Major Banking Disruption
Bank closures reached an all-time high in 2021, up 38% from the previous year. Banks, under pressure to demonstrate earnings, are supporting this goal by reducing labor and closing branches. Most understand that some branches are required to maintain market awareness and provide face-to-face service when customers request it. By focusing on low-performing branch closures, financial institutions use the balance sheet to make decisions that appear logical in the short term. One reason for the lack of attrition is that digital transformation has shifted convenience away from retail hours and toward banking on their terms. Many customers also have their paycheques deposited directly into their accounts and have their bills paid automatically, making switching to a new bank difficult.
Branch closure is an unavoidable fact of business, but the critical question is how it will affect the company in the long run. What expectations can banks have about customer loyalty if open banking allows loans to be processed quickly online? Customers will likely choose the lowest fee option if a new account can be opened online through open banking. As regulations become more tolerant of open-source banking alternatives, branches, and the human interaction they enable will become a critical differentiator for banks over digital-first brands. However, how can banks justify keeping branches open when the immediate cost savings make the math appealing? As banks transition to an omnichannel model to provide a seamless experience, what is the impact of branch closures?
SLD is a strategic design firm that works with financial brands to solve customer experience challenges. As a result, we conduct primary research to investigate a wide range of industry-relevant topics. Our goal is to look at challenges in the future to uncover untapped opportunities, challenge assumptions and biases, and provide our clients with a strategic approach to transforming customer experiences.
This study aims to assist financial institutions in thinking more broadly about the consequences of branch closure while also providing insights to help their branch network and banking services remain relevant. Finally, how do you provide an integrated customer experience by leveraging a new distribution/branch model and a best-in-class digital experience? The study discovered major gaps in financial thinking and strategy, but most importantly that customers want access to humans as well as all-channel service. Read more about our study’s insights below.
