Credit by: Panos Mourdoukoutas
Digital technologies won’t kill banking, but they will eliminate the need for bank branches, making room for other business outlets to take their place in the real estate space they currently occupy. Like coffee shops, where patrons can bank on online, while enjoying their favorite drinks rather than waiting in line, as was the case back in the old days.
Once, physical bank branches were at the center of every community, next to restaurants, churches and shopping malls. They served as the bond between the company and their customers, in what was known as “relationship” banking.
That was before digital technologies put an end to relationship banking, and replaced it with on-line banking.
That’s why bank branch closures reached a new high in 2018, according to a report out by S&P Global early this year.
“Retail banking has been defined by widespread closures in recent years, with net branches shuttered totaling 1,947 branches in 2018, up from 1,919 in 2017,” says the report. “The wave of closures appears here to stay: In S&P Global Market Intelligence's most recent mobile banking survey, a better mobile app experience was the No. 4 reason customers gave for considering a bank switch, beating out a broader branch footprint.”
Kathryn Petralia, co-author of The 22nd Geneva Report, which provides an overview of the rapid changes facing the industry, agrees."The digital infrastructure advantage and scale of Tech firms and adoption across borders hints that the digitization and democratization of financial services may accelerate the competitive landscape for the retail experience,” she says. “Big Tech and FinTech firms are wedging their way between banks and customers to disrupt the delivery of financial services."
The closure of bank branches is certainly bad news for people who have been working as tellers, loan officers, financial advisors, and managers in those branches.
Still, banks won’t go away according to the Geneva report. "While the financial landscape will continue in radical transformation for the consumer, we believe that banking at large will remain a business conducted primarily by government-chartered and regulated entities, including many incumbent banks,” says Tara Rice, a co-author of the report. “But for banks to succeed, they will have to embrace technology, partner with tech firms, meet customers’ expectations and maintain their trust."
Meanwhile, bank branches will be gone forever, joining other scores of retail outlets that have been eliminated by on-line sales.