50% of existing retail bank branches in the developed world will be obsolete by 2020

Publish date: 17-07-2012
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A new retail report released today by Jones Lang LaSalle emphasises that changes across the global retail banking environment continue to be driven by political, economic and technological trends. These trends will lead to continued bank expansion in frontier markets, offsetting the search for greater efficiency in developed markets.

The report, entitled Global Retail Banking: key trends for retail estate, identifies that changes in global retail banking will be fuelled by increasing customer demand for innovation, flexible service capability and banks actively managing their brand's presence in a retail environment. 

These drivers will result in retail banks making substantial changes to their established branch networks in developed markets. As a result, Jones Lang LaSalle predict that as much as 50% of existing retail bank branches in the developed world will be obsolete by 2020, as banks assess their space requirements. However, this decline will be offset by increased numbers of retail bank branches in developing countries such as Brazil, China and India.

Robert Bonwell, CEO EMEA Retail, Jones Lang LaSalle explained:

"The perfect storm facing the global banking industry continues unabated. However, within the kaleidoscope of increasing regulatory, legislative and legal scrutiny, retail banks face the greatest opportunity of all retail sectors to unlock the power of their real estate networks. 

New retail formats and new technology offer diverse options for those looking to drive efficiency of legacy branch portfolios, enter new markets or increase their competitive advantage. The challenge is to ensure that accelerating retail bank real estate change remains a priority and gets the attention it deserves.”

Key findings of the report include:

  • Retail banks increased focus on "multi-channel”; with banks focussed on getting the right physical presence in the right place, supplemented by mobile and internet banking services. 
  • Increased customer segmentation; focussing efforts on which services to provide to whom, where and how. 
  • Hi-tech experimental branches; with 24 hour access to call centre staff through video conferencing and other technological developments, and a move to mimicking customer-centric retail environments.
  • More attention to data storage requirements; increased online and mobile transaction volumes

Analysing the trends further, James Brown, Head of EMEA Retail Research & Consulting said:

"Historically, a retail bank's sole customer sales and service channel was through a large branch network. The rapid ascent of telephone, online and now mobile banking continues to accelerate change and innovation into the retail and banking industry.”

"Whilst we are still seeing new entrants opening physical branches, our research highlights that most developed markets across America and Europe are 'over-banked'. We predict that as a result of 'right-sizing' and embracing technology, 50% of retail branches in these developed markets will be obsolete in their current format by 2020. 

Excess branch networks won't disappear overnight, but the trend will be one of a steady run-off as property leases expire. The challenge in this truly multi-channel world will be for global retail banks to actively manage their existing property portfolio and then to identify the right locations to maintain a presence or take new space. We will see far more emphasis on right place, right space and right price”

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