Brick-and-mortar to continue being core of banking delivery, says expert

Monday, August 22, 2011

Brick-and-mortar branches will continue as the core means of delivering retail banking in Latin America for years to come, despite the proliferation of electronic financial services, Richard Speer, chairman of US banking consultancy Speer & Associates (S&A), told BNamericas.

"There is no doubt that electronic delivery of financial services has placed considerable pressure on traditional branch networks," S&A wrote in a report to clients. "Even while banks are steadily increasing their branch numbers and distribution, they are at the same time concerned with the long-term viability of costly physical facilities."

In the US, banks are redefining the strategic purpose of the branch to confront new competitive and technological pressures.

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The total number of branches continues to increase, even though the number of banks is steadily falling as a result of industry consolidation. The focus, however, is shifting from the basic provision of everyday services to the branch's role in brand marketing and client retention through personalized service.

These trends will also play out in Latin America and the Caribbean, but with a time lag.

Speer said bank branches in the region will evolve dramatically over the next 10 years to better serve emerging market segments and their payment needs.

Bancassurance is another trend that is gaining momentum in the region's retail banking industry. "Cross selling of insurance is a major revenue opportunity in South American branches and can represent 15-20% of fee income, which is key in bank non-interest revenues," Speer noted.