The future of Community Banking: is the branch dead?

Five years on, despite the significant digital disruption, physical branches remain essential and are even sought after, particularly by younger banking customers.

Are digital solutions replacing traditional banking relationships?

Back in 2020, in middle of the pandemic, that might have been true. According to The Economist, "65% of bankers believed that the branch-based model will be “dead” within five years" in 2021.

However, five years on, despite the significant digital disruption, physical branches remain essential and are even sought after, particularly by younger banking customers.

It’s a myth that bank branches are just the domain of their older customers. Younger individuals value the ability to walk into their nearest high street branch, talk to a real person and use the services on offer.

Peter Rothwell, Partner and head of banking at KPMG UK

The importance of physical branches to Gen Z

According to a recent EPAM survey on consumer banking attitudes in the US "younger consumers are more likely to visit a branch on a weekly basis, with 35% of Gen Zers and 37% of Millennials saying they visit weekly, while 22% of Gen Xers, 17% of Boomers and 22% of the Silent Generation visited weekly". 

This finding is particularly striking as it shows that Gen Z, despite being digital natives, actually visits bank branches more frequently than Baby Boomers, a generation often associated with traditional banking methods.

Although the younger generation appreciates the ease of digital banking and its features, it also prioritizes in-person interactions to establish trust and make informed decisions.

Particularly in an economy where the ongoing cost of living heightens the necessity for face-to-face guidance, services that are more easily handled in person (e.g., complex transactions, account opening), and access to cash—a classic budgeting resource.

So what would be the middle ground for Community Banks?

While they must stay on top of the latest digital advancements, Community Banks also need to offer their services through physical locations. A Gen Z Banking Insights study emphasized that Gen Z values a blend of traditional and digital banking experiences, highlighting their desire for human connections in banking.

This brings the concept of "phygital" to life.

This approach blends both physical and digital services, transforming banking branches from mere transactional hubs into centers for advice and community interaction.

By integrating advanced technologies with face-to-face support, community banks are improving customer satisfaction and redefining their role in the community.

But how can traditional community banks achieve this hybrid experience without the same resources as bigger banks?

Banking for the new generation: innovate fast but keep it authentic  

How to provide a phygital banking experience?

Phygital banking relies on the seamless integration of physical touchpoints with an underlying digital banking infrastructure. Community Banks that meet client banking needs while preserving a personal touch in their operations will be the ones to set themselves apart.

However, without a robust digital platform to start with, achieving a phygital banking experience is impossible. A stable foundation is essential for synchronizing customer profiles, transaction histories, and AI-driven insights to enable personalized in-branch experiences.

ebankIT omnichannel banking platform offers a fast deployment of digital banking channels and supports real-time processing for omnichannel synchronization which also includes the physical branch network.

ebankIT offers financial institutions an intuitive front office platform, designed to eliminate friction and provide the utmost efficiency in every stage of the customer journey.

ebankIT enables financial institutions to manage digital end-users, enabling activation, deactivation and contract management – everything in a simplified and user-friendly mode.

The emphasis on this hybrid model highlights the industry’s recognition that, even in an increasingly digital world, physical spaces remain integral to fostering trust, accessibility, and deeper customer relationships.

The future is digital, but not exclusively! Partner with a provider that offers a hybrid approach.