Fewer bricks, more clicks, & virtual tellers: Five Changes on the Horizon for Branch Banks

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BankingOutlookThe banking model of yesterday was all about the brand with the most locations—the “bricks”. Today, banks are measured by how effectively they deliver remote, anytime, anywhere access to their customers—the “clicks.”

The days of the bank branch being the most immediate and visible way customers interact with banks are long gone. The branch-on-every-corner model has evolved, and increasingly mobile, digital and other automated models are forming the front line for customer engagement.

Despite an evolving and increasingly complex banking landscape, branches remain critical for banking operations. In Orange County, through their simple daily transactions, branches are the most immediate and visible way individual customers interact with banks.

A majority of our prominent banking firms are located in the Airport Area submarket. The 2007 global financial downturn, coupled with the use of mobile banking, has resulted in a decline in the number of local branches.

Here are five key ways that banks adjusting their real estate strategies, and in turn, creating the branch of the future that more efficiently leverages expensive real estate and meets customers’ changing expectations and preferences in how they want to interact with their branch.

1. THE NUMBER OF BRANCH LOCATIONS WILL CONTINUE TO SHRINK: Banks have been consolidating and optimizing branches over the last decade.  The FDIC estimates that today there are almost 7700 fewer branches today than there were in 2007.  The decline is widespread but this does not imply that branches will disappear altogether. In fact, the approximately 90,000 branch banks in the U.S characterize a robust and mature, yet evolving industry.

2. FINTECH WILL CHANGE HOW CUSTOMERS USE BRANCHES: Mobile apps and the broader application of FinTech will streamline both personal and business banking, seamlessly changing how customers use branches. The outdated branch model is being replaced by a more focused, customer-centric approach.

3. BRANCH SIZES WILL SHRINK: Branch numbers and square feet will continue to decline as banks look to find more ways to effectively meet customer needs and manage their operational costs. The evolving “dual strategy” could take the average branch size from 5,000 square feet to 3,000 square feet or less.

4. NOT ALL BRANCHES WILL BE CREATED EQUAL: Banks are moving towards a dual regional plan with a limited number of full-service operations in addition to a number of smaller branches offering only basic transactions.  This shift could save the banking industry $8.3 billion annually in direct real estate costs.

 5. AUTOMATED BRANCHES ARE COMING: We can expect to see the introduction of automated tellers that can be contacted remotely via interactive screen.  However, universal acceptance of this technology may take time.

As time passes, online banking will become increasingly important.  This does not mean that the traditional branch will vanish however.  In the future we can expect to see banks adopt successful strategies that will optimize the “bricks” and increase the “clicks” to effectively cater to changing customer needs.

Check out JLL’s latest Banking Outlook Report to see what more the future holds for both the banking and real estate industries, locally and nationally.

Tweet this: #FinTech is changing the way we bank in #OC. Keep an eye on these 5 trends that will change how you bank http://bit.ly/2pFmbxU #2017BankingOutlook