Report: Branch banking will be dead in five years

Sixty-five percent of global banking executives believe branch-based banking will be dead within five years.

This was revealed in a report published by Temenos, a banking software company. Written by the Economist Intelligence Unit (EIU) and entitled “Branching out: can banks move from city centres to digital ecosystems?”, the report is based on a recent survey of 305 senior global banking executives.

The research highlights how COVID-19 branch closures, new technologies and increased competition from fintechs, super-app platforms and tech giants have accelerated digital transformation and triggered a shift in banking priorities and business models.

Of those surveyed, 65% view new technologies such as cloud, AI, and APIs as trends that will have the greates impact on the sector over the next four years, ahead of regulation and changing customer demands.

In addition, 81% believe that unlocking value from AI will be the differentiator between winning and losing banks. Banks say they are focusing their technology investment on cyber security, AI and cloud computing as they accelerate digital transformation projects.

Another 81% of bankers think that banks will look to differentiate based on customer experience instead of products. With this in mind, a number of established banks are looking to strategic partnerships and investments in technology to become trusted banking partners who offer consumer-friendly banking experiences.

The pandemic has also driven collaboration and experimentation, with the report revealing that almost half (47%) of bank executives expect their businesses to evolve into ecosystems in the next two years, in which banks will offer third-party products and services, along with their own, to customers and other financial entities.

Aalishaan Zaidi, global head of Digital Banking at Standard Chartered, comments on the change in attitude and culture as a result of the pandemic: “The big shift for us was our belief that we could change fast if we really wanted to.”

Before the pandemic he says his organisation would never have entered into the partnerships it is entering into today.

The report also shows how the COVID-19 has highlighted the societal role of financial services, findings showing that bankers view micro-finance for entrepreneurs (34%) and accounts for the unbanked (33%) as the most promising inclusion-related business opportunities.​

Kanika Hope, chief strategy officer at Temenos, says open banking and increased competition from big tech and new entrants are driving banks to rethink their business models.

“Many now aspire to develop digital ecosystems that bring more human, differentiated experiences to their customers using the power of cloud, SaaS and AI. This report shows that bankers now understand that technology will be an enabler for these new business models and is critical to their competitive differentiation”