The Future of Bank Branches

The fate of brick and mortar banks and stores has been in question for years because of an increasing digital market. Particularly in younger demographics, online shopping and banking have become more and more popular. Despite these trends, there are still some who prefer to do business in person rather than online. In fact, for small businesses, brick and mortar banks are hugely important.

Online Shopping & Banking Trends
In May of 2020, a survey compared the online shopping habits of people across several demographics both before and during the COVID-19 Pandemic. While nearly all demographics showed a decrease in the number of people who said they “never or almost never” shopped online, the shift wasn’t as dramatic as you might expect. Even during a pandemic with most cities in lockdown, many Americans didn’t change their online shopping habits.

That’s great for retailers, but what does this mean for banks? There has been a 12% decrease in the number of full-service bank branches in the U.S. between 2010-2019. COVID-19 forced more branches to close, even temporarily, as more and more cities went into lockdown. However, there’s still hope.

Impact on Small Businesses
According to a study at University of California at Berkeley, when bank branches close, the number of small business loans made in the area falls by 13% for more than eight years after the loss of the branch. The ability to visit a physical bank branch is vital to many small businesses not just for loans. 

Businesses need to make regular deposits both in check and cash form. Cash deposits aren’t an option for most online banks. Holding onto large amounts of cash for longer periods can put businesses at greater risk of theft and makes those funds unavailable to them for necessary business spending.

Retailers need access to a bank not just for depositing their money, but also for making change. Having a physical branch available makes it easy for retailers to keep cash registers stocked with smaller bills and coins so they can make change for customers using bigger bills. 

Embracing Change & Complexity
A Forbes article compared the changes needed by bank branches to the evolution of travel agencies. According to the article, travel agencies in the U.S. had a slow, but steady decline from 20,000 in the 1980s to only 12,000 physical locations by 2019. So how did those 12,000 stay in business despite the rise of online travel bookings?

Travel agencies that survived pivoted the focus of their business. Anyone can easily book a plane ticket online. However, coordinating group trips and/or complex multi-location tours of an area, require a lot more effort. These sort of packages are what help remaining travel agencies to survive.

Similarly, bank branches must look at their more complex offerings which are difficult to handle via online banking. According to the same Forbes article, the decline of bank branches around the world was in the single digits prior to COVID-19, but during the pandemic bank transactions fell 30-40%. The key to surviving this decline is to embrace change and follow the example set by travel agencies.

Limitations of Online Banking
The most obvious limitation of online banking is the lack of personal relationships that can be built with the customers. In this socially distant, digital world, that might seem trivial, but the importance of those relationships cannot be dismissed.
 
As previously mentioned, loss of bank branches has a direct impact on small business loans in an area. Part of this is because many small business owners develop a relationship with their bank, usually with a loan manager or small business specialist. That relationship makes it easier for the business owner to do their business and secure funding when needed while also helping the bank secure future business.

Another way online banking can cripple businesses, and be inconvenient for individuals, is the limits of RDC (Remote Deposit Capture) alone. Most online banking applications offer mobile RDC, however there are limitations on the amount of money that can be deposited in this way, and they have no option for cash deposits.

As with any technology, online banking is prone to service interruptions which could prevent customers from accessing their financial information. Last, but certainly not least, security and identity theft are an ever-present concern for customers when deciding who to trust with their finances. Knowing who to trust online is incredibly difficult, much more so than a physical bank you can visit and confirm is legitimate.

Adapting in a Digital World
As mentioned above, the best way forward for bank branches is to embrace the change and focus on the more complex lines of business that are difficult for online banking to satisfy. This means taking a look at the limitations of online banking and finding strong solutions that will help physical branches remain competitive.

Maintaining physical branches isn’t about ignoring technological advancements in banking. Rather, it’s about integrating the right technology into the bank branch to empower you to work more efficiently.

By using technology effectively, your tellers can focus on building those valuable relationships with your consumers. Things like check scanners and ID verification will decrease the time it takes for tellers to manually data and process checks, so they can focus their attention on delivering the best customer experience possible. Panini EverneXt is just one possible solution, with the ability to scan checks, stubs, and ID cards at a rate of up to 160 documents per minute. 

By embracing change and technology, bank branches can still have a rich future. The rapport and trust built between a bank branch and its customers cannot be replicated online and is especially important for small, local businesses.