Corona changes customer behavior: crisis victim bank branch

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Dhe bank branch is no longer a phase-out model in Germany, but it is being used less and less. With its quarantine measures, the corona crisis has now forced many customers to do their banking instead of in the branch via alternative channels such as the Internet or the telephone. The consulting firm McKinsey sees this as a good opportunity for German banks to realign their branch business. “The corona crisis, including its quarantine measures, is a human and social catastrophe, but it does offer German branch banks a chance,” said McKinsey partner Ursula Weigl in an interview with the FAZ

Markus Frühauf

A piece of advice that Martin Zielke, who is now expected to leave Commerzbank, has apparently already taken to heart. In the past week, rumors of cut plans caused a scandal. A supervisory board meeting scheduled for last Wednesday had to be canceled after it leaked that Commerzbank was said to be able to dispose of more than 10,000 of 40,000 full-time positions and close 400 of 1,000 branches. Similar mind games are also likely to be practiced by other houses with large branch stores. The pressure to make savings is too great. The earnings in the German banking market with its overcapacity are too low – also in comparison with competitors in other European countries.

Alternative channels

McKinsey’s advisors do not propose a cutback, but strongly recommend that banks reorient themselves. “You can now change customer behavior sustainably because customers are increasingly willing to take advantage of offers outside the branches,” says Weigl. This includes telephones, digital channels and service machines, which can also be used to make transfers. “But just closing or downsizing branches would have been too short,” she adds. The institutes would also have to improve the quality and breadth of alternative sales channels. The benefit is not apparent to the customer, for example, if he has to wait a long time in the queue of a call center.

The use of banks’ telephone services has skyrocketed in corona quarantine. According to McKinsey, some German branch banks have closed 70 percent of their branches during this time. Good experiences with call centers can make this an alternative to visiting a branch for customers. The situation is similar with online banking, which many recently refused because of security concerns. These concerns can now be alleviated after many customers had to resort to them. Another example is the sharp increase in contactless card payments: their share of card payments has doubled in the crisis from 25 to 50 percent.

Banks can now use the new customer behavior to increase their efficiency in mass business. But there are limits: “For many customers, the leap from branch to digital banking is too big,” says Weigl. They wanted to look their advisers in the eye on important transactions such as construction finance. But the new customer behavior gives the banks great potential to become more efficient. The McKinsey partner advises that it is clear that not all branches are needed and that the branch concept needs to be developed further.

Dismantling has been going on for years

The pressure to digitalize the banking business comprehensively is one of the greatest challenges the financial sector is currently facing. This makes high billions of dollars necessary for investments. But the dismantling of branches has been taking place for some time. According to Bundesbank statistics, there were more than 43,000 branches in Germany in 2000, and fewer than 27,000 at the end of 2019.

During this period, the number of employees in the German banking industry fell from 775,000 to 570,000. McKinsey consultants expect the branches in Germany to accelerate their dismantling after the crisis. According to their information, 475 branches in Germany have one million bank customers. While this is more than the international average of 416, it is significantly more in France (690), Spain (755) or Italy (570). This can also be due to more modern, less personnel-intensive branch concepts. Service machines are very common in the branches abroad.

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