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Why Customers Won’t Set Foot In Banks In The Future

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Many people today are avoiding public places due to Coronavirus (COVID-19) and it begs the question of allowing employees and customers to do everything they would do in-person, virtually. It used to be that any kind of money-related task, from depositing a check to getting cash or transferring between accounts, had to be done in person at a retail bank branch. But with the astounding growth of banking technology allowing for self-service, will customers even set foot inside banks in the future? 

Nearly 2,000 national retail bank branches have closed each year for the past three years, a trend that doesn’t show any signs of slowing. Customers now have the options to take care of almost all of their banking outside the branch, making the locations that were once hubs of financial activity nearly obsolete. 

Financial Technology Advancements

Technology has expanded what consumers can take care of on their own, making it so many customers never have to actually go to a bank branch. Surveys have found that 87% of consumers use mobile banking apps, including 97% of Millennials. These apps allow customers to do most of the common banking actions via mobile, including checking their balances, transferring funds, depositing checks and opening accounts. The technology is only growing with new advancements in wearables, such as smartwatches, and mobile wallets. Wearable payment transaction volume is expected to nearly double between 2019 and 2020 as consumers turn to technology-driven banking and payment solutions. In the future, we’ll likely see growth of the wearables industry and move away from even cards and wallets and possibly to medical implants, which would not only be more secure but also provide an easier and frictionless banking and payments experience. Only 20% of consumers prefer to go to a branch than to do their banking online or through an app.

Growth Of Digital-Only Banks

Recent years have seen the rise of new banks challenging traditional stalwarts. One of the biggest differences between new banks like Monzo, Ally and Chime is that they are completely digital with no branches. These types of banks are appealing, particularly to younger consumers, because they can pass on their savings from not having physical spaces to customers. Even big bank Wells Fargo recently launched its own digital bank, Greenhouse. Chase Bank previously attempted to roll out digital-only Finn but has since shut it down. 

These digitally focused banks show that physical branches are no longer a necessity in banking. As an added benefit, digital-only banks tend to be more integrated into everyday activities, including integrating the account directly with Uber, chatbots and instant fraud or low balance alerts. One of the last remaining tasks that requires a branch or ATM is getting cash, but many consumers are moving away from cash altogether. Digital-only banks aren’t without their hiccups and could require an adjustment for some customers. A 2018 survey found around two-thirds of consumers say having a local branch is important to them in choosing a bank. Because digital-only banks don’t have physical locations, their customer service is typically limited to chatting with or calling customer service agents or getting financial advice over the phone. 

Growth Of Concept Branches

Not all physical branches are going away; some are also getting a makeover as more banks turn to concept branches. It’s a similar idea to an experiential retail store that highlights the brand and offers services instead of just using the typical branch setup. Perhaps the most prevalent example is Capital One, which runs Capital One Cafes across the country. These locations are part coffee shop, part bank branch and serve as a trendy and comfortable space for customers to work and lounge and also talk to their banker. Other banks are redesigning their branches with new integrated technology, digital signage and more welcoming environments. 

Branches To Represent The Unbanked

Even with new technology and digital-only banks, physical bank branches will never be completely wiped out. A large percentage of the population, commonly known as the unbanked, doesn’t hold credit or debit cards and instead relies on cash. 78% of Americans live paycheck to paycheck, meaning they are more likely to want to cash a check than to deposit it and monitor their account in an app. Even as more consumers switch to mobile payments, cash will never be completely replaced. Many cities are banning businesses from going cash-less because it discriminates against the underprivileged and unbanked who operate solely with cash. These customers will likely always require bank branches, though likely not in the high volumes of branches we see today. 

So, will customers set foot inside banks in the future? It’s not likely. And if they do, it won’t be often. With self-service technology that covers most of their needs, the average customer will likely be able to bank without a physical branch. We’ll likely see the number of branches continue to decline, but physical branches will always exist.

Blake Morgan is a customer experience futurist, keynote speaker and the author of the bestselling book The Customer Of The Future. Sign up for her weekly newsletter here.

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