Covid could result in slower branch expansion for banks

The Covid 19 pandemic is likely to hasten the banking sector’s move away from branches and towards digital and contactless technologies as the business was already moving to a branch light model with bulk of the transactions pushed through cheaper digital means.

The pandemic and the resultant social distancing will further slow down branch expansion as more and more customers minimise human interaction, bankers said.

“Covid, perforce, catalyses the transition to digital as it is both convenient and above all safe, with less physical contact. This will spread faster than the virus over time and last longer because this is a good spread to have. Flattening of the branch expansion curve is good and this will be the begining of the acceleration towards contactless banking,” said Shyam Srinivasan, CEO at Federal Bank.

Banks are already talking to technology companies to develop automated systems like interactive teller machines that can help people go beyond the basic deposits and withdrawals and also live chat with bankers for their needs.

“We expect a redesigning of branches with more emphasis on self service like contactless QR code based withdrawals. The new branch will be smaller, with fewer people and more technology. There will be some transactions like high value withdrawals, demand drafts and bearer cheques for which people will have to go, but people will largely avoid going to branches,” said Navroze Dastur, regional vice president, banking sales, Asia Pacific, for NCR Corp, which has deployed more than 2.48 lakh ATMs in the country.

NCR has already deployed interactive ATMs for banks like Standard Chartered and IndusInd and is in talks to deploy more such machines in the near future.

Bankers expect branches to become more of a sales point for customers in the future. Branches will shrink from 2000 sq ft to 400 sq ft as people will come in only for certain specialised services.

“We may have branches for special purposes, like only catering to SMEs, wherever there is a high demand or a special self service technology branch with only two or three people managing it. The customer journey will be reinvented in the next few years,” said CS Setty, managing director at State Bank of India (SBI).

This does not mean branches will be shut down or no new branches will be opened. Setty said SBI will still look to open branches, especially in semi urban and rural areas where customers need a touch point.

“For public sector banks, branches are more important because we thrive on customer relationships and branches are also crucial sales points. Besides, we also need to open branches in the unbanked areas of the country,” Setty said.

SBI opened more than 500 branches last year. Comparitively, Federal Bank opened 32 branches after four years last fiscal.

Bankers said branches will remain but what will change is the type, look and form, especially after the pandemic.

[Source – Economic Times]


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