The Future of Banking: Are Brick and Mortar Banks Becoming Obsolete? (2024)

FAQs

The Future of Banking: Are Brick and Mortar Banks Becoming Obsolete? ›

While brick and mortar banks are not going away anytime soon, the online banking trend is undeniable. It's clear that financial institutions should be focused on increasing their flexibility and adaptability, and offer a competitive customer experience for consumers with a wide variety of needs.

Digital banking may be the future, but branch baking is here to stay. Sales leaders in retail banking who want to thrive in the future need to embrace this transformation, the integration of old and new, and reimagine how they manage their customer experience and how they meet customer needs.

Today's consumers demand faster transaction times, lower fees, individualized attention, and more transparency when it comes to their finances. Many traditional banks have failed to meet these expectations due to outdated technology or outmoded policies that cannot keep up with customer demands.

You can set up paycheck direct deposit, pay your bills online, make debit card purchases and get cash from an ATM without ever visiting a bank branch. But just because you can bank without a branch doesn't mean you always should, as you'll miss out on the personal touch and specialized services a bank branch can offer.

"In future, probably banking may cease to be a separate service. Instead, banking would be embedded in all the products and services which consumers are expected to avail. Embedded finance is the integration of financial services or tools within the products or services of a non-financial organisation.

Widespread implementation of AI in banking will require substantial focus on safeguarding the security and privacy of customer data, training AI models on the banking industry and ultimately, customer adoption. While brick and mortar banks are not going away anytime soon, the online banking trend is undeniable.

Many of the nation's largest banks are reducing their branch systems, and smaller banks are also trimming their networks. U.S. banks closed 2,118 branch locations between January and the end of October 2023, according to S&P Global Market Intelligence.

Key Insights & Stats:

Bank branch numbers in the US have fallen by 6.5% since 2012. Based on current trends the number of physical banks could fall to fewer than 16,000 by 2030, a number not seen since 1965. Current trends suggest that all bank branches could be closed by 2034.

Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates. The majority of those banks are smaller lenders with less than $10 billion in assets.

Banks can fail for many reasons, but generally they fall into a few broad categories: a run on deposits (which leaves the bank without the cash to pay everyone who wants to withdraw their money); too many bad loans or assets that fall precipitously in value (both of which erode the bank's capital reserves); or a ...

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Brick-and-mortar banks offer familiarity, comfort, and direct human interaction but often come with higher fees. On the other hand, online banks provide efficiency, convenience, and lower costs but lack physical locations for in-person services.

Perhaps the strongest argument that firms such as BlackRock and Fidelity can make is that unlike many of the large institutions already identified as too big too fail, these firms didn't need a bailout during the financial crisis. In other words, history is on their side.

Many banks already are moving forward and getting recognition from the market. We believe that as more and more banks embrace this kind of transformation, the market will see the change, recognize the increasing potential, and view the industry as one with a bright future.

By 2025, Alan McIntyre, senior managing director for banking at Accenture, expects payments to move completely away from cards and phones toward wearables and biometrics. “Whether it is tapping a ring that you wear or facial recognition, the payment will become more seamless,” he said.

Banks are adopting faster and more secure payment methods like contactless payments, mobile wallets, and real-time payment systems. These technologies offer convenience, speed, and improved transaction security, enabling customers to make payments seamlessly across various channels and devices.

Physical retail is not dead — only physical retail that does not strategically evolve in the face of changing shopper preferences and new technologies are on the decline. Those that recognize the importance of innovating the customer experience across channels are not just surviving in the evolving retail landscape.

Although the steady rise of e-commerce led many to predict the pandemic would spell the end of physical stores once and for all, demand for in-person retail is higher now than it was in 2020. Believe it or not, three-quarters of all U.S. retail sales are forecasted to occur offline this year.

Just when we thought the era of physical retail was over, brick-and-mortar stores are making a surprising comeback. Despite the surge of online shopping, physical retailers have found ways to adapt and thrive.

Integrating E-Commerce And Brick-And-Mortar Stores

According to a 2023 Momentive study (via Forbes), 88% of shoppers say they want businesses to offer in-store and online options. While malls across the country are closing, that doesn't mean retailers are abandoning the in-person model.