Bank Branches “Dead” In 5 Years?

Almost two-thirds of global banking chiefs believe that branch-based banking will have completely disappeared within the next five years.

That’s according to a new report from the Economist Intelligence Unit, on behalf of banking software company Temenos. They surveyed over 300 senior banking executives around the world on how their banks use technology.

65% of those who responded said that they believed high-street banking branches would be “extinct” by 2026 as everyone moved online to a digital banking platform.

Acceleration to a digital future

In the last few years, banks have been moving more to digital platforms, investing heavily in technology to help customers manage their finances from their laptops or via a smartphone app.

The COVID-19 pandemic, and the associated lockdowns which saw customers unable to visit their branches in person, accelerated this move for many banks.

They are engaging with tech platforms to integrate new software that not only replicates the in-branch experience but also elevates it, with tools that help customers see the environmental impact of their spending, or just better control their budget.

Speaking on the publication of their report, the Chief Strategy Officer for Temenos, Kanika Hope, talked about how banks are using this time to enhance their overall proposition.

Open Banking and increased competition from big tech and new entrants are causing banks to rethink their business models. Many now aspire to develop digital ecosystems that bring more human, differentiated experiences to their customers using the power of cloud, SaaS and AI.

This report shows that bankers now understand that technology will be an enabler for these new business models and is critical to their competitive differentiation.

UK banking closures

This latest survey comes as more banks are closing high street branches in the UK. Many of the closures are attributed by banks to declining customer numbers, with the COVID-19 pandemic and the changes to customer behaviours across all industries indicating a shift to online banking and money management.

In 2021 alone almost 500 branches have been announced to be closing so far, including those from Lloyds, HSBC, Santander and TSB. M&S Bank have closed all of their branches, albeit that’s only a smaller number of 29. Data compiled by Which? tells us that over 4,000 branches of bank have closed in the last 6 years.

That’s despite an estimated two million households in the UK not having their own internet access, and a noted scepticism or fear of digital banking from some of the older banking customers.

More customers are switching to digital banking though. Figures from a report conducted by Fintech company Nucoro showed that between mid-March and mid-April 2020 over six million people downloaded a banking app for the first time. This was just as the company was sent into lockdown, it should be noted.

The government is also making plans for branches to close down. As part of this, the Treasury is consulting on new rules to guarantee customers have access to cash without having to pay a charge. It’s expected that this should be within a maximum of 1km for every household.

However, rather than directing people to bank branches, it is going to include cashpoints and Post Office locations, and introduce free cashback at shops without the need to make a purchase.