There have been many articles and opinions written about the demise of the banking branch. These discussions have dated back to when the ATM was first introduced and have been brought up again more recently due to the rise of mobile banking. Today’s consumer bank provides services across physical branch, ATM, online, mobile and tablet channels. The branch is by far the most expensive of the channels to manage. Banks face the dilemma of trying to determine the right combination of staffing, services, locations and features to be provided in these brick and mortar facilities. As more customers continue to adopt mobile and tablet capabilities for banking activities, we are also seeing a rising desire for virtual bank functionalities, mainly the ability to do the banking activities that could be done at a physical branch. At the same time, data has shown that customers are visiting bank branches less often. Many assume that Millennials are further driving the demise of the branch with their use of mobile, yet recent studies have shown that this tech savvy group actually has a higher average number of monthly branch visits than other bank clients (Cisco IBSG Study).
On closer examination of user activity, online is the channel most at risk of demise. Take a look at the core transactions typically executed by a customer: checking balances, transferring funds, paying bills, making deposits and making withdrawals. The first three gave rise to most of the online capabilities banks provide today. When the first widely adopted mobile banking applications debuted in 2011, they emulated those capabilities that were already provided by online channels. However, through the second generation of mobile banking applications, banks are beginning to leverage the inherent capabilities of mobile devices (including tablets), particularly the ability to be portable, take pictures, conduct video calls, and take advantage of geo location capabilities and voice recognition. This allows banks to provide an entirely new brand of services, including mobile payments, mobile check deposits, branch/ATM locators and voice activated and directed banking. These tasks are the beginning of a wave of evolution of services as banks continue to transform the customer experience – interaction model by leveraging mobile devices. Thanks to these technologies, further capabilities for mobile payments, personalized ad offerings pushed to your device based on profiling and geo location and driven by data analytics, are right around the corner.
In a recent report (‘The State of Mobile Banking 2012’), Forrester predicts that the number of U.S. mobile banking users will double in the next five years and reach 108 million by 2017, accounting for 46 percent of U.S. bank account holders. As a result, we are witnessing a rapid adoption of mobile/tablets for banking as customers leverage the convenience of geo and anytime availability so they can execute their banking transactions whenever and wherever they want. In a similar fashion to how many consumers are abandoning landlines for cellphone only coverage, we see a trend of lower usage of online channels particularly as Millennials embrace these devices as their primary banking channel for core activities. Accentuating this trend is the fact that many new capabilities being offered on the mobile/tablet channels (e.g. mobile check deposit) are by and large unable to be offered on online channels. We see this trend only accelerating as Millennials represent a majority of the target retail banking consumer.
Customers are still visiting branches for expert services and branches will therefore continue to be a key channel, albeit one with an evolving role. Banks are recognizing these trends and starting to drive significant change in branches from a place of simple transactions to one that now allows customers to engage in more complex banking activities. The newer wave of bank branches provides opportunities to engage with complex services through the use of interactive multimedia screens and user-friendly layout changes. Online banking will continue to be a key channel but at some point in the next few years it will be surpassed by mobile/tablet use. It will become imperative for banks to account for this in their multi-channel strategy and investment approach.