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Going ‘Phygital’: Relevance of Banks’ Physical Branches in an Increasingly Digital World

Friday evenings are set aside as a time for the Research Team huddle here at MEDICI. It's hard to keep track of everything FinTech these days; but thanks to our Analyst team, we are always on our toes! The article that caught our attention this week was about 2868 bank branches being closed in the UK between 2015 and 2018. We asked ourselves why was this happening. Was that report chronicling an exceptional event, or was there a trend at work? The team decided to dive deeper into this and found that there is indeed a growing trend of bank branches being shut down globally. This can be seen in the decline of bank branches in a majority of the countries around the globe, with countries like India, Hong Kong, and New Zealand as exceptions. Consider the following numbers:


Despite the global decline of physical bank branches, there remains, evidently, a large segment of the financially-included population which prefers to conduct banking transactions via physical branches. While consultants manipulate ideas, bank executives ground their confidence in the continued relevance of a bank branch in hardcore numbers. They believe the closure of bank branches may hurt revenue more than help reduce costs. This belief seems to be backed up by Reuters, which reported, physical bank branches remain crucial for acquiring new customers and doing more business with existing ones. According to Jonathan Velline, Head of Store Strategy, Wells Fargo, “Our customers still want to visit us. They’re still coming to our stores and our ATMs at pretty consistent rates.”

Our hypothesis in this story, therefore, is that the decline in the network of bank branches, globally, is mistakenly seen as the early dusk of the physical branch.

Physical branches bring many marketing benefits to the bank, as branches remain a dominant method of opening an account (for both simple and complex accounts), as per a Deloitte survey. Physical branches also provide physical comfort to customers while dispensing cash and coin. They serve to build customers’ trust that the bank will safeguard their money and data, which results in higher customer satisfaction.

A senior ...

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