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The Future of Bank Branches

Coordinating Physical with Digital

Retail banking is evolving at an accelerated pace. Globally, banks are facing disruptions from multiple directions. Business and economic realities have reduced the total number of US bank branches by 3,000 between 2009 and 2012 — a decrease of 3% over the 3-year period. In Spain alone, banks have closed 5,000 branches or 12% of their overall capacity since the financial crisis began in 2008, lowering the total branch count to approximately 40,000 in 2012.

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Digital technologies have also brought a significant shift in consumer banking behavior. The percentage of US banking customers who prefer to bank online jumped to 62% in 2011, up from 36% the previous year. Today, four of the top five transactional banking activities in North America – bill pay, viewing balances/transactions, viewing statements, and money transfer – are happening online. Apart from standardized transactions, the number of customers using bank branches to apply for retail financial products dipped while usage of the Internet channel increased.

This brings us to a key question that retail banks increasingly face. Do brick-and-mortar branches have a role to play in the future of retail banking? This question is becoming louder by the day as banks increasingly need to stay relevant to a digital-savvy Figure 1: Channels US Consumers Use to Apply for Retail Financial Products consumer. In this paper, we attempt to put this question in perspective by discussing the evolved roles that a physical branch can take, and how physical can co-exist with digital. We also present our view of branch models of the future and actionable recommendations on how to deploy them.