The Bankwatch

Tracking the consumer evolution of financial services

Are we finally seeing the demise of the bank branch

Finally we are seeing hints of what we all know is inevitable.  It has taken a long time and probably this latest economic crisis, but the long view on branches suggests a damatic shift with less of them.

Slow but inexorable move to online banking

Yet slowly but surely, the internet is starting to make its mark on the sector as more people move their banking online. Lloyds is to shut up to 400 branches as part of its integration of HBOS. Its rivals are likely to follow suit.

A decade from now, the local branch could well be an endangered species as “cyber-banking” grows ever more popular and more branches close.

Written by Colin Henderson

July 7, 2009 at 01:37

11 Responses

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  1. “hints of what we ALL know…”? Gotta beg to differ there, Colin. Still plenty of believers that the branch is the “cornerstone of the relationship”. Their view is supported when someone comes out with research that says “branch location” was the number one reason why people chose their bank.

    Ron Shevlin

    July 7, 2009 at 07:42

  2. Ron … agree that branch location is the #1 reason people picked bank, but that result has so much other noise embedded such as being able to smoothly open accounts online that I am not sure it will always hold true.

    Colin Henderson

    July 7, 2009 at 11:55

  3. I’ll give 50% support to your statement on bank branches. BUT I am seeing some bankers beginning to capitalize on their branch being a different sales point. For example, baby boomers and soon-to-retire folks are interested in actually visiting with a bank professional to explore what to do with their retirement funds. There are just some services that cannot work well without human touch. Agree?

    Rick Wemmers

    July 9, 2009 at 09:00

  4. Rick … I agree and can see real value in those conversations translating into fee revenue associated with the management of those funds. I would add that the needs for such an office are no-where near as expensive as a typical branch. Even a small new bank branch costs several millions to build. It takes many years to recover those costs.

    Going back to Rons point earlier, what I really question is the thinking that customers go through when considering their bank branch. The classic answer is that it is based on location. Typically some event such as moving, a new job, or dissatisfaction drives people to a new bank, and the most convenient branch was the standard for that decision.

    The change I perceive is that peoples consideration of bank is broader now, considering amongst others:
    – online banking reputation, features, and online demo
    – ease of transfer of automated payments
    – associated offers or free stuff
    – reference from friends or work
    – bank reputation (i.e. is it safe)

    None of those characteristics are geo specific. The ultimate question is whether geo location will over-ride the above characteristics.

    Colin Henderson

    July 11, 2009 at 14:55

  5. When Barclays took over the Woolwich Building Society in August 2000, there were sometimes branches of the two institutions within yards of each other. It was only in 2006 that they announced that Woolwich branches would be rebranded as Barclays or closed.

    Lloyds Banking Group clearly needs to achieve cost savings more quickly. Rationalising adjacent LTSB/HBOS locations will help this effort, and may account for a large share of the 400 branches that will close.

    John Holden

    July 15, 2009 at 06:04

  6. Thanks for stopping by John. I admit it might be early to attach this 400 to my general conclusion in entirety. You are certainly correct regarding the merger and need to eliminate duplication.

    I look at the staff to customer ratio in banks though and will continue to believe it is at level that will not be sustainable as the effects of the economy on banks revenue kicks in over next few years.

    Colin Henderson

    July 15, 2009 at 14:26

  7. Here’s some fresh research on this question. J.D. Power published survey results on July 14, 2009 that specific bank choice was 36% on the bank’s brand image and 21% on branch location. Not agreeing or disagreeing, just passing this along.

    Rick Wemmers

    July 15, 2009 at 14:53

  8. Thanks for that Rick … very interesting, and does suggest their is movement in the old adage.

    Colin Henderson

    July 15, 2009 at 15:48

  9. […] careful world with far less money velocity, then how should your bank adapt products, services, service and business model to […]

  10. Human Element – Today’s market place gives enormous value to the personal relationship. Right or wrong people simply have lost faith in their lending institutions. Be it corporate greed rampant unemployment or jobs going overseas. The Lending institutions that develop or maintain customer centric low cost office/ branches will take market share from those that do not. We are going back to the banker we know….that’s how I see it.

    Marc Lash

    July 20, 2009 at 15:32

  11. @Marc … love it. The human element is lost in banking despite the ‘social web’ things that are going on. Having said that one problem banks have is cost managment versus revenue. A typical bank in Canada has 4.5M customers and 40K employees. The ratio of 100 : 1 is not sustainable. Then when you layer on the lack of scale in technology architecture (don’t get me started) I see no way for banks to get where you want them to be.

    Having said that, there is a way to get there based on embracing new technolgy and frankly new methods and approaches that are not based on ‘across the desk’ meetings.

    Colin Henderson

    July 20, 2009 at 16:26

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