Many more bank branches will give way to technology – AFB boss


With technology disrupting every sphere of human activity, brick and mortar branch banking will no longer be viable in five years, Arnold Parker-Managing Director of finance house AFB Ghana, has said.

“I think in the next five years a lot of financial institutions will scale down on brick and mortar branches, because it will be very difficult to justify the profitability of brick and mortar in the face of technology,” he said, as AFB took its turn at the Ghana Stock Exchange’s (GSE) bi-annual Facts Behind the Figures.

His prediction adds to growing calls for banks to see technological tools and applications as means of reaching out to customers instead of physical branches.

Already, financial technology companies are conducting business with clients without using physical branches across the country.

Mr. Parker noted that branches are just channels for the provision of financial services, but other channels – enabled by technology – exist to render the same services and even better.

“We are moving into an era called ‘Omni Channels’, wherein your customers will require different channels – and brick and mortar is the most expensive of channels and also takes a longer time. In the face of increasing technology, it is likely banks will scale down on brick and mortar,” he added.

He added that clients are accessing loans from AFB in some of the remotest parts of the country. “These areas do not even have bank branches, and so it is our strong view that even though it will take a while, we should be thinking more Omni Channels than brick and mortar,” he said.

Managing Director of the GSE, Kofi Yamoah, agreed with Mr. Parker, saying: “Going forward, technology is going to play a major part; whether it is in banking or other sectors.”

He said: “We all need to draw attention to that fact. If you want to expand as a financial institution today, you do not need 1,000 branches. You can still reach your customers via the phone,” he said.

Some banks have done enough in recent times to support the view that brick and mortar banking could actually go extinct someday.

Ecobank, one of the largest banks in the country, closed down 10 of its branches across the nation in the last quarter of last year as it goes more digital.

Head of Payment Systems Department of the central bank, Dr. Settor Kobla Amediku, told the B&FT last year that brick and mortar banking firms risk becoming extinct in the next five years, as technology-driven banking services continue to dictate the industry direction.

“We have all now seen that the old age of brick and mortar banking is dying. Any bank which does not want to go digital will, in the next five to 10 years, face serious challenges.”

Globally, banks are closing branches. In the United Kingdom, HSBC has closed more than a quarter of its branches in just two years, according to new research by Which?

In total, UK banks have closed more than 1,000 branches since January 2015.

HSBC closed more than any other bank, axing 321 branches. RBS closed 191 branches – which equates to 10 percent of its total, while Lloyds Banking Group, which includes Lloyds, Halifax and Bank of Scotland, shut 180, Which? said.

In response to the findings, HSBC said consumers now make 40 percent fewer trips to branches because of the increased uptake of online banking.

In the United States, banks are closing branches at the fastest pace in decades. The number of branches in the U.S. shrank by more than 1,700 in the 12 months ended in June 2017 – the biggest decline on record, according to a Wall Street Journal analysis of federal data.

Many of the closings were in big cities and surrounding suburbs, where branches were consolidated largely because of falling foot-traffic.

While banks battered during the financial crisis – such as Citigroup Inc. and Bank of America Corp. – started cutting branches years ago, regional banks have only accelerated their closures more recently.

From mid-2012 to mid-2017, Capital One Financial Corp. cut 32 percent of its branches; SunTrust Banks Inc. 22 percent; and Regions Financial Corp. 12 percent. For all three, the sharpest cuts came in the most recent 12-month period.

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