CAN BANKS HALT THE DECLINE OF THE HIGH STREET?
By Chris Labrey, Managing Director UK & IRL, Econocom UK
The economic contribution of the retail sector to the UK economy is really a sizeable one. The recent House of Commons briefing paper implies that retail businesses account for 9.5% in our employment figures and 5% in our economic output.
Unfortunately, the retail sector is under tremendous pressure and in the current year to August 2021, 2,085 stores and 39,000 jobs were lost from our retail economy. These closures are experiencing a dramatic impact on the appearance of our high streets. Boarded windows and shutting down sales are an all too abundant feature in many of our traditionally thriving towns and cities.
Some blame the banks for this. Based on Which, NatWest and HSBC alone closed over 1000 high-street branches between 2021 and 2021 and with no high street bank, consumers are not as likely to venture into the town centre. Indeed, Labour's John McDonnell has said he will change the law to prevent banks closing high street branches if Labour comes to power.
Should we blame ourselves?
None of this is surprising. Our banking habits are changing; we no longer require a face-to-face interaction to carry out simple transactions. We are able to do this from the comfort of our own home; on the internet or using mobile apps on our smartphone. And most of us are happy to do this.
But mobile and internet banking isn't for everyone. There are occasions when customers will have to, or want to, visit a local branch. So, what can banks do to encourage their clients into branch more frequently, thus preserving their physical presence and halting the demise of the high street?
Future-proofing the branch
At a recent conference Celnet cites that many consumers still value the physical branch. They may visit it less often, but when they do they are expecting meaningful interactions.
Samsung expands about this by describing branches of the future as immersive, advice-driven financial centres that give customers what they can't access by themselves. In addition to incorporating existing technologies for example smartphones, tablets, self-serve kiosks and wearables, these branches will incorporate newer technologies such as virtual reality and virtual desktop infrastructure.
This is well and good, but the technology cost implications could be huge, especially when there may be thousands of branches to consider. Also, many banks have legacy-based infrastructures which do not always align well with new platforms and technologies. It can become cost prohibitive and uncompetitive to keep high street branchs open, but there is an answer.
Technology as a subscription-based service
Retail banks can become familiar with a lot from the general retail industry. Stores have learnt that customers want the same experience across every channel, whether in-person or online. Customers' expectations are that retailers fully understand them; they can anticipate their needs based on past interactions. Banks are finding their customers want those things too.
This is where subscription models can prove their worth. In exactly the same that many of us pay for our cell phones or cars, there are models open to banking and finance companies, using OPEX instead of CAPEX, to invest in technology and infrastructure for offices and branches.
These subscription models also allow banks to spread costs evenly and regularly and update their technology assets, meaning that customers can have a consistent and compelling customer experience when they visit a branch.
The future
Our online spending increases every year. Department stores experienced an increase of 25.2% in internet sales up to April this year, according to statista. When they want to maintain their physical presence in the shops they will need to adapt their professional services.
John Lewis' retail report of 2021 shows that 20% of their online purchases were researched available before making a purchase. They have embraced this information in some of their larger stores by providing unique user experiences to complement the shopping experience and encourage them into store.
High street banks should learn from this. Future high street banks need to be more like retail outlets. They may be small compared to the traditional high street banks but expect them to be more efficient; improved by digital transformation where customers have access to highly personalised services.
All of this is underpinned by digital. It needs to be financed and a subscription-based model can make sure that customers get the experience they expect, at some point. Get it right and we will all be going back to the high street.
