An increasingly resounding concern is being felt in the financial sector: Is it the end of physical bank branches? Digital banking has revolutionized the way we manage our finances, freeing us from the need to enter a bank office and causing financial institutions to reevaluate their traditional physical presence.
The rise of this trend is not a mystery; it has been increasing in recent years, thanks to the incursion of technology in the banking sector and the preference of users for online banking facilities. However, its acceleration reached unprecedented figures during the Covid-19 pandemic, with restrictions on transportation and face-to-face attention. But even after returning to a type of normality and with the declaration of the World Health Organization announcing the end of the Covid-19 health emergency, the demand for online banking services has only increased, thanks to the constant flow of Millennials and hyperconnected Zoomers entering the workforce. All of these factors are seriously calling into question the need for physical bank branches.
Globally, multiple large financial institutions have chosen to close thousands of branches in major markets, focusing instead on boosting their digital services. For example, in the United States, 9% of all bank branches closed between 2017 and 2021, according to the National Community Reinvestment Coalition. In Spain, statistics from the Bank of Spain indicate that 33.4% of branches, that is, one in three, have closed in the last five years. In Latin America, the trend is similar. According to data from the National Banking and Securities Commission (CNBV), Mexico has seen a nine percent decrease in the number of bank branches, going from 12,849 in 2019 to 11,698 in December 2021.
These figures paint a clear picture: banking is digitizing at a rapid pace, and industry developments seem to match this fact. According to the latest Digital Banking Report survey, 77% of bankers globally predict that by 2025, three- quarters of new accounts will be opened through digital channels. This percentage coincides with research by The Economist Intelligence Unit (EIU) which found that two-thirds (65%) of bank executives believe the branch-based model will be obsolete within five years.
Therefore, the ability to adapt to the digital revolution is critical for banks to evolve and remain competitive. Digital transformation has ceased to be a trend to become an imperative necessity. For banks, it’s no longer a question of whether they should go digital, but how to do it effectively.
Currently, the solution seems to reside in digital transaction processing platforms such as Frame Banking™. This innovative SaaS platform (Software as a Service) manages the entire transaction lifecycle from the cloud, delivering countless benefits and functionalities that align perfectly with new payment ecosystems. It allows banks to provide sophisticated and modern solutions to their customers, eliminating the need for a physical presence. Despite this accelerated digitalization, it is essential to remember that the customer remains the priority, and Frame Banking™ enables banks to provide an exceptional user experience, accessible from any device or channel. It is presented as an opportunity to reinvent banking, looking to the future and pioneering a modern banking experience that offers security, profitability and capacity for growth.
The decline of physical branches seems to be inevitable, but thanks to digital banking solutions such as Frame Banking ™, banks can adapt, overcome challenges and stay competitive and adapt their offer to real customer needs. The baton of digital adaptation is already in motion, and for financial institutions it is now or never. Is your bank ready for this new digital era?
About 2innovate
2innovate is a pioneer in banking and digital financial transactions. Its cloud-based products and platforms specialize in developing next-generation payment ecosystems, enabling superior experiences for financial services consumers. 2innovate was founded in 2016 and currently operates in 11 countries, with headquarters in Montevideo and offices in Buenos Aires, Mexico City and Miami.