Around the world bank branches are disappearing. Just yesterday I received an email from Business Intelligence (BI) predicting the doom of US bank branches and cash machines. Their data is based on US economic and survey data, but others have done similar research in the UK and the world. And they all agree: the days of the local branch bank office are soon to be over.
The good news is though, that people aren’t banking less, but simply changing how they do it (for the most part anyway). As early as the 1980s technology has been changing how we do our banking. People could bank by phone, or even “dial-up” to do some banking online. In the 1990’s online banking grew and by the early 2000s it was a must for any bank. But the widespread use of mobile phones, smartphones in particular, has completely changed everything again.
The US study
The email that sparked my interest in this topic discusses a study completed by BI calledAhead of the Curve – The Digital Disruption of Retail Banking. They interviewed 1,500 millennials. That includes people between the ages of 18-34 who are also “banked”. Their predictions are based on the fact that this younger group will be the majority of people banking as they age, and that their behaviours now will determine the future of banking. Here are their four major predictions, quoted for effect:
“The bank branch will become obsolete.”
“Banks that don’t act fast are going to lose relationships with customers.”
“The ATM [cash machine] will go the way of the phone booth.”
“The smartphone will become the foundational banking channel.”
These are dire predictions for an industry that counts on local branches to build personal relationships with, and sell products to, their customers. Except, there’s still hope if you take advantage of the last prediction: smartphone banking.
Is it true in the UK too?
A similar report, Digital Disruption: UK Banking Report, published last year by BBA and Accenture goes into great depth about the issues facing the European style banking industry. They included some interesting statistics regarding both online and mobile banking in the UK:
Only 16% of banking customers never use online or mobile banking. That means 84% do use it.
Lloyds reports that approximately 60% of mobile logins are just to check balances or statements.
Lloyds also says they send 3.8 million SMS messages to customers in just one week.
HSBC also sends alerts in these amounts: 52% balance alerts, 33% balance notifications, 15% purchase made above a set threshold.
The number of customers that only bank in person is low, and is predicted to go lower as the population ages. Checking balances and simple alerts are the major mobile transactions people make. Given on-the-go lifestyles many of us live, going to a branch or even just a cash machine to get a balance takes too much time. That’s especially true because we can now have our banks in our pockets, purses, or most often – hands.
How to keep relationships with customers
Is there any way to keep personal relationships with your customers if you don’t see them in person? Yes, there is. More than one way actually. But as the Lloyds numbers above suggest, SMS messaging is one of the primary options you have.
While sending someone an SMS message isn’t a face to face interaction, it is still a personal one. It’s direct communication with your customer. It’s often even more direct and personal than a phone call because a customer can check their text messages at any time. But they won’t always answer the phone.
Some may argue that automated messages from their bank can’t create a relationship. But I’d argue differently. Customers want to know that their bank is there for them. They can access their money, their information, products, and services whenever they need them. If a customer can rely on a bank for all of that then they will develop trust which is the cornerstone of any relationship. They will feel like “you’re there for them” even if they don’t have the face of a local branch manager or teller to associate with the transactions.
I’ll share a personal example. I’d belonged to one bank for over 20 years. They were one of the first to offer online banking and bill payments in my area (that is, also had branches I could visit locally – seems quaint now with everything I’ve written above). But they never got any better. For years their “updates” simply involved changing banners or the colours on the website, but never adding a functionality. And being on the technical side, I can tell they hadn’t changed anything in how the website was actually created. The web technology behind it was over a decade old when I finally decided I needed a new bank.
And what prompted the change was the fact that I had other banking – credit cards and other financial accounts – that allowed me to not only bank online easily with good websites, but they also had apps and SMS alerts. I knew there were better offerings out there in terms of how I wanted to bank, it was just a matter of finding one that also met my needs in terms of products and fees.
Still, I had inertia in that bank. If I moved then I’d have to make lots of changes to auto-payments and deposits, but finally the lure of easy mobile banking was too much to bear. While I was transitioning, the old bank I was leaving did a “technology upgrade”. I didn’t close my accounts because I wanted to see what it included. When the bank relaunched their electronic services I wasn’t impressed. In fact, I’d say they botched it. Their website was inaccessible to previous online banking customers without visiting a branch or calling them (the phones were busy for weeks). They also failed to offer any kind of mobile banking – no app and no SMS alerts.
That was it for me. I gladly put all my money into the new bank and set up my customised SMS alerts. Now I can sit back and know my deposits were made because I get an SMS alert (before I had to keep checking my account on the horrible website manually until I saw deposits made). I get notified via SMS if there are any large transactions (amount set by me) so I can keep an eye on my balance and look out for fraud. Even though the bank I chose has higher fees on some products than my old bank, I will stick with it because of the convenience the mobile banking offers.
Though I’m a new customer, I’m already feeling pretty good about the bank because I know I can get my information, and my money, whenever I want. It’s easy. It’s free (the app and SMS alerts). And I don’t have to do anything besides pick up my smartphone.
When will the branches disappear?
None of the reports on the mobile banking disruption say that all bank branches will go “Poof!” tomorrow. Or even this year. Closing down branches, or consolidating them, is a long process each company needs to figure out. Still, it may be happening faster than you might think.
A report from Deloitte on the banking disruption throughout the EU says that in 2012 5,500 branches were closed. Those numbers are a bit old but show that the banks are already working to manage the changes that mobile is bringing.
If you work in banking, or a developer creating apps for banks, why not have a chat with us to see how we can help you get and keep more mobile bankers? If you’re a banking customer, is having SMS alerts an important factor is choosing your bank? Let us know in the comments.