Bank branches are shrinking, but they still have their place

Alison Banney 11 September 2017 NEWS

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We do most of our banking online today, but there's a reason bank branches aren't obsolete yet.

Traditional bank branches have been rapidly declining for several years now as Australians continue to embrace digital banking solutions. Data by RFI Group show that the amount of transactions taking place in bank branches is dropping by 10% each year, so it makes sense that the number of physical branches is dropping too.

So why has one of Australia's biggest online banks just opened its first physical lounge?

Bank branches are shrinking

In August, Australia's biggest bank, CommBank, reported a drastic decline in branch deposits and withdrawals from $100 million in 2007 to just $50 million only 10 years later. The bank reported that over half of its total transaction value now comes from digital transactions, with 30 million logins to its mobile apps each week.

Over the past year, the Big Four banks have closed hundreds of their traditional branches in favour of smaller ones. CommBank has opened 226 new branches which are smaller in space to account for the lower number of customers they need to accommodate.

In July, ANZ opened its seventh cashless branch. The bank's new cashless branches don't offer traditional cash-handling services, but are instead simply an opportunity for customers to seek assistance from a "real person" if they need it. The bank is closing down its traditional bank branches in favour of these new-format offerings, a move that hasn't been warmly received by some customers who argue we are not yet a cashless society.

Is Australia ready for no bank branches?

ANZ customers are right. While our use of cash is definitely declining, we are not yet a cashless society. But in addition to cash-handling services, there is something else that bank branches offer that is still in demand: humans.

ING, which has no branches and prides itself on being a digital-only bank, just last month opened its first "lounge" in Sydney's CBD to assist customers with their banking needs. The idea that a major online bank has just opened a physical lounge is a sure-fire sign that there is still demand for person-to-person banking services.

Banks are trying to combat this need with new tech offerings. In May, UBank launched Australia's first artificial intelligence chatbot for home loans, which is trained to help customers answer thousands of home-loan questions. Westpac has also revealed its plans to introduce customer service bots across the bank.

While these technologies are certainly a step closer to replacing physical bank staff, until they can figure out a way to replicate the service offered by an actual human, I think bank branches are here to stay for a little while longer.

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