Going digital: The bank branch of the future

The days of the bank branch being the most immediate and visible way customers interact with banks are long gone.

The branch-on-every-corner model has evolved, and mobile, digital and other automated models are forming the front line for banking operations.

“Banks have been consolidating and optimizing branches behind the scenes over the last decade,” observes Christian Beaudoin, Senior Director of Research at JLL. “This is not meant to imply that bank branches are disappearing, but they are certainly evolving, and oftentimes in formats that are completely unrecognizable from their predecessors.

“During this period of consolidation, new branches have also been built – as many as 475 new branches since 2014 – but these new locations are very different from their earlier peers.”

Here are four key ways that banks are adjusting their real estate strategies to get the most from their branches while meeting customers’ changing expectations and preferences.

• Branches will become engagement centers

Mobile apps and the broader applications of FinTech will continue to streamline personal and business banking. As a result, branches will become centers for education, problem-solving and financial planning rather than a transactional destination. Many banks are beginning to flip the switch on their branch staffing, going from primarily transactional staff to advice staff.

And this is not just a trend facing U.S. banks. The average UK banking customer views their finances on their phone more than once a day, according to a report by the British Bankers’ Association. It found that the average branch in the high street deals with only 71 customer visits a day – a 32 percent decline since 2011.

•  Teller-less branches are coming

Automated branches are coming. As public acceptance gains traction, there will be more automated tellers that leverage a large screen to connect a branch customer directly with a teller at a remote location to handle basic transactions. This concept is already being tested in the U.S.

The teller-less bank is emerging in pilots across Europe as well. Piraeus Bank in Greece has opened three fully-automated ‘e-branches’ featuring a variety of modern technology, including remote cashiers to help customers perform routine transactions.

In the meantime, banks are also taking smaller steps toward optimizing their branch space. With mobile banking proving that customers are able – and often prefer – to handle basic transactions themselves, self-service improvements are underway. Examples include eliminating teller lines and installing ATMs that allow customers to contact staff via video.

• Branches will become smaller

Banks will shrink branch sizes, saving billions in real estate costs annually, as they refocus to meet changing consumer behavior. Branch numbers and square feet will continue to decline, even in growth markets, as banks look to find more effective ways to meet customer expectations and manage costs.

Eastern Bank is a good example of how banks are leveraging smaller spaces to meet customer needs. The bank has a 350-square-foot “micro branch,” where instead of doing transactions through old-fashioned windows, customers sit side-by-side with bankers on couches using laptops for transactions.

• Not all branches will be created equal

The only thing that differentiated the traditional bank branches from one another was their branding. In general, the format and use of the space was fairly similar across the board. In the future, banks will tailor branches to meet customer needs and demographics, from a handful of full-scale operations to much smaller locations for basic transactions.

Café concepts are emerging as now-unnecessary space finds a new purpose. The inclusion of cafés and coffee lounges lets customers manage their finances in a relaxed atmosphere, in many cases without teller windows.

But cafés, digital bars, and automated experiences aren’t the only new formats cropping up. Last year PNC bank opened a mobile pop-up branch created from a storage container on the campus of West Virginia University. This 8-foot-by-20-foot branch has also visited Atlanta, Chicago and Charlotte.

The Federal Deposit Insurance Corporation (FDIC) estimates that today, on a net basis, there are almost 7,700 fewer branches in the U.S. since right before the 2007 global financial downturn, a decline of nearly 8 percent.

“The number of branch locations will continue to shrink as banks optimize market needs—and we likely won’t miss them,” predicts Beaudoin. “The branches of the future will provide more appropriate physical space for an industry that is becoming more digital.”