08/19/2010 05:48 am ET | Updated May 25, 2011

The Shrinking Value of Bank Branches...

I don't know about you, but my time is one of my most valuable assets these days. I work long hours, I travel a lot, when I'm home I am struggling to find quality time (and quantity) with my kids, and I am increasingly trying to eek out a few minutes each day for myself. So anything that adds an additional demand on my time, better be worth it. So when a bank asks me to come down to the branch, or even presumes that I want to visit the branch - the question really is Why would I visit a branch?

Read this personal finance 'forum' comment from a customer in respect to the branch. This sort of thing is increasingly common these days, and is representative of many customers these days:

I'm a full time worker and rarely have the time to get out of the office during the day to eat, let alone do my banking.

Last week I finally got my act together and booked an appointment to see my local in branch advisor for an account review - more in their interest than mine I would have thought. Anyway, when I arrived the queues back from the counter seemed endless, not enough staff behind the desk; nothing seemed to be moving AT ALL - and, tear my hair out time - the advisor turned out to be off sick that day!!!

Why did no one bother to call me to let me know? No one seemed able to give me an answer. The experience has left me wondering why I bother having a local branch at all. It also made me realise that I'm actually pretty happy doing all my banking online or on the phone.
So can someone tell me, WHAT is the need for a 'local' bank branch these days exactly?
They seem a complete waste of space if you ask me...
sezzie33 - Forums

Deloitte's Centre for Banking Solutions attempted to answer why customers were less interested in the branch experience in this way...

For decades, most people visited the branch for credit approval, to conduct transactions, learn about products and services, and for customer service. However, most credit approval processes moved out of branch networks over a decade ago. Today, many of the core transactions that were once conducted in branches are shifting to electronic forms or are being captured elsewhere.
Adapting to a changing environment Evolving Models of Retail Banking Distribution, 2009

So with seemingly a real psychological challenge to why I would invest the time to visit my branch, and with a shift of core transaction types outside of the branch - what is the value of the branch today?

The value exchange concept

At the heart of marketing and customer theory is a concept of an exchange of value that occurs between two parties, this is compared with the intrinsic value that lies at the heart of a product, service, relationship, etc. In fact, believe it or not Karl Marx was one of the first to recognize this concept in his 1859 Contribution to the critique of Political Economy. It is the exchangeability of 'value' that contributes to economic interactions in society. But value has they annoying habit of changing over time.

Take two examples of modern businesses whose value exchange has shifted.

Pay Phones versus Mobile Phones
I was in New York City for the BANK 2.0 launch a couple of weeks ago and I when I was walking the streets I saw something that I can't recall seeing for, well years actually - a New Yorker using a public phone. Yes...a public phone. They still exist in small numbers in various locations - but the numbers are dwindling.


Pay Phones are going the way of the Dodo - are branches next?

The reason that Pay Phones are simply not popular anymore is that it is just far too convenient to carry around your mobile phone. Let's face it. If you meet someone today that doesn't own a mobile in the western world, it is somewhat anachronistic.

So if you are a telephone company, how would you defend the 'value' of using a Pay Phone in today's modern society? It's tough... there certainly is no value proposition that is unique. In times past you'd say it was about convenience, but with mobile phones you could hardly defend the convenience of Pay Phones. Thus, Pay Phones are already virtually extinct.

Blockbuster versus NetFlix
If you are a Blockbuster Franchisee right now, you must have a pretty pessimistic view of the world. Blockbuster sprang into existence in the mid-80s to compete with the small mum and pop video stores which were around back then. Today Blockbuster operates about 6,500 video stores, serving more than 87 million customers in the United States, and 25 other countries. The thing is, that today with digital distribution through vehicles like iTunes, Hulu, Amazon, Playstation, Wii, etc and with NetFlix's approach to both digital distribution and DVD-in-the-post, Blockbuster is in severe trouble. Blockbuster has already closed 1,300 stores last year, and has announced another 545 stores will close this year. However, this is just the start - in the near term physical stores for Blockbuster just don't make sense.

In terms of value - physical brick-and-mortar stores are no longer the mode we'll get our content. We're using cable with video-on-demand, and we're downloading. There is a decreasing legacy business built around physical DVDs and Blue-Ray, but it is just a matter of time before this disappears entirely. In other words, when there is a modality shift like there has been around delivery of movie content - the value of the store in the process evaporates.

The value has shifted in respect to branch

Metro bank's recent foray into the UK market has been hailed as the first new High Street bank in 100 years. The bad news is that like Pay Phones and Blockbuster, banks are really struggling to define the 'value' in the branch as modality in banking changes.

The concept of queuing for even five (5) minutes these days is a negative (David Meister wrote on The Psychology of Waiting Lines also) - the longer the waiting time, the more serious the impact to customer service perceptions. If you don't believe me - just check out a simple Twitter Search on what people are saying about queuing at banks (Twitter Search "bank queue"). In 2006, the European Banking Federation reported that a wait of more than 5 minutes was likely to jeopardize the entire relationship. McKinsey, in a whitepaper of 2007, still believed it was possible to increase value in-branch, by managing the customer experience as a whole.


The reality today is that it's increasingly hard for customers to understand why they should exchange their time for a lengthy, time-costly visit to the branch, when the value returned is poor. Having the ability to cash a cheque, apply for a loan or pay a bill is not a sufficient reason to give up my time at a branch, especially if I have to 'wait' in a queue. The reality is, that I can do those same things outside of the branch, which results in a much more efficient value exchange.

So if you are in retail distribution for banking today - think about what value you offer. If it is anything I can do from my mobile phone, through the internet, on an ATM or a deposit machine - this has NO value in the branch. What does have value? A human interaction that can't be replaced through digital channels - a deep advisory, sales engagement, with highly qualified staff (read not tellers)

What are you going to give me for my time? If you think I'm talking trash and the branch has some intrinsic value on its own, you probably are voting for mobile phones to disappear in favor of good old pay phones too...