2021 should be about making the lives of customers easier by tailoring the client journey and targeting the imminent issue of access to cash. Taking into consideration the effects of COVID-19, the federal government and communities will be working harder than ever to fix cross-industrial problems to offer customer solutions. Recently, news about staff redundancies and towns impacted by bank closures have infiltrated this news agenda, however HSBC's recent announcement on its latest UK branch strategy has added a small amount of hope into the banking industry.
Legacy banks have experienced a mass reduction in the number of customers using traditional banking channels, there has also been an influx of recent entrants consuming the majority share of the market with digital only solutions. Surprisingly, despite the acceleration of bank branches closing, the closure rate has still not reached its peak, like a prediction of 40,000 more banks are expected to close within the next three years in Europe, hence the issue around access to funds are to worsen. Fortunately, different measures have been taken within the industry to counteract these growing issues, as forward-thinking banks now utilize alternative models.
An active method of help solve this problem continues to be the destruction of ATMs, this really is being done at the expense of communities that are most heavily dependent on them. Even though there is promise that this will decrease extra costs and increase efficiencies, there still remains possible of losing customer loyalty and withstanding reputational damage. Self-service can be a viable solution to this conflict, which is why HSBC's innovative strategy that goes beyond branch restructuring has garnered attention.
A more effective banking service
HSBC plans to introduce both digital services and pop-up branches. Although a step forward, it may have missed the objective on how self-service banking can be complemented with assisted and remote service and then remodeled into a lean branch format. It is really an opportunity that grants communities a bank branch in a box and an alternative to losing use of bank branches as a focal point for financial services. A good example of this is how modern ATMs can offer additional services such as paying bills or even doing live video calls with a banking specialist. This way, use of cash can be subsidised by creating alternative revenue streams. This trend can also be becoming increasingly common in other countries like Italy.
The future of banking
Incorporating a banking service that operates 24/7 would drastically alter the economics of a physical branch. The next generation of bank branches should also be cheaper, smaller, smarter, full-service and automatic. An example of how this can benefit a company, could be seen in Millennium BCP's strategy in Portugal. Around three to four years ago, the non-public commercial bank found difficulty in reputation management and the cost of infrastructure. In retaliation, the MTM branch model was created, along with a new style of the 24/7 branch, which was accompanied by overnight remote banking.
The results proved that this approach was profitable, as banks increased in greater proactivity, received double of deposits in comparison to legacy banks and required less costs. As personnel managed the transactions during the day, and remote tellers at night, this contributed to how they managed to cut costs operating the bank. Moreover, this also improved customer loyalty and also the retention score.
High street bank closures
There are subgroups that have become accustomed to using bank branches like a channel of financial services. This can be because it is deemed as more dependable and provides added comfort and security towards the customer. Therefore, as there will be less high street banks available, another way of ensuring customers are not passing up on accessing banking services is as simple as considering the option of sharing facilities to maintain local financial service hubs. Shared facilities is not a foreign concept in Europe, by doing so it is possible to save on costs, generate revenue, and strengthen the relationship between the business and the community.
In many European countries such as the Netherlands, Sweden, Finland and Belgium, ATM infrastructure sharing has already been an active trend in the markets. For example in Belgium, an initiative referred to as Batopin, means that a network of bank-neutral ATMs, previously managed by its four biggest banks will form a single software platform in 2021. Bank-neutral ATM estates is another way banks can guarantee customers continuous access to cash without burning through costs.
Overall, HSBC's new means of providing digital service as well as pop-up branches is a good idea, although self-service banking can be extended to incorporate assisted and remote services right into a leaner branch format. By doing this, customers will not have to lose immediate access to bank branches, and customer loyalty can continue to remain intact.