When I was at the beginning of my career, I attended a conference at which a well known professor of banking stated that 'banking is an art, not a science'. The theme of the event concerned the importance of knowing your customer and though we might question the statement the fact is that all strategic decisions need to be underscored by an understanding not only of what our customers want but what they will and will not accept. Is the interpretation of scientific research an art? And if so, how good are our banks in this respect?
A recent Which? report highlighted the fact that there are now just 6500 bank branches in the UK. According to the BBA there were 9700 branches in October 2014 and if we go back to 1988 there were 20,500 branches. Wales and Scotland have lost 43 percent and 38 percent respectively of the branch networks in the last five years and rural areas in England have been particularly badly affected.
At the same time 30 percent of the UK population do not use online banking and a Finextra article (8 October 2019) reports TNS research that indicates that 62 percent of adults are 'only comfortable using banking applications for the most basic tasks or not at all'. It concludes that banks need to differentiate between the benefits of digital first and digital only. You can't force services on customers who don't want them, and you don't throw away historic advantage. Rather, the article proposed 'a seamless omni channel customer experience to give them the best of both worlds'. And that includes the branch.
Things are undoubtedly changing. According to CACI, 71 percent of customers are expected to use mobile apps for banking by 2024. Over the same period the number of customers who bank in branches is expected to decline to 55 percent.
There is no doubt traditional financial service providers can learn from digital only challenger banks and that they have in some respects been constrained by costly legacy branch networks. However, at a time when large numbers of customers still value face to face interactions, the branch continues to deliver competitive advantage. For the bank, in each instance it comes down to balancing costs and potential benefits. With the average customer visiting the branch four times a year by 2022 (CACI June 2017) the physical unit still has an important role to play as part of personalised customer-centric service delivery.
So, retail banking, art or science? I asked an ex-colleague who majored in Banking at university. 'Well he said, I got a BA and an MSc, so I suppose I'd have to say both '.
