A fierce debate that has dominated the banking world in the past decade centers around the future of bank branches.
Who needs them in an increasingly digital world? What functions should they perform – just banking or more? Should they focus on transactions or advice?
In the last 10 years, as many as 56,000 bank branches closed down in 100 countries where data is available, translating into a 14 per cent drop in network. In the UAE, the cut has been more severe: over 40 per cent since 2015. There are about 565 bank branches in the country today, and we are witnessing an average drop of 3 per cent every year.
The reasons for rationalisation are many. Customer transactions are migrating to digital channels – up to 97 per cent of all transactions are now digital, and do not require a branch. The pandemic changed customer habits away from face-to-face assisted banking to self-service banking. And increasing focus on costs is driving banks to cut down on physical locations.
Are banks going too far?
The question is: Are banks going too far? Is there a post-pandemic over-compensation in branch closures? According to a McKinsey-Finalta study, while branch usage dropped only 1 per cent in 2020-21, banks closed 9 per cent of branches.In the UAE, most banks have rationalised their network by up to 25 per cent and some like Mashreq dropped from 39 branches to 7 today. As a result, the number of bank branches per 100,000 population in UAE is 7.6 compared to 28 in the US, 25 in UK and 15 in South Asia.
