May 23, 2016

By Brett King

The Death of Bank Products has been greatly under exaggerated

This is an excerpt from my new book Augmented: Life in the Smart Lane


Since 2005 I’ve been predicting the decline of branch banking. For almost 10 years I fought bankers who decried my assessment that branches would cease to be the most important channel in banking, to be replaced by farmore efficient mechanisms for revenue generation and relationship. Today the discussion is increasingly resorting to a sort of desperate plea — “but branches aren’t going to die completely, are they?” No one is saying branches will grow.

The United Kingdom, the United States, Spain, and a host of other countries are seeing the lowest number of bank branches in decades. For the UK you’d have to go back 60 years to find lower numbers of bank branches than we have today, and 2014 saw the use of bank branches fall 6% in a single year — the biggest reduction ever. In the US banks like BofA, Chase and Wells have cut more than 15% of their branches in just the last 4 years, bring their branch levels back to that of the early 1980s. In Norway in March, DNB announced the closure of more than half of their bank branches and the laying off of more than 600 staff. HSBC in India announced similarly that they will be closing more than half of its branches in India, and laying off hundreds of staff.

While the US has only seen declines of 1–2% per year in branch numbers, branch footprint may be a much better indicator of the waning support for branches. Wells Fargo has reduced their branch square-footage by 22% in just 6 years, and for BofA it’s one-fifth of their branches that have already disappeared in just the last 5 years.

We don’t know how to grow without [branches]… But, we have taken the total square footage of the bank from 117 million square feet at the time of the merger with Wachovia in January of ’09, to about 92 million square feet today, and we’re continuing to go down from there.”
John Stumpf, Wells Fargo CEO — ClearingHouse.org interview

The reason we’re reducing branch numbers and square footage is obvious — customers just aren’t using branches as much as they used to. They don’t need to. It’s not a branch design problem; it’s a customer behavior problem.

When it comes to customer behavior, however, the greatest challenges for banking are yet to come and they aren’t channel-based, they’re product-based.

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