[Why] Reports of Bank Branches Demise Have Been Much Exaggerated

Asaf Buchner | March 02, 2006, 09:20 PM

A recent briefing with MapInfo, which helps banks decide where to place branches, made me re-think the role of physical branches. For a few years now, nobody talks about the online channel as replacing banks’ physical presence. If anything, US banks have been adding branches. With online banking penetration on the rise, one wonders why. The main reason is that the network of branches and ATMs still plays a crucial role in consumers’ decision where to open an account. In fact, the most popular online banking activities are viewing statements and paying bills. These activities were previously performed by mail and therefore the online channel did not dramatically reduce the workload of the branches. There is also a significant credit card application activity online, but again, it replaces the mail channel more than the branch. In more complex products, such as mortgages, most consumers still prefer the human advice offered at the branch, with only a small percentage applying online. The reduction of workload is therefore still not enough to have a real impact on the design of the branches or their staffing needs. I do expect banks to eventually reduce the number of employees at the branch, but this process will take longer. The branches (and their employees) are here to stay, for now.