While banks abroad are trying out new methods of sharing branch services, Switzerland is lagging behind despite first floating the idea more than a decade ago.
In Rapperswil, a lakeside town roughly 30 kilometers southeast of Zurich, roughly seven bank branches crowd into the city of just over 25,000 people (see below). Local heavyweights UBS and Credit Suisse, St. Gallen's cantonal bank, Postfinance, Migros Bank, and regional banks Linth and Acrevis as well as upstart Valiant are sandwiched within an 150 meter radius.
This is emblematic of other Swiss villages and municipalities outside of larger (for Switzerland) urban areas. Even if the pandemic has quickened the pace of bank branches shutting, Swiss banking still has a far more dense network of bank branches than other European countries do – and institutes don't seem to mind doing business right next door to their competition.
Test Run in U.K.
A «shared branch» concept like that being tested currently in the U.K. according to the «Financial Times» (behind paywall) seems inconceivable. Since April, so-called banking hubs are in a pilot phase where Britain's postal service operates a teller which offers services from the area's biggest lenders as well.
(Image: Google Maps)
Falling Margins, Rising Alternative Channels
The idea of several banks under one roof – «branch of the future» – was first launched in 2008 by Andreas Dietrich, an academic who runs the Institute of Financial Services Zug, or IFZ. It never took off, much to Dietrich's regret, «despite the idea being interesting and economical for the banks,» he told finews.com.
Instead, the industry took a different tack following the financial crisis, in part by shutting branches. Eroding margins in interest business and a shift towards digital channels led to clients visiting branches less frequently. By 2018, the number of bank branches per 100,000 residents had fallen to 39.5, from 51.8 in 2010.
Not Unlocked after Lockdown
Pandemic-induced lockdowns last year only spurred this process on, with some lenders opting to not reopen when restrictions eased. UBS, the retail market leader in Switzerland, is closing every sixth branch while Credit Suisse, which last September launched hybrid CSX, is shutting every fourth one.
Some banks have updated their remaining branches with extensive refurbishing and more modern touches like video tellers, or lounges instead of meeting rooms. Some have opened up their space for other uses, like UBS' champagne bar in its Bahnhofstrasse headquarters, or the co-working space and cafe in Zurich's cantonal bank's main office.
Laser Focus on Brand
Even if this indicates cooperation, the concept doesn't extend to branch sharing. «Swiss banks are still very focused on their brand, and branches very important to reflecting this brand and its value,» according to IFZ's Dietrich.
Will firms abandon this somewhat nostalgic view if the pressure for spending cuts rises even further, and if clients shift more of their business online? This would affect not only branch services but ATMs as well, where clients prefer to use the machines attached to their bank to avoid fees.
«There is a lower threshold for cooperation on ATMs,» Dietrich says. Swiss exchange operator SIX advocates a so-called white-label solution, to which the banks are slow in warming again for branding reasons.
Mother of Invention
In the U.K, conditions are much tougher. Thousands of branches and ATMs have closed there over the last few years. In 2018 there were still 25 bank branches per 100,000 inhabitants. Consultancy Accenture now predicts that around 90 percent of UK bank branches could close by 2025.
The sharing of branches came about out of necessity after politicians urged the banks to guarantee minimum, basic counter services for the elderly or those with reduced mobility. At first sight, this was something of a shotgun marriage, but one which might give birth to a new business model. Swiss retail banks might be well advised not to focus solely on their brands.
