Analysis from global consultancy partnership Kearney predicts that 25% of bank branches will close across Europe in the next three years as new customer habits around digital banking, forced by the pandemic, become permanent. This is a sharp increase in the ongoing trend of bank branch closures across Europe, which saw 35% branch closures in the last ten years. 

Now in its 11^th year, Kearney’s European Retail Banking Radar is an annual analysis of the pan-European banking market, tracking 92 retail banks in 22 European markets, comprised of 50 banks in Western Europe and 42 banks in Eastern Europe.

The study also predicts an increase in online banking as a result of these closures, with 70% of all European account openings, deposits, consumer loans and credit card applications happening digitally within the next three years. Prior to the COVID-19 outbreak, Kearney’s research showed that 53% of European banking customers reported not using in-branch or other physical channels to research and buy new products.

Currently, UK, Norway and Sweden appear to be the most digitally-advanced retail banking markets, where 70% customers already use remote channels like online banking, mobile apps and call centres to research and purchase products.

As customer adoption of online banking increases, Kearney also predicts that those remaining bank branches will be primarily staffed by advisors to focus on advise and sale of complex products like mortgages, life insurance, pensions and investments advice. Some branches may even be repurposed into a hybrid space for both customer-facing and head office staff, as banks re-evaluate the cost implications of a centralized headquarters considering remote working practices adopted during the pandemic.

Simon Kent, Partner and Global Head of Financial Services at Kearney, comments:

“If there were ever a time to invest in providing a seamless customer journey across digital and offline channels, it’s now. The Covid-19 pandemic was the catalyst needed for many changes already underway in the banking industry and has significantly accelerated demand for these changes to happen quickly. Customers won’t go back to how things were, so neither should banks.

This is a great opportunity for banks to stress-test their customer processes – both online and offline and especially how they interact with each other – to ensure long-term operational resilience. Those that don’t will miss the opportunity to continue the momentum created by customers’ new digital habits, structurally change their cost base and dramatically improve customer experience.”