What it will take for bank branches to go away in the Fintech world

This talk has been around for years now. Ever since the very first Fintech companies attempted to start banking with different services, they have been touting on and on about the bank branch finally going away. But so far, the bank branches remain. Not only that but according to it seems like bank branches are not losing their popularity at all: US survey from 2016 reported that about 46 per cent of the people questioned had used the bank within a month, and 26% had used one within the week. At the time, this was taken as a sign that bank branches are not going away, not for a long time. But since then things have changed.

The world has been seeing a trend lately - bank branches are disappearing. The UK parliament research concluded that more branches have been closed than opened over the past three years. The branches closing are the ones belonging to the large banks. A similar trend is seen in other western countries as well, though in the US something interesting is happening: banks that are local to communities seem to be opening more branches. And yet, the overall number of banks is still declining, slowly.

Why are branches still here?

So why are Fintech companies struggling with winning out this battle quickly? The problem, some believe, lies with the trustworthiness of the online banking services themselves. The people questioned within surveys, especially those above the age of 50, often report that they are not sure whether they can purchase banking services online. They believe that a human element and a physical relationship is required to build trust with a bank. Fintech companies operating entirely online are looking for other solutions.

One solution that a UK Fintech startup, Scale360, decided to try was to open teller-less branches in Vietnam. The move has been praised as an interesting compromise and as a good way to lower the costs for the Fintech and provide a physical location. The solution that was truly interesting though was the live video chat option with a banking professional. This option became one of the more widely used ones among the Vietnam customers, both in-app and at physical teller locations. A solution that is sort of bridging the gap between the old banking and the new banking method.

Though there are still believers that the branch is going to go away, and the ones most hurt by this will be the big banks. Citi, Chase and other large banks will have to start adapting or risk the danger of losing large chunks of their younger customer base to young Fintechs. There are many who have realized this within the industry and are working on adapting to the oncoming changes. Chinese and American banks are already doing their best to adapt by working on solutions. Updating their online banking and phone applications to support a wider range of offers and systems, while also trying to find new solutions to the new problems with branchless banking being found every day.

The consumer decides

As the global economy becomes more integrated, so does online banking. It is easier for online Fintech banks to cross borders. It is also easier for them to offer non-traditional banking services, such as free international transfers, cryptocurrency integrations and foreign exchange options together with more traditional banking services: loans, debit accounts, so on and so on. The main problem that such banks are facing is within the way that money is used by consumers: cash.

In the end, everything comes down to the consumer, as it always does. It is up to the people using banks to decide how the banking industry will be looking in the near future. In the US a large chunk of the population is still receiving their pay through cheques. The world is still using large amounts of cash in their everyday transactions, accounting for about 30% of all transactions made on a daily basis in the western countries, and there does not seem to be a decline in the use of cash in the past three years at all. Small value purchases below 10 and 25 dollars can all be easily paid for in cash, while using a card may result in extra time being spent. Until Fintech companies figure out a way to make small scale transactions easier and faster in digital form, cash will remain the dominant payment force in the global economy and branches will remain, even if simply being ATM rooms, will remain a part of the global banking industry.