The death of the branch has been foretold for a long time. Each time a new channel has been added to the distribution mix there have been predictions that high street banking is about to enter an inexorable decline. The branch survived the advent of telephony, automatic teller machines and internet banking, but does the recent proliferation of digital and mobile platforms finally signal that the branch has had its day?
A quick look at the numbers from the US suggests that the branch may at the start of a slow decline.. In the US, the number of branches fell from 98,853 to 98,202 in 2011, according to SNL Financial, reversing a trend of growth stretching back to 2005. In the same year, CTIA noted that the number of mobile phones in the US exceeded the population for the first time.
But other data tells a different story. Customer research conducted by KPMG in the UK in the first half of 2012 suggests a changing role for the branch – but a role nonetheless. The branch, it appears, is the channel-of-choice not only for older and less technology-literate customers, but also for a surprising number of younger consumers, many of whom value the option of face-to-face contact when taking out financial products for the first time – according to our research, almost 20% of 25-34 year olds went into a branch to purchase a new banking product in the last 12 months.
Our research has led us to the conclusion that the branch will remain the channel-of-choice for both sales and service for a sizeable proportion of the population, across all age ranges. Rather than kill the branch off, we believe the explosion of digital technologies could be its salvation by allowing for the development of new branch formats which blur the distinctions between the branch and direct channels. In our view, the successful players in the branch channel will be those which develop new formats which respond to the needs of their customers in different local markets and offer a high quality sales and service experience at optimised cost levels. The role of the branch is set to evolve, and the number of outlets may indeed go down, but the days of an entirely branch-free banking sector are still a very long way off yet.
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