The way we bank: high tech or high touch?
4 December 2017
A 2014 joint report by the British Banking Association (BBA) and Ernest & Young (EY) on “The way we bank now” quoted Ross McEwan, CEO of RBS Group, and revealed much of the group’s thinking about the future:
“Do you know what our busiest bank branch is in the UK? It’s our mobile app on the 7.15am train to Paddington” - McEwan
Therefore it comes as no surprise the announcement of further branch closures and associated job losses. This in fact has been a trend within the industry as more and more online banking channels become available and gain traction. Research by Which? indicates that between January 2015 and December 2016 the major retail banks operating in the UK closed a total of 1,046 branches or 11 per cent of the network.
Part of the recent trend has been driven by the need to seek efficiencies following a period of restructuring and de-leveraging that occurred since the 2008 financial crash. Those banks such as RBS who are more under pressure to reduce cost base and maintain healthy capital ratios are perhaps seeing the shift to online as a clear opportunity to reduce costs. But the push to online banking must come from the customer and requires a strategic approach.
The experience from other sectors such as travel & tourism where companies have attempted to move online is that you have to follow the market. At the moment, there is about 63% of internet usage in the UK retail market, but this is largely to do with one-off and relatively simple transactions. The requirement for trust, personalised banking and brand awareness will continue for banks, especially for more complex and long-term transactions such as mortgages and for certain segments of the public. This will be a trend but there is no evidence that high street banks will shift completely online. I can see a further wave of bank closures as technologies gain traction, but branches will remain important.
The critical challenge for executives and the boards of banks will be how to strike the right balance between “high tech and high touch”, how to differentiate service offer in both channels and how to manage the pace and scale of the transition will be critical. This balance will be unique to each bank.