Branch banking in the Netherlands: seamlessly integrating physical with digital
In 2015, most Dutch banks will execute another wave of branch closures to further consolidate their physical branch network. Although the Netherlands has one of the lowest branch densities across Europe and has shut down half of its branches in the last decade, the closure of more physical locations is simply irreversible.
A steady decline in branch traffic derives from the ongoing change of customer behavior, especially for simple transactions, which has shifted from physical to digital. Digital dominance is, nowadays, the fundamental element for Dutch banking customers. While Online banking was fully adopted years ago, the Netherlands is currently considered to be the most developed market for mobile banking in Europe. It is even likely that most Dutch consumers will bank on their tablets more than on their mobile phones by 2016. Therefore trends to downside branch networks and significant investments in digital channels are highly relevant and crucial in order to shape a sustainable business model.
The Dutch banking industry is highly concentrated and dominated by four banks with a combined market share of at least 80%. Both Rabobank and ABN Amro formally announced the closure of a significant number of branches until 2016. Back in 2013, Rabobank said it had intentions to close at least 300 branches (40% of its entire network) in the upcoming years. Recently this number has been readjusted to even 400 closures and will be accomplished by the end of 2016. Also ABN Amro is set to close at least 100 of its physical branches due to customers that are switching increasingly to digital channels. Only SNS Bank is slightly increasing its branch network with small shop like outlets that are cashless and focused on advice for complex products.
Source: World bank, Eurostat, Sia Partners research 2014
The branch of the future has a fundamental place in Omnichannel strategy of banks
In the future, Dutch physical branches will still add significant value to customers. They will continue to play an important role for trusted advice, relationship building and branding. Personal interaction with experts that offer high quality advice remain vital when offering complex financial products. However, banks should make a clear choice on how branches are placed on their overall digital channel strategy. In this light, a customer centric Omnichannel experience is fundamental. Customers demand a seamless mix of channels whenever, wherever. A more technical step is enabling cross-channel data exchange and customer analytics. Most banks use different infrastructures, systems and client platforms per channel. This results in a lack of information and inconsistency between channels when serving customers.
A differentiated branch network
An outdated branch network without a differentiated proposition will no longer exist in the near future. Branch formats should anticipate on the different needs of all targeted customer segments. Moreover, customer satisfaction should be key when defining the right branch format. Building trust and a perfect customer experience offering are the main drivers for a successful well balanced branch network. Highly educated professionals in urban areas, such as Amsterdam, have different needs in comparison to pensioners in rural regions. Therefore, formats may vary from small self-service shops to fully operating flagship stores near high density areas.
Retail Banks in the Netherlands already make good progress in transforming their traditional branch-centric business models towards a more Omnichannel approach with a dominant role for digital. Branches switched from simple transaction banking and now offer more advice on complex financial products. They operate with less, but more educated staff who are able to offer these complex products and to support clients when using digital channels. A key point of success is the investment in the digital skills and behavior of employees.