Nick Goodway: Customers will move on if their bank branches are axed

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“Too fast, too far” was trade union Unite’s predictable reaction to Lloyds Bank’s announcement that it would cut an extra 3000 jobs and close another 200 branches as its customers embrace digital banking. 

Chief executive Antonio Horta-Osorio’s statistic that footfall in branches is declining, at 15% against 8% a year ago, certainly seemed to justify the axe being taken faster and further into the branch network.

But new data supplied to me by Accenture suggest Unite is at least correct in warning banks against going too fast. 

Looking at trends between 2010 and 2015, shows — not surprisingly — that the monthly use of mobile banking is up from 8% to 34%, reflecting the ubiquity of the smartphone. The use of telephone banking has risen slightly from 14% to 16% of customers.

When it comes to internet banking, there has actually been a decrease from 79% to 74%, with the difference probably being the shift to mobile. 

But the number of customers who visit a branch of their bank at least once a month has, surprisingly, risen from 47% to 52%.

So, more than half the millions of bank customers in this country go into a branch on a regular basis. Indeed, 69% of them say they prefer to take important financial decisions such as retirement planning, investment advice or mortgage applications in person rather than online. 

Accenture managing director Peter Kirk says that, while the arrival of more sophisticated self-service machines has helped to pull customers into branches, there is  still a strong demand for face-to- face banking when it comes to big-ticket items. 

“Transactional banking is and will continue to move onto digital platforms,” he adds. “But habits do seem quite slow to change.”

Transactional banking is, of course, only just profitable or even unprofitable on some accounts for the banks. None of them have yet really cracked charging for current accounts, although they have moved some way in that direction with packaged accounts.

The fact is that selling more-profitable services such as pensions, savings and insurance is even more important in an era of low interest rates that is likely to continue for a long time. 

Since those are the kind of decisions still largely made in branches, banks are almost certainly going to have to attract staff with higher qualifications and better training to their branches, and pay them more. Bonuses for selling may have been removed but fines for mis-selling have not gone away. 

Kirk says the banks are slowly improving their digital contact with customers, using the likes of Skype to introduce human rather than avatar contact. But at the moment, much of their digital offering is not fit for purpose, particularly when it comes to recognising the same customer in different areas of the bank. Having to sign in two, three or four times is not conducive to creating extra business.

Customers may be driving the speed of closure of branches with their addiction to apps but shutting too many, too fast could also drive those same customers into the arms of rivals or worse. 

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August 2, 2016 |
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