The retail bank branch role and purpose after COVID-19

Perspectives - August 2021
By Morten Olsen, Managing Director - Nordic Region

Retail branch network role and purpose after COVID-19

Though financial institutions were considered essential services in some regions and not required to close during the peak of the pandemic, many responded by reducing hours, temporarily closing some branches and limiting visits to appointments only.

For some banks, the impact will be long lasting and a recent article by Business Insider, stated that sixty-five percent of worldwide banking executives expect that the branch-based model will be significantly challenged within the next five years.

In Branch Banking User And Penetration US 2021 2025 Graph

Increased digitalisation, negative interest rates and the need for greater efficiency has forced financial institutions to adjust their branch network over the last few years. The disruption caused by the global COVID-19 crisis has certainly accelerated it, and now – more than ever – many banks around the world will be asking themselves – “what will be the role and purpose of the branch network after COVID-19?”

As a result, a shift to digital that might have taken years – if not decades – happened in months.

These banks are not losing customers, they have simply shifted online. As a result, a shift to digital that might have taken years – if not decades – happened in months. Illustrating this, some fifty percent of consumers in the US now interact with their bank through mobile apps or websites at least once a week: two years ago, just thirty-two percent did. Sixty-three percent of Spain’s BBVA’s sales were conducted through digital channels in the first half of June 2020, compared with fifty-seven percent in the first half of 2019, and forty-nine percent in the first half of 2018, according to its Q2 2020 financial results. Commerzbank reports that seventy-five percent of new customers in Germany opened their account via online channels in Q2 2020.

So, COVID-19 has accelerated the shift to digital, with segments of the population introduced, and in some ways forced, to adopt digital technologies and contactless payments faster than experts had previously predicted. This is not the only behaviour change that the pandemic has created. 

Video conferencing and other digital tools have become increasingly popular, creating opportunities for more personal remote customer support. In March 2020, Microsoft recorded an increase of 12 million users on its group-collaboration platform, Microsoft Teams. According to Zoom, more than 300 million participants used its services daily in April 2020.

The move from cash to contactless payments has accelerated and we are banking on the move more than ever.

In the UK, ATM withdrawals dropped by fifty percent in the second half of March. In contrast, fifty-five percent of consumers increased contactless payments—and almost 9 in 10 expect to maintain a higher level of contactless usage after the pandemic. Forty-one percent of ING’s active customers used mobile to contact the bank in the second quarter of 2020, compared with thirty-seven percent in 2019, and twenty-six percent in 2018, according to its Q3 2020 financial results

While we expect the downward trend of the branch footprint to continue in the post-pandemic era, we do not expect branches to disappear completely. Indeed, they will continue to play an integral role in the customer interaction model and be a part of retail banks’ multi-channel distribution model.

We expect the role of the branch networks to evolve further in five ways:

  1. Flexibility - branches will be designed with the ability to change shape and function to accommodate fast-changing customer and community needs over time.
  2. Experience - branches will play an even more important role as bastions of customer experience and brand ambassadors, supported by an integrated suite of digital services that make banking even more convenient.
  3. Efficiency - branches are likely to reduce the cost-to-serve infrastructure, with smaller and more flexible spaces and an increase of branches placed outside of city centres. Flagships at prime locations will promote brand awareness and positioning.
  4. Quality - branches will provide complex advice using digital tools and remote interaction. Highly skilled advisors can support the emotional needs that go along with complex life events.
  5. Local community and education - branches will continue to play an educational role and foster greater brand engagement by being brand ambassadors.
There is another add-on. The rush to digital is exacerbating the longer-term pre-COVID-19 trend of diminishing consumer trust.

Although most consumers believe that their banks, to date, have responded adequately to COVID-19, only twenty-nine percent trust them to look after their long-term financial wellbeing, compared with forty-three percent two years ago. Trust is also critical for banks to capitalise on one of their most promising opportunities for revenue growth: new digitally enabled advisory services that help customers optimise their daily spend, rationalise their product portfolio, and take advantage of tailored life-planning or business advice.

Banks need to chart a course for a future in which they are enduringly human, trusted and relevant. 

In the future, bank branches will be an enhanced location for customers and employees to interact. It’ll be a space where physical, remote and digital will be mixed together, whether it’s face-to-face or virtual meetings, educational seminars or other events, blending contact centre channels and other digital services. Banks need to chart a course for a future in which they are enduringly human, trusted and relevant. By creating trust, brand awareness and superior customer experience in customers’ key life moments, they will be able to make a difference on a rainy day.

Find out how Principle helped HSBC to create a consistent global brand experience and how, during the height of COVID-19 lockdown, we transformed classrooms into safe, adaptable spaces for the Italian Ministry of Education. 

For a conversation about the future of retail bank branches, contact me at