Retail bank branches challenged by digital banking

Deserted parking lots could be a sign of the future

The old brick-and-mortar style bank branch is entering a transitional phase in which it’s likely to lose business to digital banking platforms, a new report from Accenture (ACN) claims.

The threat is real, Accenture points out, with 35% of the banks' market share in North America facing competition from mobile and online banking solutions over the next decade.

The firm claims by 2020,15% of traditional banking revenues may have shifted to online-only platforms as the workforce and civilian life become more mobile-centric.

Accenture added that another 20% of the current market could move to retail-driven platforms with a mass-market focus — all of which would operate as partnerships between larger retailers, banks and independent ventures formed by retailers, Accenture said.

For bank branches, the mobile revolution of the next ten years could be a death knell for new business activity or at least a pretty heavy counterweight against growth, the study suggests.

"Digital technology and rapid changes in customer preferences are threatening full-service banks that do business primarily through branches," said Wayne Busch, managing director of Accenture’s North America banking practice. "Given the scale of these disruptions, traditional full-service banks, as a group, could lose significant market share by 2020 — to banks that reorient around digital technologies and to new entrants from the retail and technology sectors. Our research shows signs of this already occurring."

Mobile banking grew substantially this past year, rising 50% and recording double- and triple-digit growth in online sales of traditional banking products, the Accenture report claims.

Mortgage sales executed via the internet also grew 75% year-over-year, while sales at branches fell 16%, according to new data from Accenture.

Online auto sales also nearly doubled as branch sales declined almost 10%.

Consumers loyal to their primary banks also are shopping for new providers, putting emerging online platforms in a stronger position. Thirty-four percent of traditional retail banking products sold in 2012 were from institutions outside the consumers' primary bank.

There’s still room for bank branches, but the formula is subject to change, analysts with Accenture noted in the report.

"There is little question that branches remain important in the minds of US consumers today,” said Mike Goodson, a managing director and head of management consulting for Accenture’s North America banking practice. "They are cited as the number one reason for loyalty, and eight out of ten consumers see themselves using branches as often or more often in five years’ time. But this is changing quickly, as profitability pressures motivate banks to promote less costly and more convenient ways of banking to customers."

Thirty two percent of U.S. customers now use mobile banking once a month, and the use of it has increased 50% in just the past year.

Even the trusted ATM machine is getting a little competition.

Of the customers interviewed by Accenture, 20% said banks should be investing in mobile banking, a number closely aligned with the 21% who want more ATMs.  

A strong 43% said online banking should be the No. 1 area of investment for banks, beating the 38% who asked for a focus on branches.

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