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Mobile banking growth drives reduction in banks’ physical presence

As mobile banking is gaining traction, traditional banks are struggling to adapt to the new reality where physical in-store interactions are no longer the status quo.

With Barclay’s reportedly laying off 1,700 of its retail employees in response to the rise in mobile banking, the traditional teller may be nearing extinction. However, some analysts believe that branches and tellers will remain an important part of banking but their roles must be redefined to support more complex financial decisions as opposed to simple transactions, which can now take place online.

“Prior to mobile banking obviously online banking had somewhat of an impact, but I think we’re seeing a greater impact with mobile,” said David Albertazzi, senior analyst at Aite Group, Boston. “It’s starting to force banks to rethink their retail branch infrastructure. They are moving basically from a transactional to a more relationship building model similar to what you’ve seen in the retail industry.

“I think it’s more about rethinking your retail strategy and it’s about right-sizing, not necessarily downsizing the branch, even though there are some shortcuts here involved, but I think it’s more about rightsizing the branch infrastructure,” he said.

Rightsizing personnel
According to Reuters, Barclays will be cutting 1,700 jobs in its British network in 2014. The company has cited mobile banking and other technology as a reason for reducing its staff.

Some of the positions that will be cut include cashiers, personal bankers, operational specialists, branch managers and assistant manager roles.

Ashok Vaswani, head of Barclays’ global retail arm, is reportedly planning on investing heavily in the company’s mobile offerings and focusing more on automated services.

This major cut could signify a change in the banking industry, pointing to a shift from human interactions to automated experiences.

However, Aite Group’s Mr. Albertazzi does not foresee the entire banking industry following in Barclays’ footsteps.

He believes that banks do not necessarily need to downsize their companies, rather they need to redefine what a physical branch looks like and what it provides for consumers.

“In order to either retain or improve customer service levels, the branch personnel will clearly need a different skill set,” Mr. Albertazzi said. “It’s not so much about the transaction anymore, but it’s about the customer and providing advice to the customer. This is why people when they now come to a branch, it’s not about the transaction, it’s about do they have questions.”

Since consumers can perform simple, standard transactions on a mobile application, they will no longer be visiting a branch to deposit a check or transfer money from on account to another. They will be coming to branches for more complex financial decisions such as requesting a mortgage.

This means that banks must educate their employees to deal with more complex issues as well as how to provide excellent customer service, since this is a consumer’s only physical, human interaction with the bank.

Mr. Albertazzi expects to see a rise in what he calls “universal bankers,” bankers who can perform a number of different actions for consumers. Bank employees at a branch will be required to wear a number of different hats and function in many different roles.

Shrinking real estate
Mr. Albertazzi does foresee banks downsizing when it comes to its branches real estates.

“With the exception of flagship branches, I think with the decrease in branch traffic, that smaller branches in terms of footprint may be attractive to financial institutions,” he said. “Because of decreased traffic, I think smaller footprint branches make more sense for a lot of institutions.”

With fewer people actually visiting the branches, banks can downsize the physical location. There does not need to be a lot of space for people waiting in line.

Peter Olynick, card and payments practice lead for Carlisle & Gallagher Consulting Group, Charlotte, NC, has noticed that physical branches are becoming less and less common.

“A friend of mine was driving round and her 10-year-old was sitting in the back of a car, and they passed by a local branch and the 10-year-old said, ‘I wonder what the inside of a branch looks like,’” Mr. Olynick said. “Her children had never been inside a branch. They’d been to ATMs, used the card a lot. I compare that with experiences years a go where parents would routinely take their kids into a branch while they conducted banking business.”

Embracing mobile
With this evolving reality, banks need to refine their strategy and place a higher importance on mobile banking.

The basics for banks include offering a smartphone and tablet app that lets consumers deposit a check by taking a picture of it, transferring money between accounts and tracking payments. Beyond that, banks can also enable peer-to-peer payments.

Embracing mobile does not just include services outside of the branch. Banks can digitize their branches by inserting kiosks that help consumers with easier functions and allow for more self-service capabilities.

They can also help streamline the cross-channel banking experience.

“Within the next couple of years people are going to start a transaction with their phone or tablet or online and then finish it maybe at an ATM,” Mr. Olynick said.

“It doesn’t matter if it’s a phone or laptop, it’s all about the ability to self-service myself when appropriate,” he said.

Jeff Crawford, senior consultant at First Annapolis, Linthicum, MD, believes that banks are in a great position to embrace mobile.

A First Annapolis study showed that more than 80 percent of the largest financial institutions in the United States offer mobile banking services today, either through text, mobile Web or native apps.

“Furthermore core banking and payment processing providers have nearly all incorporated mobile banking into service offerings for financial institutions of all sizes,” Mr. Crawford said. “Mobile features such as account to account transfers and remote deposit capture are rapidly becoming available to most financial institutions.

“Offering an intuitive, easy to use mobile banking offering will be something all banks will compete on now and in the near term, however, First Annapolis believes traditional banks are well positioned to meet these needs,” he said.

Final Take
Rebecca Borison is editorial assistant on Mobile Marketer, New York