Death of Physical Branches: Is it Inevitable?

Are branches still relevant? Or are they doomed to the same fate as Blockbuster and Borders? This analysis looks at three perspectives.

Editorial contributed by Complete Data Products

Remember a few years ago when you drove to Borders to buy a book, then stopped by Blockbuster and rented a movie? Now you buy your books on an e-reader, and more movies are rented with a streaming service like Netflix. Traditional brick and mortar locations in many retail sectors are simply fading away. This same dramatic transition is taking place with financial institutions. In today’s digital world where financial services are increasingly electronic (ATM’s, online, mobile devices, etc.), is there still a need for physical branches? This is one of the hottest debates among financial institution executives, so let’s examine the subject through the lens of three perspectives:

  1. The Digital Movement
  2. Evaluating the relevancy and survival
  3. The Redesign

1.) The Digital Movement

Borders and Blockbuster are fading memories. Airlines have replaced a majority of their staff with online check-in and self-service kiosks — you don’t even need a printed boarding pass. Society is more digitally connected and as a consequence, consumers expects instant results. The financial industry has not escaped the clutches of this digital movement. In fact, many suggest digital channels threaten the very existence of the physical branch and the traditional role of tellers. What happened and how did it happen so quickly?

This dramatic change goes by many names: digital disruption, big-bang disruption or disruptive innovation/technology. Whatever you call it, a disruptive technology replaces one that existed previously. In other words, a process or service is revamped and made available, usually at a lower cost and with more features. It might start out appealing only to a small segment of the market, but then rapidly it can quickly balloon in popularity until the majority demands changes be institutionalized across the board.

Generation-Y consumers, those aged 18 to 34, are the first generation to grow up with ubiquitous computer and internet access. They are the largest generation since the baby boomers — one third of the nation’s 240 million adults — and will outnumber them within five years to become a majority of the wealth accumulators in the U.S. They will soon represent the majority of financial service customers. And they not only prefer to do their business and banking electronically… they expect it. The inconvenience of doing business within the institutions’ hours combined with the increased cost of traveling to the physical branch has led consumers to request they be allowed to conduct business when and where they want to — online and digitally, through their tablets and smartphones.

2.) Relevancy & Survival

The traditional physical branch is costly and in crisis. Foot traffic has been decreasing steadily over the past twenty years due to shifting customer expectations and the increased availability of digital transactions. Is the branch still alive and relevant? Or is it doomed to the same fate as Blockbuster and Borders?

As Mark Twain might put it, “Reports of the death of branches have been greatly exaggerated.” And here’s why: According to a Celent study of U.S. consumers (June, 2013), branches are still the #1 sales and engagement channel for banks across the globe.

Branches are the best opportunity to cultivate strong relationships such as new customer acquisition and opening of accounts. Experts agree that this area has suffered with the advent of self-service channels such as ATM’s, telephone and online banking.

The customer has access to a human when contemplating higher end transactions or is in need of a recommendation on quality products. There are still banking “traditionalists,” including those in older generations that have not embraced technology to the same extent as Gen-Y. This segment may be shrinking, but still a viable, valuable pool of consumers for the near future.

3.) The Redesign

“The old-style branch — where you’ve got tellers on one side and desks with loan officers on the other, with velvet ropes telling people where to stand — is over!”
— Raymond Davis, President/Umpqua Bank

Branches will continue to exist in the near future, but a financial institution’s survival will depend on its ability to move into the new “outside the building” branch. Financial institutions and their executives cannot afford to have their heads in the sand during this time of rapid change. They must incorporate technology upgrades that clients want such as digital transactions, virtual tellers, traditional in-person banking or a combination of those items. So, where do you begin?

Here are a few of the most popular ideas that your peers at financial institutions across the country have put in place with great success to stay ahead of the curve and make the branch of tomorrow the branch of today.

  • Cross Selling Technology. This proven, revenue generator creates opportunities to cross-sell customers at the financial institution and generates hundreds of internal referrals with an immediate stream of revenue. This is all done through a signature pad or tablet where a question is posted for the customer to answer based on their unmet needs.
  • Digital Signatures. In our busy lives, financial entities are eliminating the barriers of distance and time by catering to the modern customer by virtually placing them in your institution. Electronic signature solutions allow customers to sign documents legally, securely, anytime/anywhere using a smartphone, computer or tablet.
  • Email Receipts. Financial institutions now have the ability to offer their branch customers the option of email teller receipts. Focus on solutions that protect the information by encrypting the contents of the receipt.
  • Video Teller Technology. Ideal to handle routine transactions and give the customer the ease and flexibility of live interaction with a teller during non-traditional hours.

The goal is to never deploy the technology for technology sake (e.g. the cool factor), but to add value and benefit to the customer. These examples above meet those criteria as well as protecting your customer and their sensitive information with security measures such as encryption.

According to FindABetterBank.com, 74% of all consumers can imagine that they will bank 100% digitally in the future (this study includes both Gen-Y and Baby Boomers). So while the trend is to downsize the branch and increase the digital offerings to cater to the new generation of customers, there is still currently a need for the branch… just a better redesigned branch.


This article was submitted by Complete Data Products, a provider of custom printed products, marketing materials and supplies. CDP is an innovator of laser print-on-demand forms and thermal teller receipt technology, and they are now also a leader in paperless document management software.

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