The Future of Banking: Are Brick and Mortar Banks Becoming Obsolete? (2024)

FAQs

The Future of Banking: Are Brick and Mortar Banks Becoming Obsolete? ›

While brick and mortar banks are not going away anytime soon, the online banking trend is undeniable. It's clear that financial institutions should be focused on increasing their flexibility and adaptability, and offer a competitive customer experience for consumers with a wide variety of needs.

Digital banking may be the future, but branch baking is here to stay. Sales leaders in retail banking who want to thrive in the future need to embrace this transformation, the integration of old and new, and reimagine how they manage their customer experience and how they meet customer needs.

Many of the nation's largest banks are reducing their branch systems, and smaller banks are also trimming their networks. U.S. banks closed 2,118 branch locations between January and the end of October 2023, according to S&P Global Market Intelligence.

"In future, probably banking may cease to be a separate service. Instead, banking would be embedded in all the products and services which consumers are expected to avail. Embedded finance is the integration of financial services or tools within the products or services of a non-financial organisation.

If you value personal relationships, you should keep your brick-and-mortar bank, where you're able to walk into a branch and talk to someone you know about your financial concerns. While online banks have call centers, they can be impersonal, and you generally won't speak to the same person twice.

Cons of brick-and-mortar banks

They charge higher fees and often have high minimum balance requirements. Loans and other products may cost more. They typically pay lower yields on savings and other deposit products. Visiting a branch takes longer than banking online.

Bank branch totals mostly move lower but still remain ample.

It continues to close some branches, but over time the shuttering will slow down as it sees fewer profitable ways to consolidate.

Like digital, the Age of AI is likely to have a transformative impact on the industry, affecting roles in virtually every part of the bank. Not only is the rapid adoption of gen AI the most important trend for banks in 2024—it's also shaping the other nine trends.

The Financial Brand analyzed the number of FDIC-insured banks and bank branches in the U.S. since 1935. The trends paint an alarming picture for the future of banking. In the next 20 years, half the banks around today will be gone, leaving fewer than 2,000 banks in the US by the year 2042.

Reports of the bank branch's death are greatly exaggerated, though you soon might be unable to recognize the old boy. The bank branch indeed has a future, especially if one caters to specific groups or is based in certain parts of the world, SunTec Business Solutions President Amit Dua said.

Do you need a brick-and-mortar bank anymore? ›

But while many people will find online banks work for them, this doesn't mean everyone should switch. In fact, there are a few really good reasons sticking with a brick-and-mortar bank could be better for your personal finances in some circ*mstances.

Brick-and-mortar's staying power

But online retail is not rendering physical stores obsolete. Instead, brick-and-mortar venues still have a critical role to play in the modern retail ecosystem.

The future of brick and mortar is “phygital.” In other words, stores need to be able to incorporate digital elements into their physical stores to thrive in today's world. On the extreme end of this, you have cashierless stores like Amazon Go.

The main factor cited in the closing of retail stores in the retail apocalypse is the shift in consumer habits towards online shopping. Holiday sales for e-commerce increased by an estimated 11% to 20% from 2015 to 2016.

The commercial banking industry is rapidly evolving through digitization, increased competition and tighter regulation. Commercial banks serving small and medium-sized businesses are transforming to compete.

The future of banking will be innovative and hybrid

As we look ahead at the next phase of the branch of the future, moving on from ATMs and automated depositing machines, it is worth in the very first instance considering whether: it's worth the investment for the branch.