digital-banking

The end of bank branches

Are the days of popping into your local bank branch becoming a thing of the past?

The way we bank is changing at a rapid rate. In the past, if you wanted to open an account, make a deposit or take out a home loan, you had to physically go into your bank branch and meet face-to-face with a teller or a lending specialist.

Fast forward to 2016 and the vast majority of banking transactions, especially for younger generations, are carried out digitally. You can pay the rent, do your shopping, move money between accounts and even apply for a home loan online, all without leaving the comfort of your couch.

Could this shift to digital banking spell the end for bricks-and-mortar bank branches? Let’s take a look at the issues involved and some of the developing technologies that could soon make bank branches obsolete.

Read our guide about online banking here.

Online Savings Account Offer

AMP Saver Account

3.00 % p.a.

max rate

2.10 % p.a.

standard variable rate

Online Savings Account Offer

Introductory rate of 3.00% p.a. for 4 months, reverting to a rate of 2.10% p.a. The bonus rate offer is for new AMP Saver customers only, and applies to the first $250,000 deposited.

  • Maximum Rate: 3.00% p.a.
  • Standard Variable Rate: 2.10% p.a.
  • Introductory period: 4 months
  • Monthly fees: $0.00
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Rates last updated May 27th, 2019
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
AMP Saver Account
3.00%
2.10%
0.90%
$0
$0 / $0
Introductory rate of 3.00% p.a. for 4 months, reverting to a rate of 2.10% p.a. The bonus rate offer is for new AMP Saver customers only, and applies to the first $250,000 deposited.
UBank USaver
2.87%
1.81%
1.06%
$0
$0 / $0
Earn up to 2.87% p.a. by linking your USaver account to a UBank Ultra transaction account and transferring at least $200 per month into either account. This offer is available on balances up to $200,000.
HSBC Serious Saver
3.10%
1.20%
1.90%
$0
$0 / $0
Receive a maximum variable rate of 3.10% p.a. for 4 months, reverting to an ongoing rate of 1.20% p.a. for each month you don't make any withdrawals from the account. Available on balances below $1,000,000.
Bankwest Hero Saver
2.60%
0.01%
2.59%
$0
$0 / $0
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
Citibank Online Saver
2.90%
1.60%
1.30%
$0
$0 / $0
Introductory rate of 2.90% p.a. for 4 months, reverting to a rate of 1.60% p.a. Available on balances below $500,000.

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Rates last updated May 27th, 2019
$
Name Product Debit Card Access ATM Withdrawal Fee Fee Free Deposit p.m. Monthly Account Fee Product Description
UBank USaver Ultra Transaction Account
Visa
$0
$0
Earn up to 2.87% p.a. interest on your linked savings account. No foreign ATM or transaction fees.
$0 monthly account fee.
You must open the UBank USaver savings account in order to get this account. Enjoy access to ATMs in Australia and overseas for free and a 0% foreign transaction fee for online purchases. Manage your spending with a built-in sweep facility that automatically moves money between your linked accounts based on the limits you set. Make contactless payments with Apple Pay.
ING Orange Everyday Account
Visa
$0
$0
No fees for any ATM in Australia or overseas.
$0 monthly account fees.
Enjoy $0 ATM withdrawal fees when you deposit $1000 and make 5+ card purchases per month. Get a competitive ongoing variable rate when linked with the ING Savings Maximiser.
MyState Bank Glide Account
Visa
$0
$0
Simplify your everyday banking with these sleek digital features.
$0 monthly account fee.
Choose the way you pay with access to Google, Samsung and Apple Pay plus Fitbit Pay and Garmin Pay. Send and receive money in less than 60 seconds with PayID.
CUA Everyday Account
Visa
$0
$0
Enjoy flexible payment options and access to a wide network of ATMs.
$0 monthly account fee.
Access to Google, Samsung and Apple Pay. Enjoy fee-free cash withdrawals from 10,000+ ATMs across Australia. Deposit $1,000+ into this each month and receive bonus interest on a linked CUA eSaver Reward Account.

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A dying breed

Figures released by the Australian Prudential Regulation Authority in 2015 revealed that Westpac, ANZ and NAB all reduced its branch numbers nationwide in the 12 months to June 2015, by 48, 19 and 2 branches respectively. Only CommBank increased its branch network, by one.

Experts are predicting that branch numbers will continue to drop as digital and mobile banking replaces old-fashioned options such as cheques and ATMs for many Australians.

Roy Morgan Research conducted in 2013 revealed that 59% of Australians aged 14 or over (or 11.2 million people) used internet banking at a financial institution in any four-week period and this trend is expected to continue in coming years.

The convenience and time-saving nature of online transactions has played a huge role in the rise of online banking, but there’s also been another important player: the smartphone. Smartphones have made it possible to bank at a time and place that’s convenient to you.

Smartphones have also led to the development of mobile banking apps that are easier and more intuitive to use. In 2015, an international survey by Bain & Company revealed that mobile banking is actually more popular in Australia than internet banking. In 2014, 38% of customer interactions with their bank occurred over a smartphone or tablet (up from 22% the previous year), while online banking made up 35% of customer interactions.

But what does this mean for the banks? In December 2015, the Economist Intelligence Unit surveyed 203 senior retail banking executives from around the world to find out what they thought. A total of 49% of survey respondents agreed with the statement that traditional transaction/branch-based banking model will be dead , while 64% agreed that retail banking will be fully automated and 32% disagreed

The results of this survey suggest that if the banks are to stay relevant in the digital world, they’re going to need to innovate and adapt.

Not the end of banks

While the shift to online and mobile banking services has undoubtedly had an impact on Australian bank branches, this doesn’t mean the end of banks in Australia. The major banks have taken measures to ensure that they are well placed at the forefront of the digital banking revolution. We still have transaction and savings accounts, credit cards and home loans with the same banks — we just don’t need to pop into our nearest branch to manage them.

At the same time, banks are making a raft of changes to the layout of their branches and the services available to customers. With the decline in the use of physical cash, many modern bank branches feature automated teller machines, staff holding iPads, and are far different spaces to what they once were. As more people manage all their day-to-day transactions online, the modern bank branch is being transformed into a place where customers can go for more complex discussions, such as applying for a home loan or receiving financial planning advice.

However, that doesn’t mean the digital revolution doesn’t pose a risk to the major Australian banks. The cost of maintaining branch networks is expensive, and there are plenty of technology-based businesses with their eye on offering cheaper services than the banks in certain sectors.

For example, look at the rise of specialist online money transfer companies in recent years. While sending an international money transfer via your bank can be expensive thanks to high transfer fees and low exchange rates, online transfer companies don’t have as many overhead expenses as the banks. Focusing their effort on money transfers — instead of the range of products and services banks provide — means these companies can afford to offer cheaper transfers.

Another example can be found in online savings accounts. Without the cost of maintaining physical branches, many online-only banks are able to offer higher interest rates than competitors that operate in the real world.

A new way of banking

Looking ahead, millions of dollars are being spent around the world trying to predict what the future holds for banking. Some experts have pointed to China’s Alipay as a sign of things to come. The ecommerce payment platform has more than 400 million users around the globe and processed USD $519 billion of digital payments in 2013 alone — as a comparison, PayPal processed just $180 billion.

But while it started out offering an easy way to manage digital payments, Alipay now offers a much wider range of banking services to customers, including transferring funds to other users, paying bills, top up their mobile phone credit and even earn interest on your savings balance. Best of all, it can all be done via your smartphone.

While many of these services are not available via PayPal, you can’t help but feel that it’s only a matter of time before PayPal — and a range of other providers — expand its offerings in the digital banking sphere. And as consumers, we can only be better off for that increased competition.

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