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Branch strategies:
Lowdown on the High St

As banking adjusts to its huge contemporary challenges, one particular area of flux has been the high street presence of the sector’s retailers. ROWAN MORRISON examines how branch strategies are changing in the UK and Europe.

The banking landscape is never static, but it’s on the high street that we’re seeing some of the sector’s most interesting innovations. Just four years ago, OECD figures showed that Europe as a whole was 75 per cent more ‘over-branched’ than the UK, with 495 branches per million population compared with 285 million in the UK, which was, in fact, Europe’s most under-branched country.

But, rather than indicating a fall in standards, with banks focusing on profits over providing accessible customer service, these figures were cited as evidence that the UK industry was more advanced in addressing over-supply than its European counterparts.

UK banks, it was argued then, were simply better at concentrating their efforts where they were needed most – and, in 2007, that meant not building a huge branch network. The intriguing thing now is how the strategic rationale is changing.

What’s driven the branch shrinkage, clearly, is the growing popularity of internet banking and the increasing bite of the credit crunch: the BBA’s latest statistics show a fall of more than 8% (from 10,388 to 9,482) in the branches of the UK’s main banks between 2004-9.

The trend is confirmed by the Centre for Central Banking Studies (CCBS) which identifies an 18 per cent decline in UK branches since 2000. But, despite tabloid furore to the contrary, the main story here is how banks’ branch strategy has changed globally with the focus on service innovation.

According to the European Financial Management and Marketing Association (EFMA), many banks are evolving a tiered branch network – highly automated, cashless branches operate alongside a smaller number of advisory centres focused on sales, advice and more complex enquiries. It expects the number of branch advisers/sellers to rise from just over a third in 2010 to a half by 2015.

The buzzword is ‘mutichannel’: quoted in the EFMA Trends Report, Douglas Beckett of Mashreq Bank (UAE) says: “I expect there will be a radical shift from pure branch banking to multichannel banking, driven by a young generation which is online, comfortable with new technologies and time-constrained.”

The BBA’s Brian Capon agrees: “Banking has always been quick to adopt new technology, and you can now bank by telephone, PC or by mobile, 24 hours a day, every day of the year, not to mention the 60,000 AT Ms around the country. With all these options, many people choose not to use a branch at all.”

All the same, not all banks are cutting branches. New players are increasing their footprint – Metro Bank aims to open 70 UK branches in the next five years; Tesco Bank is rolling out a supermarketbased network; Santander is bucking the trend worldwide, with more branches than any other international bank.

“Our model of commercial and retail banking puts the branch at the centre of the relationship with customers,” says its spokesperson. “Branches provide proximity to and knowledge of the customers that constitute a competitive advantage in building loyalty, quality of service and in managing quality of credit. Branches are the cornerstone of multichannel banking – the other channels require the backing of a branch network to thrive.

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