Will Branch Banking Survive the Pandemic?

Cnbc.com stated on August 27, that “25% of U.S. malls are expected to shut within 5 years. With a report circulating earlier this month that the biggest U.S. mall owner, Simon Property Group, has been in talks with Amazon to convert some shuttered Sears and J.C. Penney department stores into fulfillment centers, many industry analysts have been pontificating on the future of malls as logistics hubs.” 

While shuttered retail stores might make great fulfillment centers for the likes of Amazon, what can financial institutions do with their Triassic Period branches?  Video arcade?  Internet café? Maybe museums dedicated to what banking used to be; displays could include teller stations, pens chained to desks, check books displayed in glass cases along with the Mr. Coffee® machine and powdered creamer.

Kidding aside, branch banking, I think, is as dead as the retail shopping experience.

There’s been, of course, lots of back and forth on the fate of branch banking.  Some like Renaud LaPlanche, CDO of Upgrade – as quoted in the Bankdive May 6 article, Do Bank Branches Have A future?, speculates that “Americans are forming habits that could continue once the pandemic is over. People are understanding that they don't really need a branch for a lot of the transactions they want to accomplish.”  Others, like Andrew Cecere, Chairman, President and CEO of US Bank, in a Financial Brand interview, said that  “…branches will always be important to and a key part of how we serve customers…”

It’s a tough call to make, best left, probably to the reliable ol’ Magic 8 Ball.

Will branch banking survive the pandemic?  “Doubtful,” says 8 Ball.  That’s because, in my opinion, branch banking has never offered the “value add” that the shopping experience did for consumer goods… and look what happened to shopping?! 

According to Accenture’s Financial Services, and this was back in 2017, “online banking has become the preferred way for North American consumers to access their banking services, with two-thirds (65 percent) using online banking at least weekly. The one exception is Gen Z consumers, as more than two-thirds (69 percent) of this group prefer to bank via a mobile app, making mobile the preferred banking channel for today’s youngest consumers.”

Seniors and GenZers who, as far as I can tell, once seemed like the last two segments of the population that even considered branch banking, have now moved away from it; in favor of the online and app experiences they’ve more or less been forced to adopt over the last six months. 

It’s too late for retailers to rethink their business models and strategies in order to survive the onslaught of e-commerce.  Is it too late for banks?  Perhaps not.  But banks need to start to really think out of the box.  What does a branch experience really bring?  Throwing some teller pods, booths, video conference rooms and café-style lounges with Keurig® machines into a 2500 square-foot space does not a branch bank make. From Independent Banker: “Some industry research predicts that there could be another 40 to 50 percent decline in the transaction volume within bank branches over the next decade” However, statistically, 80 percent of all consumers prefer to walk into a physical branch to open up a new account.” 

So, do we need retail banking centers or not?

Perhaps it makes sense for banks to consolidate branches and, at the same time expand, using “micro” branches to tap into new markets and that new-account-opening opportunity. But, those branches can’t be what we’re seeing.  Capital One cafes, Bank of America virtual centers, and PNC pop-up branches (shipping containers with windows and a coat of paint that can be dragged by a pick-up truck) are at least attempts at revolutionizing the retail banking center experience.  Are they working? I’d love to know as there doesn’t seem to be much evidence out there one way or the other. Some are staffed, some are not; kind of like Home Depot nowadays, where employees are there to help you at self check if the card processor won’t spit out your receipt.  To me, these branch concepts are a lot like carnival fun houses… minus the fun.

C’mon, banking industry. We can do better.

I remember when I was growing up, a service station was truly that. As you pulled in and ran over that little black rubber pipe, a bell rang inside and someone would literally run out to pump your gas, check your oil, and clean your windshield. Those days are over. Now the successful service stations in Florida, for instance, are selling everything from Hot Donuts to Boiled Peanuts to Alligator Heads.

Asking people to walk into an 800 square-foot, pseudo space age shipping container for the same services they can get while sitting on their couch is not a winning proposition. Maybe banks need to think of other products to sell or services to offer. How about “Bank and Brew,” where customers can enjoy both financial guidance and their favor IPA? It could give new meaning to the phrase, “bank draft”!?  Or, maybe banking is best left to the SmartPhone…

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