As more of our banking is increasingly transacted over the digital space with internet, mobile and agency banking slowly surpassing more traditional channels, there is a realisation that something monumentally transformative is happening to bank branches. Branches, which have been the brick and mortar of banking for decades, are slowly being replaced by virtual technologies that have not only reduced the cost of operations for banks but are also fundamentally transforming customer experience. As millennials and Generation Z begin dominating the formal and informal workforce, they are demanding a financial sector that is in line with their modus operandi which can be summarised as quick, seamless and tech-biased. This therefore paints a gloomy picture for traditional banking setups that have for so long relied on low tech branches for their front office function. With a growing number of tech companies taking a pie off branches’ core services such as deposit taking and cash withdrawals, it’s become vital and almost urgent that branches redefine themselves. Facebook, with its Libra currency, will seek to harness the company’s 1.6 Billion active users to capture the ever growing online shopping and payment segment but also money transfer services further affecting key product lines like cards and Western Union that have been, for almost two decades now, major income lines for bank branches. In fact, research by the US Federal reserve found that older, wealthier and self-employed individuals are more likely to use bank branches than other customers. It goes without saying that the old, wealthy and self-employed form a tiny fraction of our demography. In the UK, research indicates that 34% of all branches have closed in the past five years alone. That number will reach 49% by 2021, meaning in less than a decade, half of all branches in the UK will close their doors. In the US, Capital One which visions itself as a “tech company that does banking competing against banks that use technology” has pioneered café style branches in place of traditional branches were clients get answers to questions and manage their finances in a casual, relaxed atmosphere with open layout “designed to facilitate discovery, conversations, hospitality, education, and community events,”. Close by, Kenyan banks closed almost 40 branches nationwide in 2017 leading to the loss of 1,700 jobs. So is it doom and gloom for branches? My answer is a firm MAYBE. Branches will have to reinvent and retool if they are to survive the next one to two decades. As repetitive tasks that currently take so much of branches time and resources become digitised, branches will have to come up with new ways to generate fees and commissions and thereby justify their continuous existence. For this process to be achieved, a two-pronged strategy will have to be adopted. A human capital strategy but also a business model strategy. Bain & Company, a leading Boston based Management Consulting Company, summarises the human capital element quite eloquently “How a bank manages employees through the branch evolution will make the difference in how fast it can progress. Reducing headcount gradually becomes less important than redeploying employees in ways that will build a superior experience. Employees will play different roles, with many moving from narrow service or sales positions to broader, digitally fluent relationship coaching roles, both within the branch and outside its four walls through video chat and other virtual channels. With this in mind, banks should start planning for the new skills, training, incentives and behaviors required. The playbook for new employee functions includes training to upgrade skills, both technical and coaching-related”. The bankers of the future will be highly skilled financial advisors, cross sellers and relationship managers. For this human capital evolution to take place, significant investment both in time and money will have to be brought into play. Clear and STP (Straight Through Processing) will have to be at the center of all key processes in bank branches. The era of sluggish systems with high downtime is long gone and frankly speaking intolerable to tomorrows customers who will more likely be young, tech literate and well-travelled. Branches will ultimately become a place where tech leveraged self-service platforms will exist side by side with highly skilled bankers providing advisory, education and transaction assistance for high value transactions. To quote Bain & Company again “Bank branches are by no means dead, but many in their current guises have become obsolete. The network has to change faster and more substantially than most bankers acknowledge. Banks that accelerate their branch transformation can not only mitigate the threat from technology firms but also pass their competitors, delight customers, and achieve stronger, more profitable growth”. This combination of human and business modelling cohesiveness and integration will play a pivotal role in ensuring not just the survival of bank branches but also the banking sector as we currently know it. The fact that branches are going to go through a radical transformation in the next few years is quite frankly unassailable. So instead of a fully digitized bank, I foresee a combination of clicks and bricks, a mix of physical and digital that benefits clients. There are a few examples of digital-only models globally that have since evolved into a physical presence. One must exist with the other. Oh, and Facebook’s Libra will become operational in 2020. Tick Tock Tick Tock……. The writer is the Strategy and Business Analytics Manager at BPR part of Atlas Mara, with over 10 years of experience in Financial Audit, Consultancy and Banking. The views expressed in this article are of the author.
