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With the growing popularity of online and smartphone banking, will face-to-face banking be a thing of the past?

Any suggestion that face-to-face banking will be obsolete is an overstatement. Although customers now prefer a self-service approach for their everyday banking, face-to-face service will remain important for complex banking decisions and advice. Digital technology is merely expediting a transformation of bank branches, rather than making them extinct.

Mobile banking on the rise

According to Brett King, a banking advisor and author of "Branch Today, Gone Tomorrow", customers, on average, visit a branch 85% less than they did in 1995. King describes the mobile app as "the nail in the coffin."

Mobile transactions are easier for customers and cheaper for banks to service. In 2010, Diebold, a company which specialises in ATM and branch transaction services, estimated that a transaction costing a bank US$4.25 to process at branch, costs only US$0.08 through mobile banking. Furthermore, a 2013 study by Deloitte found that 40% of consumers were willing to pay more for the ease of mobile banking.

In New Zealand, ASB reports that only 5% of its customer transactions are now done through branches.

Despite this, it appears that face-to-face banking is far from dead; ASB is in the middle of a five-year expansion programme spreading the geographical reach of its network of about 140 branches. Kiwibank, alongside its parent New Zealand Post, is planning to spend around NZ$60 million to reduce queues and spruce up "tired" branches.¹

Face-to-face remains critical

Customers want the flexibility to shape the relationship they have with their bank. They want contact whenever and however they choose, and the method of interaction may change from one day to the next, depending on their specific needs at the time.

Customers prefer digital methods for everyday banking tasks such as accessing account information and paying bills. However access to branches and branch staff remains crucial for receiving high quality, personal service for more complex transactions and advice.

According to the 2012 Ernst & Young Global Banking Survey, 50% of people prefer to use the internet or a mobile app for simple transactions compared to 25% who prefer to visit a branch. However when it comes to complex transactions, 15% prefer to use the internet or mobile app, while 71% prefer to visit a branch.

Call centres also continue to be especially popular for seeking advice in Australia and New Zealand.

Does age make a difference?

Face-to-face service is still very important to customers over 35. According to the Ernst & Young survey, when seeking advice on banking products and services:

• People under 25 only marginally prefer using a branch instead of the internet (33% compared to 29%)
• People between 25 and 34 have a slightly clearer preference for using a branch over the internet (36% compared to 29%)
• People between 35 and 54 clearly prefer using a branch over the internet (44% compared to 27%)
• People 55 and over have an even stronger preference for using a branch versus the internet (58% compared to 21%).

Banks as coffee shops and technology stores

The key to providing a flexible service that caters to customers' needs is a fully integrated banking experience that combines information-rich digital channels with the advantages of physical branches and in-person interactions.

Worldwide provider of advanced knowledge services to the financial industry, Lafferty, maintains that the branch remains the single most important expression of a bank's brand. The humble bank branch is not facing extinction but rather being reinvented as the location where all retail banking converges. We are already seeing banks disappearing as institutional spaces and re-emerging as hybrids between coffee shops and technology stores.

^{1. Will bank branches go the way of the dinosaur or are they becoming a driver of buying decisions, financial playgrounds and spas?" Gareth Vaughan, July 26, 2012.}