Finally someone else makes the call on the demise of branch banking.

Jim Bruene, the Seattle-based publisher of Online Banking Report has been a visionary, and a beliver in Online Banking since the beginning, or at least as long as I remember back in the mid 90's, when online banking began.

Unfortunately, its became de rigeur today whenever anyone says branches will disappear, the answer is, didn't we try that with mbanx, wingspan, toysr'us" (pick your virtual failure). So lets look at this carefully.

Branches becoming window dressing for banks

Bruene does believe we are at the midpoint of a trend captured in the report's subtitle: "The 40-Year Shift from Branch Banking to Branchless Banking." …..Bruene is not predicting that plywood will go up over the windows of bank branches overnight (or that they'll all be converted to coffee outlets). "I've never really been bearish on branches," he says. "It's very hard to change habits in the consumer market overnight."

Online banking is used by 40 – 50% of DDA/ deposit customers. All the transactions done through online banking, no longer take place in the branch. This statistic get lost so lets say it again. Between 40 -50% of transactions that would have been completed by tellers in a branch have been eliminated from branches – eliminated.

"Lots of value of the branch has migrated out," Bruene says, and that loss of value will accelerate as customers become increasingly comfortable with electronic banking and electronic payments. "Once the paper check goes away, branch traffic drops off the cliff," he writes.

Hand-held wireless communications devices — what we used to quaintly call cell phones and PDAs — promise to be the next big delivery channel for banking services, and one more chisel chipping away at the bricks-and-mortar branch.

As evidence, KeyCorp is actively re-architecting its branches. Other banks are reconfiguring branches as financial stores, with offices and desks.

Karen Hofer, vice president and branch channel manager for Cleveland-based KeyCorp, says the company has been making some adjustments to its branching strategy. Branches are smaller, and they've been added to fill gaps in existing markets rather than to extend the bank's operating territory.

So what is the final end game. The challenge is how to have a broad national/ regional presence, yet minimise the cost of real estate. It also depends on the actual role of the branch in the future, which may be introduction, personal advice, card pickup, and picking up anything physical. Certainly physcial marketing may be a key part.

Even if no one ever entered a branch for a transaction, banks would still be reluctant to give up branches because of their other important function — as a marketing tool. Seeing a branch confers "peace of mind you could go to a branch and talk to a person," Bruene says.

Branches also serve as billboards — every time you drive by one is a reminder of that bank's brand name and identity, which is of no small value if it gets you  to go home, log on and check out that institution via computer.

Technorati Tags: branch