The evolution in technology has a promising effect on us. It has made people’s life fast and comfortable. Technology sooner or later will affect everyone. It has no exception.
Rather, it is one of the most important technologies to change the lives of the people. It has put a positive and negative impact on almost every department.
Banking is also one of the affected departments. Look at the strongly emerging technology of digital currency which has revolutionized the whole concept of banking. Many more are being introduced on every single day. One thing that is slowly but steadily changing the entire banking is “Digital Banking”.
It has put such furious impact that many has thought physical banking or branch banking will soon die on its own. Will it happen soon?
Let’s try to find out the answer.
According to a report of Khaleej Times, many speakers in a seminar that held in June 2019 by the “Institution of Chartered Accountants of India, (ICAI)”, expressed their concerns regarding this and told the audience that the emerging Fintech firms will disrupt the banking industry, but they would require the big players to get the customers. They also told that “Digital Banking” is getting pace in major markets like India, US and UAE.
“The footprints of bank branches will go down but they will not disappear at all due to the emergence of digital banks,”. Abe Karar said, who is the founder and CEO of Alchemy digital solutions.
Bain study was conducted on the impact of Mobile channel on traditional banking. Which concluded that almost half of the customers, who moved to the mobile channel, made fewer visits to the branch.
Talking about the cost comparison, another research by Diebold stated that the branch transaction costs about $4.25, while it’s just $.20 if done online and its expense further shrinks to $.08 if it moves through the mobile channel.
That is a huge and eye-opening difference in the expenses which will change the approach of the banks.
Considering this, it is a win-win situation for both customers and banks. It will save the customer’s time who is already obsessed with his fast-paced life and don’t find time to come to the bank for his routine banking needs.
Eventually, the Banks can cut a lot of expenses and maximize their profits.
A study spanning over 10 years revealed that although the gain of European retail banks is All-time high, yet the big players are facing the lowest growth(+1% in west Europe).
A.T. Kearney’s “Retail Banking Radar 2019” inspected Europe’s 92 banks data and revealed that despite getting strong growth, a big drop in income per client was observed.
This caused the shutdown of about one four of the branches across Europe since 2008. This shows that the banks need some serious modification to meet the increasing customer demand for digitization and new opportunities in open banking.
A new wave of digital banks in Europe called “Neobanks” was introduced only a few years back, which only offer digital products and no physical banking involved in it.
This Idea is attracting more and more customers and they are partially or fully ditching conventional banking in favour of these new models. Now if you look at the customer retention, then “Neobanks” have gained over 15 million customers since 2011 which, in near future, is predicted to further rise significantly, yet the traditional banks show the drop of 2 million.
This situation has forced many main-stream banks across Europe and the US to shut down their branches (many more to close soon) and shift their customers towards online banking.
In the UK only, over one-third of the branches have already been closed since the start of 2015. This includes the branches from the banks like TSB, HSBC and Royal Bank of Scotland.
Similarly, in the US, many renowned banks including Bank of America, The City Bank and Wells Forge have cut dozens of their branches in the last few years.
According to a World Bank report, a decline of 17% was observed in the European Union during the period of 2012 and 2015.
Now, what do you think that branch closure is the right thing to do? In my opinion, it is not a solution to this problem. Rather, banks must ensure alternatives to support and keep their old and loyal customers.
They themselves need to make some aggressive transformation and offer some remarkable innovations not only to flourish but also to survive in this digital era.
Muhammad Daud is a Pharmaceutical salesperson & tech enthusiast. Curious by nature, he loves to know & write about the things that attract him. He loves more to write about Tech, Health and Entrepreneurship. Further seeks to adopt blogging as a profession. He can be reached on facebook and twitter.