Banks Need to Balance Technology and Human-Run Banking Options
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The physical bank branch is in crisis. The most recently available statistics show that the UK alone has seen the closure of 66 percent of its bank and building society branches over the past 30 years - from 20,583 in 1988 to only 7,586 today.
With more and more people seeking to bank using digital means, the days of the brick-and-mortar bank branch indeed seem numbered. It's easy to see why this situation has arisen. In the old days, people were forced to rush to the bank during their lunch break to transfer or withdraw money, pay a bill, or even just to print out a statement. But with the rise of online banking, these simple everyday tasks can be completed without leaving one's desk.
However, there's still a need for banks to have the human touch. It's just a case of knowing where and when it's required.
The above statistics mean 19 percent of UK residents live two miles from their nearest branch and eight percent live more than three miles away. Obviously, this is inconvenient for most customers, but for some - the elderly and/or infirm, for example - this makes it all but impossible for them to access physical banking services.
"The true scale of bank branch closures in recent decades is staggering and has left millions of people struggling to access the vital financial services and cash that they need," said consumer watchdog, Which? which carried out the research. "For many, there is simply no substitute for a dedicated branch and the wide range of services it offers, and many customers now face having to travel long distances if they are to avoid financial exclusion."
With US residents often being even more spread out and isolated than their British counterparts, a repetition of this in the States would be even less desirable. Unfortunately, having dropped from 91,900 branches to 89,900 since 2016, it seems the pattern is set to replicate itself on these shores.
It may be that you don't recognize the issue here. After all, if fewer people are using branches and more are using technology-based banking solutions, then how will losing said branches negatively impact the customer experience?
"Consumers want to be able to check their balance before they buy another round of drinks or freeze a misplaced card," said Manish Madhvani for Forbes. "They want a breakdown of spending at the click of a button and to be able to save as easily as they spend. This is where bright and innovative banking start-ups step in: the likes of Monzo, N26, Monese, and Revolut hardly need an introduction. On top of the convenience and digital perks, they offer lower international exchange rates and have even incorporated cryptocurrency trading."
The Human Touch
However, it's not all doom and gloom for the physical branch. It turns out banking customers still want human interaction when it comes to certain types of financial concerns, and this is where branches still have a role to play.
First, branches offer the impression of security. Customers want to be able to trust their financial institutions, and the presence of a physical branch offers that reassurance. Digital banks just don't have a physical presence and can seem nebulous and opaque as a result. Entirely digital banks also have more risk attached to them, such as in the example of Metro Bank, where loan miscalculations resulted in a 40 percent drop in its share price.
"Most customers want to deal with another human for bigger personal finance questions, from finance goals to mortgages and pensions," continues Madhvani. "GP Bullhound's Technology Predictions report found that while US banking customers aged 18 to 44 said they normally banked digitally, over half said they would prefer to resolve some matters person to person. Just as business meetings are often most effective, and leave people most satisfied when they're done face-to-face, customers are reluctant to leave their banking and financial decisions to an app."
While technology-based banking is clearly the future of the industry, it seems there is a way to balance it with human interaction and physical branches. Online banking is ideal for small everyday interactions and transactions, but face-to-face is still preferred for big financial decisions.
Balancing tech and the human touch is set to be a hot topic at Future Branches 2019, taking place in November at the Hilton Austin, TX.
Download the agenda today for more information and insights.