Opinion: Bank branches, an archaic phenomenon
“60% of core banking profits are at risk within the next 10 years.” - McKinsey
However, many of them are blind to this prognosis and continue to progress along their way; not realizing they are gradually losing their loyal customer base to disruptive Fintechtech innovation.
There was a time when all transactions required that the customer visit the bank. But today’s customer is more interested in services on the go. This means less brand loyalty and greater competition for the banking sector as a whole.
Today, many banks and other financial institutions must assume that customers will no longer accept traditional banking practices and services. Consumers, searching for tools to manage their financials, have an almost endless array of options to choose from. Nevertheless, banks are likely to be the first option for most consumers. However, if banks mismanage this advantage they are in danger of losing their “monopoly" on current customer data and relationships. And if banks do not address real consumer needs, customers may be forced to look for alternative third parties (Fintechs) to manage their payments and finances.
Disregarding the value of emerging technologies may mean banks losing the opportunity to engage with their customers.
In times past the key appeal of any large mainstream bank was the vast distribution of network branches scattered all over the world. Thanks to these branch networks they were able to generate brand awareness as well as brand loyalty. However, that was then and this is now, and for current bank customers, such a real-world branch network is a dying phenomenon, long past its prime. This is partly due to the increasingly common use of mobile devices and their associated potential for the provision of financial services that were hitherto the exclusive domain of bank branches, which has effectively chipped away at the long-standing position of such banking networks. New customers, especially younger customers, do not want a local branch, they want a branch everywhere; on the train, in their living rooms, in their pockets; at hand.
Traditional banks must make applications available that allow self-service, personal advice, data aggregation, etc. Banks must build bridges between online self-service interaction and traditional communication methods in order to positively affect customer satisfaction, sales conversion, and customer loyalty. Gone are the days when a customer had to go to the bank and stand in a queue for a single transaction. Mobile banking is now gradually taking over and this transformation is of critical importance to the proliferation of Fintech (financial technology) companies.
"The changes to come over the next 10 years will be less visible than the global financial crisis or the bursting of the dot-com bubble – and yet their impact on banking sector's economics and even fundamental business models will be much more substantial," said McKinsey.
If banks do not overhaul their entire services and marketing paradigm they may well be rendered irrelevant.