Troubled Times Predicted for European Retail Banks’ Branch Networks

Branch networks of European retail banks are moving towards a future of significant change, pressure for reinvention and selective cutbacks, according to a study jointly published by the not-for-profit European Financial Management & Marketing Association (EFMA) and a trio of management consultancies specialising in financial services – Equinox, Resolving and Zeb/.

They report that following years of stable profitability enjoyed by branch networks in retail banking, leading banking executives expect a troublesome future. Research conducted in the study indicates both declining revenue pools and increasing operating costs for branch networks in upcoming years. Demographic trends, digitalisation, regulatory pressures, competition and overall changing customer behaviour were identified as the core drivers for the challenging situation. However, only few banks show signs of a holistic strategy for their branch networks to tackle these drivers adequately and prepare for difficult times ahead.

In the future, banking executives will have to manage the fragile balance between two strategic opportunities and investment choices. On the one hand is the option of capitalising on their existing branch network and increasing its attractiveness while sticking back to the core business of bank and insurance – diversification attempts having proved disappointing in most cases. On the other hand is building a state-of-the-art multichannel experience, with branches as one of its pillars. In either case selective cutbacks of the overall branch network are generally perceived as unavoidable in the long-run, especially in mature markets.

Considering these circumstances, reinvention of the role of the branch and its employees within the overall multichannel sales strategy is key. The potential entrance of new market players from the digital world, regarded as an ‘earthquake scenario’ for retail banking, may serve well as a catalyst of this reinvention process in the industry.


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