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Branch Transformation

What trends are driving branch closure, transformation?

In response to changing trends and COVID-19, many banks have to make a choice around whether to close the branch or transform it.

What trends are driving branch closure, transformation?Image via iStock.com


| by Bradley Cooper — Editor, ATM Marketplace

It's been no surprise that some banks have begun cutting back on branches. Banks have made this decision for a variety of reasons, ranging from changing customer expectations to recent events, such as COVID-19.

Other banks, however, are working to transform their branches into more customer experience-centric locales that deliver omnichannel experiences.

To learn more about some of the trends, ATM Marketplace spoke with Rajashekara Visweswara Maiya, VP and global head of Business Consulting of Finacle.

Q.What trends are driving branch closures?

A. We are witnessing that branch rationalization and closure is taking place largely due to the following reasons:

  • High cost of operating a physical branch.
  • More services are delivered through alternate channels such as mobile, internet and kiosks.
  • Negative interest regime forcing banks to re-look at their cost per transaction, which happens to be the highest in branches.

In the U.S., branch closures are at an inflection point that has been exacerbated by COVID-19. Banks are frequently announcing mergers offering cost savings through branch consolidation, and many banks are beginning to question if their branches should remain closed.

Q. What role has the pandemic played in this?

A.The pandemic has played an important role in this phenomenon — retail, SME and corporate customers of banks are demanding more services to be delivered digitally, while lockdowns and social distancing have also contributed to drastic branch reductions.

Most banks have few options when it comes to considering digital transformation for their branches. Many vendors offer branch software that is integrated with their core banking systems, and core agnostic systems offer limited functionality.

As a result, mid to small-size banks have few to no options. Large-scale banks have the resources to entertain a custom buildout, with the support of the right technology provider, but unfortunately this is not feasible for a majority of banks and the legacy systems within their branches cause further complications. This is why many banks consider or choose to close their branches altogether.

Q. How are banks transforming?

A. Customer experience is becoming an important element in every industry and banking is no exception to it. Customers are becoming used to the experiences delivered by the likes of mobile-first companies like Amazon, Apple and WhatsApp, hence they expect similar experiences in banking as well, which has been successfully attempted by few tech companies in the financial services space. Customer expectations are higher than ever before — they're constantly asking why account openings that take just five minutes online take 30+ minutes in a physical branch — and they now expect omnichannel capabilities across customer and banker channels.

The challenge in front of banks is to reimagine the differences between physical and digital processes and then integrate them. The definition of work, workplace and workforce is changing dramatically post-pandemic, so banks need to reimagine their financial services experience delivery for a digital-first customer and prepare themselves for that.

Q. What services can banks offer to help in this process?

A. Banks need to start working to create a compelling ecosystem of partners including startups and fintechs. They need to integrate the physical and digital processes and reorient their transaction flows. Lastly, they need to reimagine customer journeys keeping a digital mindset at the forefront. Everything that they decide going forward needs to be based on a "digital-first, customer-first, mobile-first, cloud-first, API -first" approach.


Bradley Cooper

Bradley Cooper is the editor of ATM Marketplace and was previously the editor of Digital Signage Today. His background is in information technology, advertising, and writing.

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