There is no denying that digitalization is the megatrend of our time. In addition to smart factories and services such as Uber and AirBnB, which are disrupting entire industries, digitalization is also entering the financial and banking world and brings new challenges for our industry. The declining use of banknotes and coins is making this trend even more complex.
The discussion on how we use our cash is already in full swing: abolish, defend, secure by law, prescribe or replace with a digital Euro - this is only a small part of the discourse on cash. Euro banknotes and coins are currently the only legal tender in the European Union. Alternative payment methods, such as ApplePay, only serve to process payments and cannot replace the Euro.
The total abolition of cash is something only politicians can decide. KEBA does not assume that will happen for a variety of reasons - lack of inclusion would be one among many challenges if cash were no longer used.
We believe that cash will be used less frequently in the future but will not disappear entirely. Cash will decline to a base level, but will stay with us for a long time to come. At the same time, lower circulation means higher “per unit” handling costs.
Digitalization is not only impacting cash but also the entire banking sector. Everything that can be digitalized will be digitalized and move from the bank counter to the digital space. Countless, highly-specialized fintechs are already at play in this area. The result is a transformation of the banking and financial world: Compared to other regions in the world, the number of bank branches in Europe is shrinking. In 2016, for example, 2.7% of all bank branches in Western Europe and 1.8% in Central and Eastern Europe were closed. Even if the potential for consolidation exists, closing locations harbors potential dangers despite the excellent supply of e-banking solutions. Negative press, loss of trust and a declining customer base are common consequences.
Is the bank branch dead?
Withdrawing from retail locations is not an economic cure-all for banks and savings banks. The bank branch is not just a cost factor, but also the most important sales channel and main point of contact for your current and future customers. Giving up the entire branch network would permanently damage the brand of a financial institution.
Especially with regard to financial transactions, the branch office is a place where customers can get information through personal conversation and have their questions answered discreetly. Proximity and personal contact form the basis for the relationship of trust between the financial institution and the customer - a critical asset for every bank and savings bank.
Besides offering customer services, the branch office also serves as the “house” of the brand. For the end customer, it is the place where a bank or savings bank can be experienced. The values that an institute represents, which often relate to locality, reliability or innovation, help customers identify with their bank. They must therefore find their place in the branch environment.
Even beyond the financial world, it is evident that the branch office represents an important channel for the brand and for customer loyalty. In the meantime, online players have discovered the offline location as a marketing channel for their business. The online retail giant Amazon, for example, said it would significantly expand its Amazon GO branch network by 2021 and operate a total of 3,000 shops in the United States alone and is “thinking about opening stores in German pedestrian zones”.
Other internet giants like Alibaba and Tencent have also recognized the potential of an offline presence and are building up a network of stores.
Convenience is perhaps one of the most important elements in a customer relationship. A modern branch with a welcoming atmosphere has a positive influence on the customer relationship, increases trust and loyalty to the institute and offers the convenience of being able to do your non-digital business on site.
A medium such as cash remains stationary because it cannot be digitalized per se. The ability to switch between physical and digital forms of cash is a must - in both directions and with the utmost convenience. Automated cash payment is therefore not enough. A key to digitalizing the bank counter is to automate both the deposit and withdrawal of cash. Doing so will make cash recycling technology the standard.
This calls for high-availability self-service ATMs with intuitive operation and a focus on customer experience so that bank customers actually enjoy using them. KEBA's self-service cash recyclers from the evo series are able to meet these requirements today.