Bank branch closures to continue as customers are missing in action

There’s a big reason why banks are angering their customers and workers by closing hundreds of branches across Australia.

Bank customers are abandoning branches in droves as digital banking gains greater acceptance during the pandemic.

New research has found almost nine out of 10 Australians won’t return to their pre-pandemic branch usage, suggesting the trend that has seen hundreds of branches close since early 2020 could gather pace.

About 60 per cent of consumers now use mobile banking apps, up from 35 per cent in 2019, says the report by financial services data firm RFi Group and technology specialists GBG.

Older Australians have been rapidly playing catch-up with younger generations when it comes to digital banking because COVID discouraged fact-to-face interaction, it says.

“Eighty-eight per cent of consumers can see no resumption of their branch usage post pandemic, either indicating their pandemic branch usage will be the norm or predicting a further reduction in their branch visitation,” says the report, which questioned 6000 people.

The big four banks have been at the forefront of branch closures during the pandemic.

GBG general manager Australia Carol Chris said the pandemic “accelerated a trend we are already seeing” as consumers flocked to e-commerce, social media and adopting digital financial services.

“The benefits of digitalisation could have bred new habits,” she said.

“For example, processes like identity verification can be quite cumbersome when conducted in-person … meanwhile, digital identity verification methods can be as simple as taking a selfie.”

Ms Chris said the pandemic had brought forward peoples’ long-term plans to “immediate execution”.

Banks have been under fire from the Finance Sector Union after closing or scheduling closures for more than 300 branches since the pandemic began.

ANZ alone has closed more than 140 and its CEO Shayne Elliott told a parliamentary hearing this month that there had been an “astonishing, rapid rate of customer behaviour change”.

“We have seen branch traffic fall at an alarming rate,” he said.

The Commonwealth Bank has said COVID accelerated the trend towards digital services and its digital wallet transactions doubled last year, while NAB had experienced a 30 per cent drop in over-the-counter branch transactions in the past 12 months.

RFi’s managing director of consulting, Alex Boorman, said branch closures would mean some consumers could not return to their pre-pandemic banking behaviours.

RFi's Alex Boorman expects branch networks to continue to contract. Picture: Supplied.

“While we cannot predict the end of the branches – they will always play a role in customer engagement – evidently branch networks will continue to contract,” he said.

“Consumers are becoming increasingly comfortable using digital channels.”

Mr Boorman said older customers had been slower to embrace digital banking but were now becoming more familiar with it.

“One key area of digital growth is in mortgages, where consumers have typically been resistant to applying for mortgages online, but where comfort and preference is now increasing,” he said.

The research found 32 per cent of people taking out a mortgage in the past two years did part of their application online, and half of under-35s are happy to apply for mortgages using digital channels.

@keanemoney