Is Digital Killing the Bank Branch?

The increasing “drive-to-digital” in the banking industry begs the question, “What will happen to traditional bank and credit union branches?” Will they stay the same, evolve in a dramatic way or just disappear altogether? Mark Arnold, President of On the Mark Strategies, set out to explore this question by asking fourteen industry experts to weigh in on a one word question: “Branches?” The response runs the gamut, with some experts claiming that the traditional branch network is no longer needed and others declaring that the demise of the branch is greatly exaggerated.

According to David Gerbino, a bank-focused digital and database marketer, the traditional branch network needs to be replaced with a digitally based network that also includes branches, but these may have no resemblance to historical bank branches. Carolyn Jordan, Senior Vice President of Neighborhood Credit Union opines that, “A successful financial institution will aim for a premier online and mobile experience paired with strategically placed branches in critical markets. Branch networks will become smaller and more efficient but will remain the community face of banks and credit unions for many years to come.”

James Robert Lay, CEO of CU Grow, references the demise of once-popular physical delivery channels such as bookstores, movie rental stores and record shops in the wake of digital fulfillment, indicating that bank branches could go the way of Borders bookstores.

While most experts spoke to the need for branches to evolve and adapt to a more digital landscape, Elliott Brown, AVP and Marketing executive for Farmers Bank draws a comparison to the Amazon.com effect on brick-and mortar stores. He states that while Amazon has increased tremendously in popularity, there are still people who wish to visit stores instead of shop online. Likewise, while digital banking increases in popularity, there will still be those who prefer the traditional bank branch.

As digital channels grow, part of the challenge for financial institutions will be to deploy a successful sales strategy across these channels. Jim Marous, SVP/ Corporate Development for New Control emphasizes that the brick-and-mortar branch is no longer the first stop for financial products and services. Customers are using mobile and online channels before even coming in, so the branches will need to complement the new digital system.

In some major cities, the future of bank branches is already here. In New York City and beyond, the basic branch architecture of a row of teller windows, long line and vault in the back has been replaced by smaller branches with more high-tech tools and employees circulating with tablets to assist customers. In recent years, Bank of America introduced virtual tellers, where a customer interacts with a remote teller via video.

In an article by the New York Times, Nicole Sturgill, a research director at CEB TowerGroup states that, “We are definitely seeing branches become smaller. That space isn’t necessary anymore because so much happens online.” As customers conduct more transactions through digital channels, the function of a teller is rapidly changing. Customers are now visiting banks more for advice than to conduct routine transactions, according to Todd Barnhart, Executive Vice President for branch banking at PNC Bank. Even in branches, which are starting to look like Apple stores, there is more self-service through digital means, and customers interact with screens as much as with human employees.