valuable time to visit a branch, and we don’t ask them to wait in line to be served – and often served indifferently at that. 
    Occasionally, I lament the decline of vinyl records. Yes they were big and fragile with a limited life expectancy, but the fact is that they simply sounded better. They sounded better because they can hold 20 times the sound detail an MP3 file can. But, who would deny the flexibility and versatility of digital music and video? Yes, it requires a quality compromise but in return, you can quite easily take your entire music collection for a jog – the rewards are many.  
    And there’s the irony when it comes to branch banking – although things have improved, it’s simply lacking. When compared with the consistent, reliable, always available service we offer, branches still have some way to go.
    Vinyl records are still manufactured and sold, but they are anachronistic, museum pieces – and they were better 😉

  • For me the word missing in the discussion above is convenience. We all have different preferences, but what puts us all in the same boat must be the need for convenient services. Let me provide some examples; when going to the ICA supermarket (which you probably do at least once a week) you can pay bills, pay with your ICA-card and withdraw cash, or when shopping at IKEA you can tap into your savings account or set up a savings plan for buying that new set of Billy shelves you have been yearning for. Providing the appropriate banking service in the moment when it is needed in other words.
    And yes I agree, if you are looking for advice from your bank – you should be able to book a meeting at a branch (or a ‘less branch’ as David calls it above). It is a transformation of branches in order to correspond to the customer’s evolving preferences. As a final example, I am sure that the possibility to pay a debt to a friend over Barclays Pingit is something I would find convenient, rather than going to my internet bank.

  • Chris Skinner

    @Serge, @Mark
    Interesting note I just found that shows the USA is seeing branch numbers going up at a rate of over 3% CAGR in a five-year cycle.
    See Table 3:
    @Marie, @Mark
    Convenience = remote; trust = local … that’s why banks keep branches and even though I like First Direct, would they have the same trust without that HSBC logo?