Originally published in Global Banking and Finance.
By Chris Labrey, Managing Director UK & IRL, Econocom UK
Our high streets have changed dramatically in the last ten years, especially in market towns. Familiar favourites such as Woolworths, Blockbusters, BHS and Poundworld have all fallen into administration and can no longer be found in our town centres. As e-commerce sales continue to grow, stores continue to close. ParcelHero’s Industry Report predicts that by 2030 we will have less than 120,000 physical shops in our high streets compared to 600,000 in the 1950s.
Some blame the banks for our deserted shopping centres; without the high street bank, consumers are less likely to venture into the town centre. Indeed, Labour’s John McDonnell has said he will change the law to stop banks closing high street branches if Labour comes to power.
Gary Womersley, from Nottingham Building Society, recognises that banks play a major role in boosting sales and business, but states that as many as 1,500 towns in the UK no longer have a high street bank. According to Which, NatWest and HSBC alone closed over 1000 high street branches between 2015 and 2018.
A consumer-led revolution
None of this is surprising. Our banking habits are changing; we no longer need a face-to-face interaction to carry out simple transactions. We can do this from the comfort of our own home; over the internet or using mobile apps on our smart phone. And most of us are happy to do this. Statistaran a survey to assess online banking penetration in the UK. In 2017, 30% of respondents had used an online bank account in the last 3 months. This rose to 56% of respondents in 2018.
Due to the increased choices of how we contact our bank, we are actually interacting with them more than ever before. However, according to the Royal Bank of Scotland,customers are visiting branches 40% less often than we did four years ago.
But mobile and internet bankingis not for everyone. There are occasions when customers will need to,or want to visit a local branch. So, what can banks do to encourage their customers into branch more frequently, thus preserving their physical presence and halting the demise of the high street?
Relevant banking for the future
At a recent conference,Celnet cites that most consumers still value the brick and mortar branch. They may visit it less often, but when they do visit they are expecting meaningful interactions.
Samsung expand on this by describing branches of the future as immersive, advice-driven financial centres that give customers what they can’t access on their own. In addition to incorporating existing technologies such as smartphones, tablets, self-serve kiosks and wearables, these branches will incorporate newer technologies such as virtual reality and virtual desktop infrastructure.
This is all well and good, but the technology cost implications can be huge, especially when there may be thousands of branches to consider. Also, many banks have legacy-based infrastructures, which do not always align well with new platforms and technologies.It can become cost prohibitive and uncompetitive to keep high street branches open, but there is a solution.
Technology as a subscription-based service
Retail banks can learn a lot from the general retail industry. Stores have learnt that customers want the same experience across every channel, whether in-person or online. Customers’expectations are that retailers know and understand them; they can anticipate their needs based on past interactions. Banks are finding their customers want those things too.
This is where subscription models can prove their worth. In much the same way that many of us pay for our mobile phones or cars, there are models available to banking and finance companies, using OPEX rather than CAPEX, to invest in technology and infrastructure for offices and branches.
These subscription models also allow banks to spread costs evenly and regularly and update their technology assets, meaning that customers can have a consistent and compelling customer experience every time they visit a branch.
While digital has become an all-encompassing part of our daily lives, some banks have been slow to adopt new technologies in comparison to other sectors. This has not gone unnoticed by customers where expectations are high.
The high street banks of the future will be more like retail outlets. They may be smaller than the traditional high street banks but expect them to be more efficient; improved by digital transformation where customers have access to highly personalised services.
All of this is underpinned by the technology. It needs to be financed and a subscription-based model can ensure that customers get the experience they expect, sooner rather than later. Get it right and we will all be returning to the high street.