I’ve just read an article titled “Within a Decade, Retail Banks will be Dead”, at the time of reading, it had 2517 likes and 697 comments on LinkedIn. As a result, I assumed this must be great stuff. But instead, after reading, I was left slightly bewildered by the title, for what the article was trying to say was retail branches will be dead within 10 years. Then in the comments (not that I read all 697) there was discussion about how retail banking as we know it now will change. Again that still missed the point. Yes, the services that banks will offer will inevitably change, but the fundamentals of retail banking wont.
Now I don’t want to critique the article, but what it did was highlight a few problems within the Fintech bubble; these include:
- There are a lot of people building cool things that don’t know anything about banking;
- There are even more cool people commenting on Fintech that know even less about banking;
- There is a very narrow view of the customer profile.
So an article with so many likes that can’t differentiate between retail banking and branches highlights point 1 and point 2; and I agree that a fresh pair of eyes is exactly what the banking sector needs. At the end of the day, however, it’s still banking, and subject matter knowledge will be required at some point (when dealing with banks and bankers for instance).
Contrary to the original article’s title, retail banking is set for a huge increase. New digital innovations like bitcoin promise to bring banking to the billions of people currently unbanked, and while how we use banking services and how and where we choose to make payments is changing, there will still be a need for retail banks (though they may not necessarily be the present incumbents).
Then there is the last point, an assumption that the customer is just like the author. This customer is tech savvy and trusts electronic transfer of information, likes the convenience of mobile applications, and is of high intellect and wealth and with no disabilities. Now this may be 90% of the finance blog reading population and 99.9% of the Fintech circles, but it doesn’t reflect society as a whole. It doesn’t even cover the “millennial” either, my daughter is 19 and doesn’t use a banking application on her phone.
I can understand this stereotypical oversight because it’s also rife within the banking sector. While branches indeed cost money to own, facilitate, staff, and run, they also provide a useful and necessary function to a lot of sectors of society. Not everyone understands or wants to understand internet and mobile banking, nor can everyone use it for a number of reasons. The rush to close branches and have centralised coffee bars and learning centres may look good on paper in the push to a digital engagement but in adopting this strategy, many banks are actually destroying the only differentiation they have to the challenger banks, and that’s the bricks and mortar branches and their staff.
There is a comfort in knowing that whichever town or city you visit you can pop into a local branch. There is the reassurance that a friendly member of staff can talk you through the fine print and give advice on the best products and services for each customer. Sure, for most people likely to read this, AI “robo-advisors” automatically making the best choices to where your money should be located or predicting your next best decision will be welcome and warmly embraced, but it won’t be for everyone.
I think the high street banks, in a rush to save costs, could be killing off their crown jewels. By removing their signage from the streets where we live, they will also remove their brand from our subconscious. Think back to why you opened your first bank account, it was probably because it was the closest branch to your house – or, like me, the prospect of picking up a free “super saver squirrel” badge.
I agree whole heartedly that Retail Banking needs to digitise and “think outside the bank” in terms of services and products, but this shouldn’t be at the expense of the retail branch network. The writing is on the wall in terms of further consolidation of banks. The closing of even more branches, but along with creating an intuitive, secure, and frictionless (and also sterile) digital interface, should make traditional banks think about also differentiating themselves in terms of face to face customer service, and that can only be achieved through a retail branch network.
Again though, banks needn’t be confined to the branch. By increasing community work in schools, further education, citizen’s advice centres, or holding workshops and seminars, retail banks can win the hearts and minds of their customers and create a whole different kind of community from the challenger application only banks.