The impact of cutting bank branches
Although it is undeniable that COVID-19 has accelerated digital adoption in a myriad of ways, it is important to remember the importance of branches and the value they provide to customers and banks.
A number of banks including Suncorp and MyState Bank have announced branch closures while National Australia Bank said it would scale back its branch hours in regional towns.
RFi Group data suggests that there has been a steady decline in the proportion of consumers who visit a bank branch at least once a month, and it is forecasted that this trend is going to continue over the next four years. However, the demand for branches is not likely to eradicate as 1 in 5 consumers are still likely to use bank branches at least once a month in four years time.
Source: RFi Group
Going forward, the demand for branches is likely to be higher among older consumers, as despite COVID-19 they are more likely to be non-digital channel users. These are consumers who have never used any digital banking channels.
Another trend that has emerged over recent years has been the growing appetite towards online application channels for lending products.
Despite this trend, branches remain to be consumers' most preferred channel for application for these products, with RFi Group data suggesting that 2 in 5 consumers would most prefer to apply for a mortgage or personal/ car loan face to face at a bank branch.
Having the ability to speak with someone to seek clarification currently stands out as being the main barrier to applying for banking products online, suggesting that consumers are seeking omnichannel banking experiences.
Source: RFi Group
An omnichannel experience is not only what consumers value in banking, providing consumers with this experience is valuable to banks themselves.
RFi Group data reveals that consumers who use both digital and traditional channels to interact with their main bank are more likely than those who solely use digital channels, and to associate their main bank with positive traits such as trustworthiness and being empathetic towards their needs.
With 3 in 5 omnichannel channel users associating their man bank with these traits, compared to around 1 in 2 consumers who only interact with their main bank via digital channels.
All signs indicate that the demand for traditional channels such as branches will persist. Hence perhaps banks should look to adopt a prunning strategy towards their branches rather than cutting.
Nitish Bhatt is a lead analyst with RFi Group