Why are customers less and less attracted by traditional banks?

Coronavirus (COVID-19) has had a significant influence on the lifestyles of people around the world. More than anything else it has restricted the amount of time people spend outside the house to minimum, meaning they only go out to get groceries or for similar vital reasons. Work, shopping and social interactions have been transferred to the online environment, along with other routine tasks, like those of payments and transfers. For what concerns the latter, recent technological developments in the banking industry have made all operations simple and fast, while eliminating the need to visit a retail bank branch. This raises a reasonable concern: will customers return to bank branches at all? The truth is, there has been an increasing trend for closing physical bank offices and transitioning to the provision of a fully digital experience. The locations that were previously the center of financial activity are now becoming obsolete.

With the help of technological developments, users are able to take care of their day to day financial tasks without the need for regular bank branch visits. According to surveys results, about 87% of customers use banking apps, most of whom are Millennials. The user-friendly interface of the apps allows people to get access to a wide range of financial operations such as account opening, balance check, transfer execution etc. Consumers have been increasingly turning to fully digital banking and payment solutions, as the speed and quality of service provides a much more seamless experience without the need to physically visit a bank branch.

The market is constantly being joined by new, challenger banks and payment companies that provide an attractive alternative to traditional banking institutions. The main difference is that entities like Monzo, Revolut and SatchelPay are fully digital. This makes them especially appealing to younger customers, who value the online experience. Keeping up with the modern trends has been a serious challenge for traditional institutions. Some, like Wells Fargo, have developed and launched their own digital banks, allowing them to satisfy the ever-changing customer needs. As a consequence of such change of scenario, physical bank branches are no longer a necessary element for banking.

Another benefit of digital-only banks is their ability to integrate well into the everyday activities of users, allowing them to connect their accounts with apps, like Uber or Glovo, and adding useful features, such as fraud or low balance alerts. The only activity that remains dependent on bank branches or ATMs is cash withdrawal operations. Yet, it must be taken into account that the society is gradually moving away from cash payments in general.

However, it is also important to mention the concept branches, which is the response of traditional banking to digital only banks. Basically, branches are getting a drastic makeover and are being integrated with the latest technological developments to minimize the necessity to employ workers. The main goal is to make these physical offices more welcoming and the service there faster and more streamlined.

Today, the user experience in a digital banking environment is so convenient and intuitive that people no longer have the need to be assisted when conducing their daily financial operations. The banking ecosystem continues to change, and it is quite unlikely that many physical branches will survive to see the future in their traditional form.