Destination Branches: What Does the Future of the Branch Look Like?

The unstoppable rise of online and mobile banking over the last few years has left a big question mark hanging over the future of the traditional bank branch. A study last year by Swiss bank UBS of 24,000 customers in 19 countries found that more than half (52%) of all customer transactions now take place online, making it the primary method of banking. The study also found that four in five consumers use mobile phones to bank at least once a year, whereas the proportion of transactions conducted in-branch fell from 48% to 34% between 2017 and 2018, leading three quarters of global banks to plan closures.

Branches are already disappearing. In the UK, as many as 60 bank and building society branches are throwing down the shutters each month, according to research by Which?, while across Europe, more than 6,000 branches have been cut over the past year.

As this alarming trend continues, it’s more than fair to speculate – as many credible commentators are – that the future of the traditional brick-and-mortar branch is hanging in the balance. However, we emphasise the word “traditional” here. While others are closing branches, others have taken this as an opportunity to reinvent their in-branch experience. These are the next generation branches.

Virgin Money Lounges

Here’s a question for you: When is a branch not a branch? Answer: When it’s a bowling alley, of course. It might sound too extraordinary to be true, but that’s precisely how the UK’s Virgin Money has reinvented its branch concept, turning its Virgin Money Lounges into community locations where customers can go to relax, unwind, and even tumble a few pins while they go about their personal banking.

Take the Sheffield Lounge, for example. Spread over three floors, the Lounge offers a games area with air hockey, a pool table, children’s play room, and two full-size ten-pin bowling lanes. Venture upstairs and customers find a library, a bar – serving complimentary soft drinks and refreshments – artwork, tweed sofas, and plenty of charging portals for customers to recharge their phones, tablets, and laptops.

There are also iPads and iMacs, TVs, a cinema, games consoles, a café, newspapers, magazines, free Wi-Fi, and private meeting rooms that can be booked out. Virgin Money customers can come into the Sheffield Lounge – or any of Virgin Money’s seven other Lounges around the UK – and use any of these facilities free of charge.

But the branches still are branches which customers can use to conduct their personal banking too. 'Lounge Hosts' are on-hand to assist customers in all manner of their finances, and there are dedicated areas for customers to undertake online banking or service their Virgin Money products. Special events are also organised, such as 'Meet the ISA Masters', where Virgin’s personal finance experts host 30-minute interactive talks and Q+A sessions to help customers make better savings decisions.

“Our Sheffield Lounge is much more than just a bank – it’s a place where community and charity groups can meet to work on their plans for the local area,” said Virgin Money Chief Executive Jayne-Anne Gadhia when the branch launched. “We’ve built a games room because we wanted to create somewhere people could come together and enjoy each other’s company. It’s time for a better kind of bank and Virgin Money and Sheffield’s new Lounge are here to deliver that.”

imaginCafé

Other banks are also reimagining their physical locations as high street ‘destinations’ in order to keep customers coming through the doors. In the US, Capital One’s 'Coffee Shop Banks', for instance, are designed first and foremost as cafés, where customers can go to enjoy a cup of joe and a pastry while they learn the ins and outs of mortgage applications and other financial products from an iPad-wielding Capital One “Café Coach”.

In Barcelona, Spain, CaixaBank has launched imaginCafé in partnership with several universities and brands like Samsung and Adidas. The new branch is a 1,200-square metre multipurpose facility, designed to help millennials meet and connect through concerts, gaming sessions and workshops. Divided into three floors, imaginCafé has specific zones for food and drink, exhibition spaces, giant screens for audio-visual exhibits, special areas for interactive training sessions, and an auditorium that can accommodate 250 people.

Javier Mas, CaixaBank’s Chief Marketing Officer, described imaginCafé as “a place where the ‘imaginBank’ brand is rendered tangible thanks to a blend of innovation, immediacy, the combination of the online and offline environments, interaction with users, and the interests of young people. All of which makes imaginCafé the perfect platform for imaginBank content, and a foundation to build innovative relations with customers. The way that we communicate with consumers, and particularly young people, has changed. ImaginBank is a response to the demands of this target market: more entertainment, more fun, more spaces for sharing and creating. […] Content represents the present and future of relations between brands and consumers.”

Final Thoughts

So what does the future of the branch look like? Well, if the rate of closures continues, one possibility is that it could be a case of no branch at all. This, indeed, was what the majority of consumers polled for a recent Bank Innovation study found – 41% said that branches will cease to exist in the future, while 37% said the future branch will essentially be an ATM with advanced functionality.

However, there is another possibility – that the future branch won’t look like a branch, but a coffee shop, or a bowling alley, or a concert hall, or a gaming arena, with brands like Virgin Money, Capital One and CaixaBank paving the way.

For millennials and the up and coming Gen Z, the world is digital. They don’t want to walk into a branch in the same way, or for the same reasons that their parents and grandparents did. They want to be able to perform everyday transactions on their phones – and that’s precisely what today’s banks have been forced to deliver.

As such, for the branch to survive in the digital future, banks must invest in creating “destinations”, and realise that younger customers ascribe much more value to experiences than previous generations. Whether this proves to be a winning strategy in the long term remains to be seen, but destination branches are most certainly on the rise in the face of traditional branch closures, and there’s every possibility that it is a model that could get consumers excited about visiting their local branch – perhaps for the first time ever.