Will Traditional Physical Banks Vanish in the Coming Years?

With the ongoing trend of fewer and smaller bank branches, the question arises: will most traditional physical banks eventually disappear in the coming years? This trend mirrors the decline of physical retail shops in many areas. In my local suburban neighborhood, one bank branch has closed, but two still remain, and while one local grocery store has shut down, another is conveniently close by.

The shift towards digital banking and financial services is undeniable. I no longer use my physical bank deposit box, and I rarely visit the ATM. Instead, I manage my accounts completely online or through my preferred neo banking app, such as Federal Bank's Fi. Neo banking is not just the future of banking in India but is already a real and efficient alternative.

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The Role of ATMs and Human Managers

The question naturally arises as to whether machines can fully replace humans in managing physical bank branches. While ATMs have significantly expanded their capabilities over the years, performing tasks such as small loan disbursements and coin changes, they still fall short of replicating the comprehensive services provided by human managers. At my bank, there are two human tellers, three ATMs (mostly for cash transactions), a few loan officers, and a manager.

Some functions, such as loan processing and handling large transactions, still require human oversight. For example, the ATMs offer small loans at 10% interest for 30 days, a service that is not replicable by machines. Human tellers are better equipped to handle these complex and unique requests, including paperwork for which machines would only be a detriment.

Comparing Regional Trends in Banking Evolution

The evolution of banking is not uniform across all regions. Institutions in the USA and the UK illustrate different paths and timelines for the gradual withdrawal of physical branches.

Compared: US vs UK

In the USA, many bank branches ceased providing cash counter services over 40 years ago, a trend that eventually spread to the UK about 25 years later. However, the next wave of evolution, primarily related to business deposits of cheques, has seen a significant difference between the two nations. The shift to digital payments has almost made cheques obsolete in the UK, whereas the Eurozone has been leading the charge in this transition for several decades.

Banks will continue to adapt to customer needs, but their basic function of attracting savings, securing customers' funds, and providing finance remains. Their products and services, as well as the number and location of their branches, will continue to evolve to meet the changing demands of customers. While some regions may see a greater reduction in physical branches, others may retain more.

Whether traditional physical banks will vanish completely in the coming years depends on the specific region and the pace of technological advancement and customer preference.

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