While talking with friends and family over the last few months we have, naturally, been talking about what the future will look like. Where will we shop? What will the places we are used to shopping look like? How will we bank in the future and will the branch survive?

Of course, we don’t definitively know the answers to those questions as the answers are still evolving. Some of the answers are out of the hands of businesses and firmly in the hands of the governments and their plans to reduce the risks to the public. One question I think can be answered though, is that of the survival of the branch.

Firstly, we should think about the reasons that the branch exists in the first place. Selling financial products is the undeniable number one priority for any financial institution and their retail branches. Other reasons that branches have been necessary include; the depositing and withdrawal of cash, answering questions from customers, attracting new customers, enabling the building of relationships with customers and facilitating meetings for more complex products or transactions.

In recent years we have seen the branch evolve, with many arguing that this had to happen to ensure the branch stays relevant. From in-branch coffee shops, to yoga classes, and offering meeting space for small businesses to meet with customers in a professional and private environment. Offering additional services within the branch, adding value for the consumers and businesses that are their customers, has been an effective tool in a market where differentiation from competitors has been ever more challenging to achieve.

These coffee shop branches, or yoga studios have additional benefits, I can honestly say I haven’t gone into a bank branch to browse the products that they have on offer. Equally, I have been in to two banks I was not a customer of in my adult life. Why do I remember that specific number? I remember that I have done this twice in my life because of the experience that I had, and how I felt.

As I was not a current customer of these branches or the FI’s that operated them, I felt uncomfortable. The staff seemed friendly, but I did not feel welcomed, not in the way I would have in a retail store. If I was walking into an environment like a coffee shop, or a yoga studio, I would have felt more welcome, regardless of how welcome I, someone who is so inflexible my socks are a problem, would have been in a yoga studio.

So how does the branch survive?There are two parts to the above question.

The first is will the branch survive? Secondly, how will it survive?

The answer to the first part is emphatically; yes. The branch needs to survive, for all the reasons the branch was ever conceived. Attracting new customers has never been more difficult to achieve without being very aggressive with pricing and effectively commoditising financial products. Customers, whether they are small businesses or private individuals still need a place to withdraw and deposit their cash. Financial institutions need a physical space to engage their customers, inform them about their products and ultimately generate sales in the same way that they needed these spaces twenty or thirty years ago.

Certainly, financial institutions need to continue to evaluate the locations and profitability of their branches and keep the branch channel as lean and profitable as possible. The branch does continue to play a key part in the customer experience and as a result, a physical space continues to give you a competitive advantage over those challengers who don’t and allow you to differentiate yourself from those who do.

To the second question of how?

The branch must continue to evolve. Evolution of the branch will include further automation. Solutions that continue to enable staff and customers to engage and build the relationship will be key. Further consideration, like in retail stores, will have to be given to some of the new norms. Things like social distancing and “touchless” interactions with branch staff, will remain for the short to medium term, at least.

Continuing to be innovative in branch layouts and activities will remain an important way to attract new customers. While coffee shop layouts might struggle to have the same level of attraction as before the pandemic, it would be unwise to bet against people wanting to socialise. Equally, it would be unwise to remove people from the branch, relying on technology for interactions that at their core call for a human touch. Branch staff help your customers to relate to your organisation. They are the “face” of your business.

It is almost cliché to say “people buy from people” but being cliché doesn’t mean it is untrue. This is the most important part of the puzzle, for both the survival and evolution of the branch. The ability to interact with people is as important for financial institutions as it is for retailers. People will continue to seek advice and contact with other people. The physical connection that makes people tick is reason enough to keep the branch alive.

Combining the physical connection with format and technological innovations across the branch does something entirely different to the initial question. It needs rethinking and rewording. The question should be, “Why wouldn’t the branch survive?”