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Is this the end to legacy bank branches in 2021?

Is this the end to legacy bank branches in 2021? 1

By Mark Aldred, Banking Specialist at Auriga

2021 should be a year focussed on making the lives of customers easier by helping them decide how they want to engage with their respective banks in a way that is safe. As access to cash becomes increasingly difficult, stakeholders are expected to work harder at finding solutions whilst also taking into consideration the repercussions of COVID-19. Due to the steep reduction in the usage of traditional banking channels by customers, legacy banks have been experiencing major challenges. Additionally, the rise in new entrants taking over market share with cutting-edge digital solutions further contributes to the depletion of legacy banks.

Making the banking industry more efficient 

The removal of ATM machines and the shutting down of branches in communities that need them the most, has been the recent reaction to attempt to reduce costs and increase efficiencies in the banking industry. Although this may appear as a solution, it also risks losing customer loyalty. Reputational damage can also be done. Nevertheless, the integration of assisted self-service can be the saving grace the banking industry needs to mitigate this issue.

Meanwhile, as the news focusses on employees and towns that are affected by the closures, HSBC’s announcement on how it is planning on restructuring its UK branches is both refreshing and reassuring, especially as it is more innovative than the traditional methods. One example of their strategy is their plan to open pop-up branches and invest in digital service branches.

However, one thing HSBC did not address is the opportunity to use self-service banking with assisted and remote service, to transform into a lean branch format. This way, communities are given a rejuvenated bank branch as a focal point for financial services. Examples of this would be adding more services to modern ATMs, such as being able to pay bills and seeking help from a financial product specialist through a live video call. These are ways of allowing continuing access to cash and financial services to be subsidised by new and additional revenue streams. Moreover, an alternative way of transforming the economics of a physical branch would be to offer a fully automated, unmanned 24/7 service. This trend is already growing in countries such as Italy and Portugal.

Saving high street banks

The recent local and regional uproar in relation to both towns and neighbourhoods losing their high street banks could be addressed by banks sharing their facilities to maintain local financial services hubs. This strategy is very common in European countries, and there can be a lot of money saved though branch sharing, as well as an increased return on revenue and improved community relations.

Additionally, there remains those who rely heavily on bank branches as a channel of financial services in a process that promises more security as the transaction is made with a real person rather than online, email or text correspondence. Legitimate fears have materialised due to the rise of online hackers, as a result of which many distrust communicating only through digital channels.

Reduced access to cash

The move toward the loss of access to cash is accelerating, and when it does arrive, it can potentially become a national scandal and an embarrassment to banks. The availability of a cashback service at retailers of all sizes may be a promising strategy and may provide some light at the end of the tunnel. In countries like Germany, restrictions to cashback and the requirement of making a purchase first to receive it have long been abolished. Meanwhile in the UK, there are new schemes in the works to address this issue during 2021. According to government reports, consumers withdrew £3.8 billion worth of cashback when paying for items at the point of sale in 2019. That figure makes it the second most popular method for withdrawing cash in the UK, behind none other than ATMs. This suggests that even though remote and rural communities may lack in proper access to cash due to the reductions of ATMs, consumers will not be left completely abandoned. With the support from retailers, coupled with properly implemented cashback schemes, accessibility to cash may still be available. This of course does not do anything to address the accelerating withdrawal of access to the full range of financial services typically lost to many as a result of branch closures.

That said, even though retailers can help revive some access to cash following removal of cash machines, small businesses cannot carry the burden of fixing the issue.  SMEs are already experiencing their own problems including the same changes in customer behaviours and other effects of the pandemic. Therefore, consumers only entering their stores for access to cash will not revive their fortunes.

Video banking for remote financial services

Another solution to improve access to cash would be to invest in video banking, as it would allow banks to provide their financial service in a more cost-effective way, in areas that will be most affected by the transition to less bank branches. This way, customers can be served via a remote teller or subject matter expert instead of depending on the staff available to service multiple customers in different branches. This kind of branch can be kept open and continue to make revenue just by using video banking.

This method is of course beneficial to local customers as it protects their access to financial services. In fact, when compared to in-person traditional banking, video banking can actually prove to be even more of a convenient experience while also increasing branch productivity. With access to 24/7 servicing, customers can contact tellers remotely via a video link at a time most convenient to them.

The legacy ATM infrastructure is in dire need of an upgrade, as without this, the channel will be unable to modernise and function as the next generation of delivery channels arrive. Moreover, ATMs and assisted service devices need to be provided in order to give customers a wider range of banking services, instead of limiting them to cash withdrawals. Banking specialists should focus on the automation of all teller functions through the use of self-service technologies and video-banking – as the closure of bank branches is inevitable, preparation for the changing atmosphere in the banking industry should be given the highest priority.

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