The bank branch’s future is seemingly hanging by a thread in many countries. In the UK, the total number of bank and building society branches fell by 40% between 2012 and 2022, according to a recent UK Commons report, ‘Statistics on access to cash, bank branches and ATMs’. The report cites Office for National Statistics data, which found that the total number of bank and building society branches fell from 13,345 in 2012 to 8060 in 2022.
Yet research from the Oliver Wyman Forum found that 43% of Generation Z (those born between 1996 and 2010) members think branches are important — whether they use them or not. Analysis also shows that when UK banks close local branches, customers leave and keep leaving — with attrition increasing by 30% for the following three years after closure, according to Oliver Wyman’s June report, ‘Banking on Humans: Power of your people’.
As such, some banks are resolute in maintaining and even expanding their branch networks; instead, they believe that the branch is key to their future success. Handelsbanken UK, the country’s 15th largest bank by Tier 1 capital and a subsidiary of Sweden’s Svenska Handelsbanken, is one of those lenders.
The subsidiary currently has 150 branches in the UK, as well as several meeting places. The way the lender thinks about its strategy is “the branch is the bank”, according to Chris Teasdale, chief branch officer, Handelsbanken UK.
Mr Teasdale says that the bank’s unique selling point is the local customer relationship management that it provides. “We see a lot of value in having people in the local community. Customers enjoy the ability to walk into a branch and to talk to someone,” he explains. “Also, our branches are not like other high street branches; there are no counters and they are more like an office.
“And while we are competitive, we don’t position ourselves as the cheapest option,” he continues. “Although we are not a private bank, we provide a private banking service for the individual, plus a broad corporate banking service from a small local business all the way through to a public company. In addition to this, our customers have access to our wealth and asset management services, so customers are able to speak to a team of experts who know them well, and are able to address their banking, lending and investment requirements all in one place.”
The strategy appears to be paying off, with Handelsbanken UK reporting its best results ever at the end of 2022. Its results before credit losses rose by 116%, to £303m. It also managed to improve its cost-to-income ratio, dropping from 69.66% in 2021 to 49.46% in 2022. At a time when many lenders are reducing their staffing levels, over the past five years the bank has expanded its employee base by 18%.
The key to Handelsbanken UK’s success is its decentralised operating model, according to Mr Teasdale, where the local branches are authorised to make decisions. “Our model is different from other banks in that it’s decentralised. Our branch teams are empowered to make the majority of banking decisions, which means there isn’t an additional layer of management — and this provides efficiencies as well,” he says. “You can operate a successful business with a branch network.”
He emphasises that the bank’s strategy is to continue offering that local relationship management and complement it with a good digital offering. “It’s banking characterised by human-led advice combined with a good digital offering,” says Mr Teasdale. “This hybrid model where customers can choose how, when and where they engage with us, is something that our customers value today and which we believe is banking for the future too.”
According to the Oliver Wyman report, there are typically three main reasons why customers go to see someone in a branch: to get cash out or pay it in, to execute a specific requirement like paying a bill and, crucially, to receive support. While the first two reasons are noticeably diminishing, the report says that “customer support are the moments that really matter, and this is where access to expert, empathetic, and empowered people can make a difference”.
The report also states that in-person experience is “three times more influential than digital for overall net promoter score”. So, is there a place for the branch in your bank’s future?
Joy Macknight is editor of The Banker. Follow her on X @joymacknight
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