The way in which we bank is changing. Bricks and mortar branches are expensive to run with high rents, salaries, and dedicated tech installations. Some of the challenger banks have no physical presence and there is an abundance of customers who no longer want or need to go into branch.
They are more than happy to swap the branch queue for digital banking. In fact, as demand for high street services decreases, banks are closing their doors. HSBC shut 1000 branches in 2015/2016 alone according to a report by the BBC which represented 27% of its network.
HSBC are by no means alone, as the Co Op and Lloyds follow suit.
So what we are witnessing is the reality that the likes of blockbuster and HMV felt when Amazon came along. How could traditional retailers possibly be competitive and profitable? How could they differentiate from the online retailers in a way that made customers value physical premises? The sad answer is that they couldn’t.
Most consumers were happy to buy without browsing rows of physical DVDs – in fact doing it from the comfort of their home and with an internet connection typically meant they could access a free trailer and lots of useful reviews. By the time Blockbuster tried to change and divest of their property, it was too late.
According to Which?, 56% of adults used online banking last year. That is a huge number, but in real terms that means that there are still 20 million adults who do not or cannot use these services.
Of these people there will be some without an internet connection, lack of a mobile device, nervousness to adopt, lack of technical capability, and so on. For the traditional banks this gives them time to adapt and to close branches as the late adopter’s drift off.
This also represents a huge opportunity for the challenger banks who are already embracing digital banking technology. It will be this early adoption that helps these organisations to be in prime position to take advantage of new digital banking innovation, and keep a step or two ahead of the traditional banks who will inevitably be playing catch up.
One might not envy the position traditional banks are in, as they must close branches to maintain profitability and invest in digital banking. Yet they cannot afford to risk alienating their loyal customers who want and need a branch.
Therefore, there is a balance to be struck here between the physical and digital, and this must be managed in real time as consumer demands change.
Featured picture via Pixabay.com by dawnfu