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BRANCHLESS BANKING A branchless future


Branches have traditionally been at the centre of the banking universe. But, asks Kate O’Flaherty, with the rise and rise of online and mobile, are their days numbered?


arly attempts at this failed to take off. There was a lack of consumer appetite and the technology had not reached the point where it could support such a market.


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Even today, branchless banks have a tiny slice of the market. However, regulatory changes and the ubiquity of smartphones have led the winds of change to blow at a much faster pace than a decade ago. This is seeing digital challengers emerging with an appetite to disrupt the big banks’ creaking IT systems and sizeable branch networks.


In turn, the bigger banks have been reducing their branch footprints over recent years. In the UK, about 3,000 have shut over the last decade, according to the Campaign for Community Banking Services, leaving around 8,000 now. This is in part fuelled by changing consumer attitudes. People are happy to go online and only need a branch for expert advice on commitments such as mortgages or investments.


Over the last five years, technology has made it possible to do the transactional side of banking without visiting a branch, observes Warren Mead, Partner and Global FinTech Lead at KPMG. “We aren’t as dependent on cheques and cash. The smartphone has only been around a few years and the ability to use a mobile to go online through 4G didn’t exist before today.”


The branchless banking market is being boosted by the availability of new technology, agrees Atom Bank Chief Innovation Officer Ed Twiddy. He adds: “Most of us don’t want to wait for the bank to open and people are more than


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happy to perform simple tasks themselves and then agree or disagree with a certain action.”


This is in addition to the UK regulators making it easier for new entrants to get a banking licence, which has created a flurry of activity in the startup market. Michael Allen, VP EMEA at Dynatrace – which works with challenger banks and the larger financial organisations – says “the floodgates have opened up since last year.”


He explains: “The big guys have the resources for change but at the same time, they are being attacked by branchless banks on all fronts. With a couple of exceptions – such as Metro Bank which started off branchless and now has branches – it’s regulation that’s driven these challenger banks. This is pretty unique in the UK.”


It used to be much more difficult to get a banking licence, concedes Twiddy. “It was expensive and resulted in a big bang ‘yes’ or ‘no’. That’s why, with exception of Metro Bank, there weren’t really any new entrants.”


Whereas now, Twiddy says: “If you want to start from fresh with a digital proposition you can go through three or four control gates and have a discussion with the regulator.”


According to Mead, there are currently about half a dozen branchless challenger banks, including Atom Bank, Starling Bank, Mondo, and OakNorth.


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