How can the branch be protected as a unique selling point of regional banks?

Why is the branch the last anchor and a unique selling point for regional banks?

Branches should not be seen as a burden, but as a unique selling point of regional banks. Since 2011, however, the number of bank branches in Germany has roughly halved from approximately 38,000 to around 19,000. Although the retreat from physical presence has slowed somewhat in recent years (2021: -10%, 2022: -6%, 2023: -5%), the trend is still clear. During this period, major banks in particular scaled back their operations significantly (−22%, −8%, −7%). According to their own statements, Deutsche Bank and Postbank also planned to reduce their number of branches “to a considerable extent” in 2025.

Despite considerable reductions, regional banks still offer about 13,000 branches, serving as the last anchor for customers who value local banking.

How does the branch become an essential part of the omnichannel strategy?

Regional banks must make branches an integral part of their omnichannel strategy. Maintaining a physical presence across regions is no easy feat. By 2030, around 30% of branch employees will be approaching retirement. At the same time, finding qualified staff to fill these positions is becoming increasingly difficult.

If regional banks are to maintain a successful presence in the future, they need to rethink their branch strategy. On the one hand, they currently operate highly profitable branches with a wide range of services and generous opening hours. On the other hand, there are branches that can only cover their costs because their services and opening hours are severely restricted. This discrepancy has little to do with a genuine local presence and leads to dissatisfaction, particularly among customers in rural areas.

Instead, the goal should be to provide a consistent range of services and convenient opening hours in all branches, including the smallest rural ones.

This can be achieved if regional banks pay attention to three aspects:

1. Branches will continue to have the same importance as the media channels and must be embedded in the regional bank’s omnichannel strategy in terms of sales concepts. All channels must be dovetailed so that customers can switch between them at any time during the initiation and conclusion process without having to choose between them.
2. Customer proximity and personal advice are not the same as physical presence. In other words, the bank should centralize its service, sales, and expert functions as much as possible. In branches with limited or no on-site staff, customers can still interact with the relevant bank employees – either spontaneously or by appointment – provided they are connected via modern communication technologies.
3. The branches must have the necessary communication technologies in place, particularly low-threshold, user-friendly options for video and voice calls as well as messaging.

Excursus: avatar and video terminals in the branch – a strategic opportunity?

Around 5% of regional banks are already using modern (self-service) technology to ease pressure on staffed services and improve service quality for their customers. Initial practical experience with these technologies shows that queuing can be significantly reduced and multilingual requests can be processed more efficiently. Two types of devices are particularly suitable for the cost-effective implementation of a genuine local presence.

• Avatar terminals, which can be described as (artificially) “intelligent” self-service terminals, enable customers to interact with an AI-based chatbot in the branch. Customers can use these devices to resolve simple service issues themselves. Additionally, they can use QR codes to access online banking for more complex service requests.
• Video terminals connect bank customers in the branch with service staff or advisors, either ad hoc or by appointment. These terminals can be installed either as a dedicated video zone in the branch or self-service area or as a separate video room.
• In the future, it will also be possible to combine avatar and video terminals. If a customer doesn’t receive a solution after interacting with the AI at an avatar terminal, and routing to online banking does not resolve the issue either, the “last resort” is to connect with a service employee via video call.

Although first success stories have emerged in practice, these devices are neither sufficiently tried and tested nor technologically mature. Customer acceptance in particular is a prerequisite for the long-term integration of these devices into the branch strategies of regional banks. However, this also means that the technological potential of avatar and video terminals remains underutilized, and the benefits to regional banks and their customers are not yet foreseeable.

How should the branch network of the future be designed for customers and employees?

The branch network of the future will benefit customers, employees and the regional bank alike.

• Maximum flexibility for customers: Customers are already regularly switching channels for their service requests and product purchases. In the target scenario, neither the customer nor the regional bank will notice a difference whether the customer comes into the branch, contacts the bank by phone, uses the app or switches between channels.
• Maximum flexibility for bank employees: Although bank employees primarily work at their designated bank locations, they have unrestricted access to all other channels for customer interaction. This not only improves customer accessibility but also enhances the flexibility of employees’ work environments. Remote work becomes standard practice, enriching the role of regional bankers.
• Improved quality of service and advice and perception of the regional bank: Efficient bundling of functions at central locations creates free capacity. These can be used to develop consultants into experts and thus increase the overall quality of service and advice. Due to current capacity constraints, specialist staff in areas such as sustainability and generational wealth management often remain underrepresented in regional banks.

More insights into retail banking at regional banks

If you’re interested in gaining further exciting insights into retail banking at regional banks, you can download the latest whitepaper “Omnichannel: Excellence in customer and advisory services – How regional banks can hold their own against (digital) competitors in the retail banking business.” here.