As branch numbers go down, is the future of banking going with them?

If you’ve done any scanning of the financial headlines lately, you’d think the banking industry was in some sort of downturn.

Numbers back up the concern.

The Wall Street Journal recently reported 1,700 branches were closed in 2017 alone. That represents 2% of all the branches in the United States, bringing the total down to somewhere around 90,000. This headline grabbed a lot of attention.

We know that the rise of mobile banking has reduced the amount of foot traffic in many locations. Are we in the midst of another digitally-led upheaval? Have millennials decided they’d rather conduct their banking without having to look up from their phones and actually talk to someone in person? (We kid, we kid).

What’s the real story?

Big banks aren’t necessarily in trouble. They’re just pivoting. Each mobile interaction costs about 10 cents per customer, while an interaction with an actual human being is around $4 (see infographic below from Bain & Co.). It doesn’t take a CPA to realize the cost savings of closing a branch that’s not being utilized.

Another reason the numbers are skewed.

Another data point that makes the closures sound more alarming than they actually are, is that they are attributable to the top ten banks. When larger banks make cutbacks to save money, the numbers reflect it, and the market pays attention.

Do we even need the branch anymore?

All the studies say: Yes, absolutely.While consumers are certainly shifting their routine banking needs to their mobile devices, they still visit branches. Studies put the numbers as high as 90%  as noted below from Bain & Co. The need for customers to spend time speaking to their banker, either face-to-face or over the phone, is still important.

What happens when a branch closes?

When branches serving less populated areas decide it’s not financially feasible to keep a branch open, longtime customers are forced to drive miles and miles to their nearest branch.

Customers may love you, but do they love you that much? Studies have shown that 40% of the time, customers will switch to a different bank that has a branch nearby. All banks deal with “churn” to a degree, and closing a branch can be a self-inflicted pain that may cost the bank in the long run.

What does this mean?

If the branch solution is built on a “If we build it they will come” mentality, perhaps the big banks closing branches did a poor job identifying the real opportunity in their markets. Otherwise, they they wouldn’t have to be closing the branch.

There is a precision to branching that can rear its ugly head later if not done well. At LEVEL5 we specialize in solutions that go beyond design-build, by helping you decide what kind of branch solution works best for your markets and needs.

What can we learn from big banks on what not to do?

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