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The beginning of the end of bank branches, according to Sufficient Funds director and broker Randy Araya-Bishop, was the pandemic.
“COVID-19, for example, pushed us into the future by 100 years … The banks themselves basically [said] now we’re going to introduce all these virtual documents you can sign now electronically. You can see your customers virtually. There’s ID verification, now the banks are implementing their own ID processes that can all be done by the customers at home, not having to go into the branches as well,” said Araya-Bishop.
Are branches ‘outdated’?
The age of the digital-only bank has taken off significantly, the consequences of which are putting strain on the viability of a traditional bank branch.
“A lot of the branch traditional lenders, the top four banks, they’re becoming outdated with their processes with that face to face. Where a lot of these emerging online lenders, they’re providing quicker turnaround times than the major banks, cheaper rates and cheaper products,” Araya-Bishop said.
“Interest rates aren’t always going to be as competitive because we’ve got these extra overheads of a branch network and all the staff are going to pay. And yes, they would sell that we provide a better service because customers can come into the branch, they can provide a quick turnaround time when they come in to see someone in the branch. But I think that that’s really outdated now with a lot of these online lenders where they can provide this service a lot quicker.
“For example, Macquarie Bank is the leader of these online lenders probably the last year or two. In regards to an application submitted to assessment; they’re doing it within four hours. We can get it submitted to them, picked up within two hours and then assessment within another two hours, where a lot of major banks, they’re struggling to get to that turnaround time. Today’s clients, they want a lot of stuff done yesterday. Time is a lot more crucial for clients in today’s day and age.”
A continued rise
According to Araya-Bishop, we’re only going to see a “continued rise” of digital-only banks: “There was an article the other day about Macquarie trying to become the fifth major bank in Australia and they’re 100 per cent online. And if you also look at Bankwest, they’ve closed all their branches because they’re going to focus on being a purely online lender. So, the banks are closing branches and I think it’s going to be a continued thing.
“[Branch closures are] going to be growing each year. Banks are going to be pulled back on the branch network, I think. And these online lenders, it’s providing more competition as well for the customers as well. So as a broker, I’ve got about 40 different lenders on the panel that I’ve got access to. And the major banks, they’re no longer at the top options for clients.
“These online lenders can provide the same product, the same service, and it’s all online. And the rates are potentially cheaper than some of the banks can offer as well. So, there’s more competition.”
How is tech enabling this change?
Branches will become a thing of the past “maybe within the next 10 years to 20 years,” said Araya-Bishop.
“Some people still prefer the face to face, more of the older generations. Some clients we deal with want to have that peace of mind and can actually walk into their bank and talk to someone face to face,” he said.
“There are still clients that want it. So, I don’t think it’s going to go overnight. I think that they will still be around for a little while for now. But it is going to be something that for clients, there is no longer a preference, a major issue for them.”
Despite this, what Araya-Bishop has noticed is that the majority are increasingly using online services for their banking needs.
“I talk to clients every day: what’s your preference on the banks? Are you okay with online lenders or do you want a branch network? And customers are telling us that, I don’t know when the last time I walked into a branch was. So, customers don’t really need that service anymore. But I think some do still, but it’s definitely going to be a dying feature that our customers don’t require anymore,” he said.
What’s driving this change? Tech may be a crucial enabler, as it makes connecting virtually faster and easier for many.
“Brokers are running over 70 per cent of new loans, and that has definitely increased significantly in the last five years. And I think it’s got to do with a lot of the technology that we’re able to utilise now and these online lenders. And it’s one that we can provide that support to the customers as brokers to access these online lenders to provide the competitive options that they’re seeking,” Araya-Bishop said.
“Where sometimes when they go into that specific bank, they’re limited. That one bank can only offer them that one product. So as a broker, as an industry, technology and what’s emerging with these online lenders provides the customer so many more options that we can provide them.”
Brokers forced to conform to new ways of working
While there are certainly opportunities to be made through the use of tech, there will always be those resistant to change. Brokers must understand that these new ways of operating are here to stay.
“I think brokers have conformed. I definitely think a year ago, two years ago, you were reading these older generation brokers, they were pushing back on these systems and utilising this online technology that some of these banks wanted to implement when you’re submitting an application. Where the brokers today, they’ve had to absorb it because a lot of banks have changed their processes to be like, this is how you submit the loan to us now. You’ve got to utilise these online systems to be able to submit the loan to us now,” said Araya-Bishop.
“So, the brokers have to adapt or else they’re going to be not able to write the loans for the customer to that specific lender. So as a broker, you won’t be able to provide the full-service options.”
[Related: How mutuals are transforming their systems]
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