The Future of the Branch in a Digital World

By Rob Morgan

Countless pundits and consultants have predicted that the continued digitization of banking will bring about the end of branches. However, much like Mark Twain liked to point out about his own demise, the rumors of the death of branch banking are often greatly exaggerated. While the branch of the future will look different and will serve a very different purpose, I believe branches will continue to serve a critical function in the future of banking. As branches evolve, they will be used less for processing routine transactions and instead as tools to build deeper relationships with customers.

Banks have invested heavily in new digital tools and innovations that give customers access their bank wherever they go. The COVID-19 crisis has undoubtedly accelerated this digitization as customers have become more comfortable with the digital tools that their banks offer.

In many cases these innovations eliminate the need for customers to come in to branches for routine transactions. Mobile banking allows customers to do things like open an account, deposit a check or transfer funds right from their phone.

Despite this, a local physical presence remains an important consideration for many bank customers when choosing a financial institution. Customers want the option to see a live person, particularly when they have more complex questions involving their financial future. This allows banks to use branches to create more meaningful relationships.

There is a close parallel in the technology world that banks can learn from. Apple is the poster child of digitally native companies, but still relies heavily on its physical stores. While these stores don’t drive direct sales, they are an important piece of Apple’s strategy to connect with their customers in the following ways:

  • Trust. A physical presence in a community gives a brand trust and credibility. It creates a sense of permanence that customers want. This allows Apple to build a corporate image that is consistent with its business plan.
  • Explain complex products. Computers can be complex products, and no one computer is best for every customer (much like bank products). Apple uses its physical stores to give customers a chance to engage with experts and find out what product might best fit their needs, even if they ultimately buy that product online.
  • Customer service. A physical presence is critically important when things go wrong. Apple uses its stores to give customers a friendly face to visit when things go wrong or when they need help understanding Apple products. With something as important as a laptop (or bank account), customers want the peace of mind that comes with visiting a real person to get their questions answered and any problem solved.

Banks can learn from these lessons and many already have. As the nature of branch visits change, banks can make these interactions more meaningful and use them as an opportunity to learn about a customer’s financial needs and deepen relationships. This is already happening in many banks across the country and will accelerate as technology frees up staff time that has traditionally been tied up with processing transactions.

Banking has always been a relationship business and digitization will do little to change that. In the future of banking, branches can play a key role in helping banks stay connected with their customers, clients and communities.

Rob Morgan leads fintech policy and engagement efforts as SVP for innovation and strategy at ABA.


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