Banking Review

Kicking the branch habit

OPINION

In a world where the bank is no longer a place you go, and banking has become something you just do (‘Banking’s new normal), the role of branches is back in the spotlight.

The prospect of closing branches — always a sensitive political issue— has returned, following the release of a UBS report that says growth in online transactions, which approached two billion in the past year, is making retail branches redundant.

The number of branches, at 5,588, is at a 13-year high, representing a significant expense at a time when banks are closely scrutinising costs amid revenue pressures and a weakened credit environment.

“A substantial proportion of the banks’ expenses are borne running the branch network and occupancy expenses,” says UBS analyst Jonathan Mott.

Westpac is tipped to move first on branch closures, given its agreement with the government to avoid branch closures in the wake of the St George merger recently expired.

Meanwhile, the Commonwealth Bank continues to invest in its always expanding mobile offering, and smaller institutions, never reliant on a large branch network, are stepping up their social media efforts to reach new customers.

But these investments remain small fry compared to the millions spent on branches by the major banks each year.

Why are branch investments still measured in millions while mobile investments come with a lot less zeroes?

Retail banking remains ripe for disruption says Brett King, and the more a bank insists on physicality, the more it risks becoming irrelevant to ustomers. It’s a big call, and King has been predicting the demise of branches for some time. Financial pressure could prove to be the real death notice for branches.