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September 15, 2016updated 21 Sep 2016 2:55pm

Bank customers turn to their apps as the value of the branch declines

The local branch may still have a role to play but it is much less important.

By James Nunns

The majority of the world has realised by now that mobile technology is a must if the goal is to reach as many customers as possible, this is particularly true of banking.

The reason for this is that customers are looking to do their banking on the go and popping in to a local branch can often be time consuming. Now the ability to offer mobile banking apps has become a clear differentiator.

That is according to App Annie’s European Retail Banking report which found that mobile has become a critical point of differentiation for banks.

On the 9th of August the Competition and Markets Authority said that banks needed to adopt more technology and place a greater emphasis on developing phone-based apps. Challenger banks such as Monzo (formerly Mondo) have already begun appealing to customers by offering a bank through an app.

Meanwhile, banks have traditionally been slow in their development of apps, and while the majority of banks do have apps, they have not always received positive feedback, just look at the ratings on the app store.

App Annie’s research continues to highlight the importance of mobile banking and the necessity for banks to adapt.

The report reveals that in the UK and France, there more than two times as many sessions in the top 10 retail banking apps by monthly active users (MAU) in the first half of 2016 compared with the same period in 2014.

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Perhaps unsurprisingly it is the age group of 25-44 which access retail banking apps most frequently. In the UK, users older than 45 are much less likely to access retail banking apps relative to other age groups. Over 45’s actually use retail banking apps 85% less often per week than the 25-44 year old age group.

The report found that this is a much larger figure than seen in France and Germany, suggesting that banks should look more closely at this demographic to boost usage.

Fintech has quickly made an impact in this year with the total number of sessions in the top five retail banking apps from fintech companies increasing by more than 2.9x.

The report said: “By focusing on — and optimizing — one or a few individual services, these apps have the potential to decouple the traditional full-service retail banking experience.”

What is really telling is that this growing mobile consumption has had a direct impact on branch-based banking.

A recent Bain report suggests that for every 100 mobile banking interactions globally there have been 16 fewer interactions in branch. HSBC has seen a 30% decrease in branch visits since 2009, and RBS and Natwest have faced similar reductions.

The response has been to reduce the number of branches. No longer is the number of brick-and-mortar stores a competitive advantage and the door has been opened for new technology.

“The UK, for example, has seen an explosion in applications to open new banks. Metro Bank, the First new High Street bank in the UK for over 100 years, plans to open only 110 branches by 2020,” the report said.

Clearly there is still some value to be found in having a bricks-and-mortar store but that value has been significantly diminished by the continuously increasing importance of mobile banking.

The full report can be found here.

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