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Are white-label branches the future for retail banking?

Are white-label branches the future for retail banking? 33

By Brian Holden, Global Director at SAS UK & Ireland

Throughout the pandemic, stories of branch closures have been commonplace as the pivot to digital pushed consumers towards online banking. Such decisions will not have been taken lightly, with questions raised around what is truly needed for banks to continue serving their network of customers.

One could be forgiven for the assumption that banks wouldn’t need physical branches in the future given all the hype around digital banking over the past couple of years. But the pandemic has turned this argument on its head – customers don’t want to speak with digital assistants during times of financial uncertainty, they want to speak with real people who can support them through the crisis.

This would explain why many nano and challenger banks may be struggling right now, with consumers transferring funds back to long-held current accounts with established banks. Under current circumstances, people are putting their trust in banks with track records of supporting customers in times of difficulty, where they have access to human assistants to help them with their problems.

Supporting every customer

It’s become increasingly clear that online banking just isn’t accessible for large segments of the community. Older people, for example, often aren’t comfortable with the online world. They may not know how to use a computer or smartphone. They’ve heard horror stories about falling victim to fraudsters. And many feel it’s not worth the risk to engage with online banking at all.

There’s also a worry that when banks close branches and move out of a local community, people may be more likely to seek other sources of credit – often at much higher interest rates than high-street banks would charge. This could have a damaging impact on their financial security, particularly in the COVID era, when many people who have suffered job losses or reductions in income will find themselves struggling to service their existing debts.

If everyone has access to a local branch on their high street, many of these problems evaporate. That’s the real social benefit of banks having a physical presence in the community. As banks increasingly focus on their social responsibilities in helping the country recover from the COVID crisis, local branches will play a key role in supporting not only the affluent but those who have fallen on hard times too.

Different banks offering the same service

However, although we’ve established that branches are a social good, that doesn’t necessarily mean that every bank has to have a branch on every high street.

The vast majority of the activity that takes place in branches is simple and transactional. Customers check their balance, make withdrawals, pay in cash and cheques, make payments, and so on. All of these tasks are generic enough that the process doesn’t vary much between banks. You don’t get a noticeably different or better experience when you withdraw cash from one bank’s branch than you would at another bank’s branch, for example.

Some of the in-branch processes are slightly more complex – establishing proof of identity when opening a new bank account, for example. But even then, it’s a process that all banks need to implement at their branches. And there’s no real differentiation between banks because they all need to comply with the same Know Your Customer regulations.

Finally, there are higher-level services, such as face-to-face meetings with financial advisors to discuss pensions, mortgages or investments. These are an important differentiator for banks. But since they effectively only require a meeting room, a desk, a computer with a secure internet connection, and a couple of chairs, there’s no reason why, for example, a Banking Relationship Manager necessarily needs to meet their clients at their own brand’s branch.

White-label banking

What am I proposing, then? Well, instead of each bank paying rent, rates, bills and salaries for different buildings on the same high street, branch banking could take inspiration from co-working spaces. We could have a “white label” concept, where a single high-street location acts as a shared service centre for all banking-related activity, regardless of which bank(s) the customer holds an account with. This would not only significantly reduce overheads for the entire retail banking industry but also reduce carbon footprints and contribute to banks’ sustainability goals.

A single location could house all the apparatus required by a traditional bank branch: a secure vault with safe deposit boxes, ATMs, a row of cashiers’ windows and so on. Staff could be trained to handle all of the day-to-day transactional business of paying in, withdrawals and even KYC checks in a standardised way and pass the information securely to each bank’s back-end systems.

Then, for the higher-level services, financial advisors from any bank could simply reserve a meeting room in the building and arrange to meet their clients there. Even today, many advisors (especially mortgage specialists) are itinerant, splitting their time between several different branches in different towns instead of having a single permanent office at a “home branch.” The white label concept would simply take things one step further, with advisors from different banks co-working flexibly in whichever branch is most convenient for the customer.

Putting white-label branches into practice

The Post Office is one facility present on almost every high street which offers everyday banking services – could we see a return to the days where they were used for the majority of banking transactions? While it is certainly possible, the Post Office is already preoccupied with an extensive range of other services and is under considerable strain as a result of pandemic-related staff shortages. What’s more, white-label branches will need systems, processes and regulatory oversight geared specifically for the banking industry if they are to be truly effective. All of this means the best bet would be to convert former local branches to do the job, or to build a completely new facility.

While this may seem far-fetched, the reality is tech-savvy consumers are already making use of white-label branches. With the touch of a button, smartphones are enabling customers to access any of their current accounts by simply downloading an app – so why should this be any different on the high street?

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