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Despite rapid digital advancement across Australia’s banking landscape, consumers still value the face-to-face interactions of a bank branch, said a recent report from Kearney.
APAC is a leader in the shift towards digital banking, outpacing Europe by 4.5 per cent.
This is made evident by the rise of digital and non-banks. A report from the Australian Banking Association found that between 2019 and 2023, banking interactions grew 37 per cent (from 10 million to 13.7 million) through a rise in online banking and apps.
Bank branches are hurting, with the majors closing more than 1,400 branches as of May 2024, mainly in regional Australia, according to the Finance Sector Union.
There was some relief recently with the big four agreeing to pause regional bank branch closures until mid-2027.
However, the future of bank branches beyond this date is uncertain.
Despite the rapid decline in bank branches, Kearney said branches “aren’t likely to die out” as consumers will continue to value the “expertise and advice provided at physical branches.”
The report predicts that banks will refocus branches on sales and complex products, including mortgages.
Speaking to Broker Daily, Robert Bustos-McNeil, partner and APAC lead, financial services at Kearney, said the services provided by a bank branch can’t be replaced.
“The banks are certainly making very good progress on the simpler categories, but more complex needs see customers coming back to the branch. And we’ve been hypothesising, why is that? It comes down to the convenience. It comes down to the reassurance and the preference for some face-to-face interaction,” Bustos-McNeil said.
Further to providing expertise and engagement, it simply comes down to choice, said Bustos-McNeil.
Reports claimed there are 97 banks in Australia and around 600 non-bank lenders. These massive numbers are due to varying consumer needs and a desire for choice.
Bustos-McNeil believes Australians’ desire for choice will keep bank branches open.
Part of the reason behind bank branch closures is the sheer number in Australia. Kearney said in its report that while Australia is among the fastest in the world for closing branches, it is also starting from among the highest branch densities.
The report highlighted the main challenges for banks in expanding digital channels:
- Ensure a coherent customer experience across both physical and digital channels and offer a single customer view both online and in the branch.
- Shift the banking workforce from serving customers directly to supporting customer self-service and upselling.
- Nudge customers toward digital channels without alienating them. For example, don’t encourage digital channels by decreasing service levels in traditional channels.
Bustos-McNeil said that the rise in digital channels has caused issues for customer interactions.
“The banks have really let themselves down a little bit in terms of the way in which they provide connectivity and seamlessness between their online, their assisted and their face-to-face channels,” said Bustos-McNeil.
The future of Australian banking will need to see some better integration between channels, he said.
While digital transformation is top of mind for lenders, it must not come at the cost of those who interact with branches.
“I think there’s a lot of room for the digital offerings to close the gap on convenience that there still exists between the experience you can get online compared to what you get through a broker, or what you can get through proprietary lender and branch,” said Bustos-McNeil.
“That’s a very easy prediction to make. There’ll be continued focus on the customer. There’ll be continued investment in usability and convenience. We identify doing that as an opportunity in a very high value space.”
