Technology allowed banks to cut costs but now it seems that with the popularity of mobile banking on the rise, banks are now looking to remove their biggest expenses, branches.
This has been the recent trend. Banks like FirstMerit in Akron, Ohio have eliminated assistant branch managers. PNC Financial Services is also spending to improve their mobile banking arm and cash machines. KeyCorp in Cleveland has also closed a lot of branches while choosing carefully where to open new branches.
Many bank executives recently spoke about their cost-cutting strategies at the Barclays Financial Conference. Branches have been in the hot seat for several years now but these past two years where there have been low loan demands, declining traffic, increasing costs, and the rise of technology closing down branches seemed like a good idea.
The executives from FirstMerit, PNC and KeyCorp said that there were just too many branches. KeyCorp is aiming to close 5% of its branches while FirstMerit has just closed roughly 4% of its branches.
The increasing popularity and convenience brought about by mobile banking has made branches less relevant. Banks have released mobile apps that allow you to do just about everything including deposit checks using their smartphones.
For PNC, their statistics have shown that mobile transactions have been picking up. There are about 7,000 mobile transactions daily that is recorded by their systems and that is enough to get rid of 40 to 45 tellers.
This trend is not only happening in the U.S. but also applicable to the Pakistan banking industry. Branchless banking in Pakistan has increased dramatically to 1.45 million or a 37% growth. Account activity has also increased as active accounts have increased to 66%. Over 28 million transactions were recorded worth Rs 115.3 billion during the 2nd quarter of the year.
- KeyCorp aims to close 5% of its 1,062 branches
- FirstMerit has already closed 4% of its branches
- PNC mobile transactions: 7,000 equivalent to what 40 to 45 tellers can handle in a day
- KeyCorp online banking improves by 20% since a website overhaul last September
- Pakistan mobile banking growth in the year 2011-2012: 37%
Paul Greig, the chief executive of FirstMerit: “We are seeing fewer branch transactions. The assistant branch manager duties were reassigned within the branches.”
James Rohr, PNC Chairman and CEO: “Unlike a branch these ATMs lower our costs. Almost six times more than the same transaction at an ATM.”
Unarguably, the rapid adoption of online and mobile banking and the increasing customer expectations for ‘anytime, anywhere banking’ is impacting the banks’ distribution strategy. So are the days of branch banking numbered? And in this context, should banks like Bradesco or credit unions like Credit Union Australia spend millions of pounds on branch of the future projects?
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