For the last couple of years, banks have been shutting down branches at an alarming pace, while limiting the opening of new ones. Well over 2,000 large to midsized bank branches in Canada and the US have been shut down with more to come.
After all, many analysts have criticized the closure of bank branches. These critics claim that banks closing have disenfranchised low-income communities and are forcing them into higher-cost banking situations. While big banks may provide physical convenience and more personalized service, the advent of forward-thinking Fintech’s and Neobanks could be turning these criticisms on their heads.
Physical vs. Digital
As it turns out, many consumers are actually opting for digital-only options now more than ever before. The convenience factor of handling all of your banking activity over your phone while also skipping out on the high fees that come with the big banks is hard for consumers to pass up.
By 2022, industry forecasts project that over three-quarters of millennials will be digital banking users. In addition to this, 43% of people cite lower fees as being the main factor that influences where they choose to bank. This illustrates how people are starting to snap out of the illusion and realize that bank branches may not even be necessary at all anymore. Why would you pay fees for a service that many will only visit a couple of times per year? I’ve covered this in previous posts as well.
Millennials are the ones who are actually leading this digital charge
They are using banking services more than ever and are getting more and more frustrated with the dated procedures of traditional big banks. According to a study, 47% of millennials are using digital banking now and have a heavy focus on convenience and the associated perks associated with these digital apps. While this is true, this same study concluded that 38% of these millennials dropped the digital service when they felt it was performing too slowly and becoming inconvenient – something the legacy banks’ mobile tools have struggled with. This shows that newer and more modern standalone digital banking options are becoming more enticing, making big banks’ execution of a time-saving and well made digital service a necessity in the near future.
Thanks to modern options from new-entrants and big marketers like Chime and N26, users can get all these services and more without having to deal with any fees or having to drive to a branch. All of the benefits of a branch seem to mean less and less as we move deeper into the digital era.
Do We Even Care if Banks are Shutting Down Branches?
The answer is maybe. Banks still have services that require a personal touch and that experience is still best in branch. Beyond those advisory services, there seems to be little to no unique advantages to digital banking platforms anymore and are simply an inconvenience compared to the best neobanks that are now available for free. A majority of the big banks including Bank of America, Wells Fargo and JP Morgan Chase are all pouring millions of dollars into developing their mobile platforms, which shows that they are keen on what is happening in the industry. If they are going to maintain their position and find growth they are going to need to adapt and get more innovative when it comes to their mobile experiences.
If these big banks are wise, they will take the best parts of the branch experience and digitize it. The only experience that people want from branches is a human touch, which these new digital banks are all starting to offer.
Will Technology Save Banks?
Tools like, Facetime, and Slack can allow digital apps to offer face-to-face services that people crave. After all, research says 80% of consumers are more likely to make a purchase when they are offered personalized services.
At the end of the day, the convenience of mobile just can’t be beaten. Consumers are getting more and more frustrated with the fees and inconveniences of the dated legacy banks which is causing a shift in consumer attitude. Just as we have seen record-breaking closures of retail stores, we can predict the same for banking as digital alternatives continue to shift the public perspective.
Banks are losing their grip on their branch visitors as we begin to see this shift in opinion. People are realizing just how much time can be saved by going mobile, and the industry is providing more personalized and streamlined services with every passing month. The only hope big banks have to keep up with this new wave of digital services is to listen to what their customers are telling them and find a way to stand out from the increasingly competitive Neobank niche. Needless to say we are going to see an increase in banks shutting down branches and new digital solutions come to market faster than ever before.