The Role of Physical Bank Branches in a Digital Age

As smartphone use has proliferated over the past decade, more and more customers are opting to perform many traditional banking functions online without ever stepping foot in a bank. Indeed, digital transactions far outpace in-branch transactions for financial institutions across the world, and physical bank branches have been closing at a rate of three per day since the late 2000s. Despite this, brick-and-mortar branches are still a critical piece of every bank’s customer service function thanks to their ability to dispense in-person financial advice (and, of course, actual physical cash). Indeed, even in the most digitally advanced nations, as many as 60 percent of bank customers still prefer to do some banking at a branch. So how can banks make the most of their physical locations in a digital landscape?

According to a recent McKinsey article, the key will be using emerging technologies to create “smart branches.” While many banks have incorporated some smart-branch technology into their branches in the form of tablet computers or new machines, the full potential of such technologies goes much further, potentially offering customers a completely seamless experience between online and in-branch. For example, next-generation banker tablets equipped with live dashboards and advanced CRM software could allow staff to roam their branches à la Apple Store employees, enabling better customer service and higher sales potential.

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Other emerging technologies could allow branches to go even further. Interactive teller machines (ITMs) would provide almost all branch services without the need for any live staff, essentially offering a “branch in a box.” The advantage here is that customers would be able to do almost everything they need to be in a branch for—from making a deposit to setting up an account transfer—24 hours a day with remote human banker support as necessary. Other innovations could go even further, from interactive digital walls to robot greeters.

As McKinsey notes, few bank branches are currently taking full advantage of the promise that smart branch technology offers. However, it is clear that technological advancements and the digital age have not made the bank branch extinct; rather, they have increased the potential for what is possible.