The future of bank branches

Retail banks have been making a push into digital services in recent years (albeit at varying speeds), but the pandemic supercharged this process. It became essential for digital interaction points like banking apps to be as seamless and comprehensive as possible as it became harder to access local bank branches.

Bank customers very quickly became comfortable using digital banking services and communications tools (more than 90 percent of people in the UK use online banking, according to Statista) and it’s hard to see them going back to the old ways of branch-based banking. As a result, there’s lower demand for the services offered by branches (which were already in decline), and we’ve seen a huge number of bank branches close as a result. A Which? survey shows that banks and building societies have either closed, or plan to close, 5,155 branches since January 2015, a closure rate of around 54 branches per month.

But don’t make the mistake of thinking all our bank branches will turn into cocktail bars or luxury apartments. While we’ll see more closures to come, the death of the bank branch is greatly exaggerated, to paraphrase Mark Twain.

What will happen is branch banking will transform. We’ll see fewer routine transactions done in-branch, and more integration of technologies like contactless kiosks, robotics and augmented or virtual reality experiences. But alongside this, there is a need for high-value, expert advisers to deliver the kind of advice and service people still want in-person – to advise on complex things like mortgages, investment decisions, or how to manage their finances better.

Learning from changes in workspace preferences

We can look to the changing workplace to see what the future of bank branches might be. HSBC and Deutsche Bank are reducing their office space as they switch to hybrid working in the long-term; and challenger bank Revolut is changing its office space to make 70% of it dedicated to collaborative working, with spaces for quiet working and meetings. (Its remote working programme allows employees to work from anywhere in the world for up to two months every year, and it’s also adding some fully remote positions to complement the hybrid model.)

This works for employees, and the same principles of hybrid working apply to high street banks. They will be redesigned to act as regional hub offices and meeting spaces, where employees can meet, and customers can go for the kind of in-person advice and services they can’t get online. Technology is essential in making this work. To provide a high-grade, personalised service to customers, branch staff will need the right technology and data to give them the information they need to assist effectively.

ISG research reveals five primary formats for brank branches of the future:

1. Champion branches, which act as a sort of showroom for the bank’s products and services and creates a physical experience of the brand.
2. Satellite branches which cater to existing customers and reflect the needs of the local market (with support from champion branches for more complex services and products).
3. Café branches which include small branches in supermarkets and airport lounges, for example, that help foster community engagement. (The idea of the café branch was pioneered in the fashion industry by Marc Jacobs, as a way to improve customer experience)
4. Micro branches that could be a box-style branch with secured entry (even temporary booths or pop-ups, similar to what we’re seeing in the food industry), serving a few customers at a time.
5. Humanoid branches, run by intelligent automation technologies which you enter using facial recognition for security.

There are marked cultural and regional differences that will determine which format will work where. In France, for example, it’s more common to have a local branch manager whom you meet twice a year to discuss your finances. So branches there are increasing, as closing a local branch means losing customer share in that region. In the UK, banks are thinking more like a boutique than a supermarket, to cater to the mass affluent. 

Whatever their niche, branches of the future will make good use of technology, but they’ll also rely on high-value, specialist human skills and expertise. For example, tellers are starting to become more like financial concierges – with some walking through the branches with tablets ready to help customers.

Humans and technology will need to learn to work together in tandem. Automation will replace routine or repetitive tasks (in the way ATMs replaced cashing cheques with counter staff), and deal with easy-to-solve queries or sales. This will free customer service specialists to provide higher-touch services to customers.

This is where banks will differentiate themselves. They will need to focus on delivering exceptional customer service, personalised products and advice, and seamless customer experience to thrive and remain profitable.