Do recent investments in mobile banks signal the end of branch-based banking?

It has become an accepted wisdom in financial services that mobile is the future of banking, so the news that Moven has raised $8 million in a funding round led by SBT Ventures should come as no surprise. The US-based bank, which has no branches but provides the front-end for transactions, now claims to have around 10,000 active customers and is planning expansion to New Zealand and Canada. This follows an announcement that British digital start-up Atom Bank has received a six-figure investment. The bank, “designed entirely for the digital age”, will have no branches and will instead operate through online and mobile channels.

The story of start-ups shaking up the financial services industry is part of a broader trend towards what the British Bankers’ Association (BBA) has described as a “revolution” in mobile banking. This revolution seen not only a surge in private investment in technology-enabled financial providers with no physical presence, but a rapid uptake in the use of mobile apps from the high street banking providers. BBA figures suggest that customers now make 5.7 million transactions a day using smartphones and other mobile devices, and this is only set to continue to rise.

An initial read suggests that investors are hedging their bets that branch-based banking is dying a slow death. But is this likely? The US-based digital bank Simple provides an illustrative example of how growth in digital-only banking is being driven by younger customers. While there is no doubt that many older customers are also flocking to mobile banking as the fastest, easiest way to complete transactions, high street banks that ignore some segments’ unswerving preference for face-to-face banking may end up alienating some of their most loyal customers by forcing them to go completely digital.

The solution could be to infuse the branch experience with more digital technology. State Bank of India (SBI), for example, has introduced video conferencing and interactive wall displays into so-called ‘digital branches’ and RBS has announced plans to invest more than £1bn to modernise branches with iPads and free Wi-Fi. By enhancing the traditional banking experience without losing the personal touch, banks may be able both to woo digital natives, without alleniating customers who prefer face-to-face banking.