The Rise of the Micro-Bank - Smaller Branches for a Smaller World
The world has gotten smaller. We live in an almost infinitely connected world, and we have grown very used to having everything we could want or need available to us at the touch of a button.
The banking industry has not been immune to this trend, and we have been enjoying the convenience and great service of online banking for some time now. Figures from Statista, for example, reveal that roughly 65% of US population use digital banking, while a recent Forbes Advisor survey showed that roughly three in four Americans (76%) bank via a mobile app.
The COVID-19 pandemic has, of course, also driven us further into the arms of digital banking. However, there is still a place for physical branches in the world and many brands are now turning their formally sprawling locations into micro-branches.
The State of the Branch
The rationale behind the micro-branch is simple to grasp. As the need for physical banking services declines, it becomes harder and harder to justify a large location.
However, as a banking brand, you still want to be there for your customers, and you understand that there are elements of the banking experience which are just better handled face-to-face and there are plenty of customers out there who are not as comfortable using digital services as others.
Branches still perform an important role when it comes to banking services. Banks are different to other brands a customer interacts with as the relationship is not simply transactional - they hand over money and receive a product or service. People need to feel like they can trust their bank and having a physical presence helps cement the idea in a customer's mind that your brand is a real tangible thing and can therefore be trusted not to simply evaporate overnight.
"In other words, the bank does not need branches, but customers need them to feel reassured the bank actually exists and there is somewhere they can go to see their money," said financial commentator and author, Chris Skinner in a blog post. "It's a psychological thing. Money is emotional. It's one of the most important and most secret things for most of us. Most of us would rather talk about our sex lives than our financial situation."
So, the bank branch still has a place in the financial ecosystem, but not to such an extent as to justify a large expensive building and all the business rates, rent, tax, and staff costs which go hand in hand with one. This is where the micro-branch comes in.
The Micro-Branch
The micro-branch takes the fully featured bank branch and, as the name suggests, shrinks it down to the minimum possible size. Your typical micro-branch may only be the size of a small convenience store and will most likely only be staffed by two or three staff members.
In place of the familiar bank of teller booths, customers may find a few simple tables festooned with tablet computers through which they can access products or services - with the assistance of the on-hand staff if required. The micro-branch will also likely have advanced ATMs, through which customers can access a range of services besides the expected cash withdrawals.
Micro-banks also present an opportunity for a banking brand to have physical branches in locations which would not previously have been possible or financially viable. This means that customers in more isolated communities can have more opportunities to access physical branches and avoid having to make long journeys into city centers, which can be extremely inconvenient, especially for those individuals who must rely on public transport for getting around.
By reintroducing themselves to these smaller towns and villages, banks can also re-establish themselves as part of those communities - something which will also help build and maintain that all important trust between them and the people they serve.
This means that a bank can continue to offer a physical service for those customers who require one, while keeping running costs to an absolute minimum. That money can then be reinvested into other digital transformation initiatives, such as platformification (more on that in a future article).
Final Thoughts
While people have been sounding the death knell of the physical branch for some time now, it's not quite ready to shuffle from this mortal coil just yet. Branches are still an important part of the banking experience for many customers and micro-branches are one way in which brands can maintain that all-important physical presence, while still remaining financially viable.
Micro-branches are set to be a hot topic at Future Branches 2021, taking place in December at the Hyatt Regency, Austin, TX.
Download the agenda today for more information and insights.