Mobility Matters: Death of the Branch
Survey results make clear exactly how fast branches are becoming obsolete.
Three in 10 Americans have not visited a bank or credit union branch in the past six months, according to a survey conducted for Bankrate.com.
What is dazzling is that there are not significant generational differences, said Greg McBride, Bankrate’s chief financial analyst.
“Among those under age 30, 42% have been to a branch within the last 30 days compared to 52% of those over age 50,” he said.
A zinger is that among retirees, one in five has not visited a branch in more than a year, per Bankrate.
McBride predicted within five years, the number of consumers who don’t visit a branch within six months will top 50%.
Even Anthony Browne, chief executive of the British Bankers’ Association, admitted his lack of branch attendance Sunday in the London Telegraph.
“I realise this is a strange confession from the head of the British Bankers’ Association, but I haven’t visited my branch since last year – and I’m not alone,” he told the newspaper.
Right now, there is a big rethink happening on the future viability of branches.
Also of Interest:
Jim Marous, a financial services marketing expert with New Control in Cleveland, said, “I called seven of the top ten banks. Every one said if they had the choice they would close 80% more branches than they would open. There are at least 10,000 branches out there that should be closed.”
And yet, added Marous, old habits die hard. Many bankers, especially in community banks and credit unions, cling to their branches.
“The customer base is moving much faster into digital money than the bankers are,” Marous said.
Don Peppers, a best-selling author and customer service guru, said the future of branches looks a lot like the future of video rental stores a few years ago.
Is the branch vanishing? Nobody believes that, but an increasing number of experts point to the death of video stores, bookstores, record shops and, lately, big box appliance stores as harbingers of what is coming to banking.
They believe that in the very near future, not only will there be fewer branches, they will be much smaller, and they will be designed to deliver consultative services such as financial planning and complex loan origination, rather than old fashioned transactions such as deposits, cash withdrawals and simple credit card account originations.
Branch defenders argue that financial relationships are special, and therefore, branches will long endure.
However, others scoff at that notion.
“I’m tired of hearing, ‘banking is different,’” Marous said.
Marous pointed out that although bankers may like branches, there is not much evidence that consumers do.
“In most you could shoot off a cannon and you wouldn’t hurt anybody. That’s how empty they are,” Marous said.
Some experts point out that the flight from branches started years ago.
“It began with the ATM,” said Peppers, who elaborated that when ATMs became commonplace in the 1970s, many consumers realized they could do most of their banking without entering a branch and they liked it.
They also like online banking, because it often delivers on the promise the name suggests: from home, a consumer can do most of what he/she formerly did in a branch.
Smartphones, which in effect put a bank branch in every hand, have accelerated the flight from branches by making banking something that anyone can do anywhere, 24/7.
“It’s about the digitization of money,” Peppers said.
That’s the intellectual view that, as money morphs from analog (paper) into digital (bits and bytes), the physical world of money, exemplified by branches, diminishes.
Kirk Ward, a retired 72-year-old loan examiner located in Marco Island, Fla., offered a simpler explanation as to why he never goes to branches at his credit unions, the $1.3 billion Associated Credit Union, located in Norcross, Ga.
“It’s about convenience. That is why branches are closing,” he said.
Then there are the economic benefits to financial institutions in embracing digitalization.
Stephen Ellis, director of the financial services team at Chicago investment research firm Morningstar, reported digitalization savings are huge.
It’s 95% cheaper to process a deposit via Mobile Remote Deposit Capture than at a teller window, he said, adding that it’s also 65% less expensive to process a mobile or online payment than one made via paper check.
Simply put, operating branches is very expensive. The digital DIY channel delivers efficiencies; and, for many consumers, their preference for DIY appears to be on the rise.
In the United Kingdom, where cellphones took hold faster than in the U.S., HSBC, Barclays and Royal Bank of Scotland have all warned their customers that significant branch closures are coming.
“Bankers don’t want to believe it, but most people do not want to go into a branch. They want to do this remotely,” said Greensboro, N.C.-based branding expert Tom Dougherty, CEO of Stealing Share. “Bankers believe in branches because they are stuck in an old model.”
“The writing is on the wall for branches,” Dougherty added. “Even if some still don’t see it.”