Why predictions of death of brick-and-mortar bank branches were dead wrong


Equity bank opens a branch in Kiritiri market, Mbeere South Constituency which is the epicenter of Muguka trade ON January 22, 2024. [Muriithi Mugo, Standard]

Many have predicted the death of brick-and-mortar banking halls for a long time.

Yet Kenya is opening more of such banking halls with much publicity. Is that part of Kenyan peculiarity or what is going on? 

Why more physical banking halls when you can do all your transactions online from home or wherever you are on the phone or shift money from your bank account to M-Pesa?

You can even open an account without going to the physical bank. Who wants to board a matatu or drive to the bank and queue?

We thought the current banking halls would become high-end restaurants. We may have to ‘chill,” to use Kenyan street lingo. One of the banking halls at Westminster House became a restaurant.

Does it still exist? Let me try and speculate this peculiar trend which goes beyond banking. One is visibility. Such physical branches serve as billboards, demonstrating a bank’s strength and reach. Traditionally, the presence of a bank was a sign a small town had come of age. “Hata kuna bank (there’s even a bank),” locals would say. Are banks riding on that nostalgia? The second reason is more subtle. Think of new clubs, better known as joints.

Once they open with fanfare and music, they are packed. The owners are perplexed when they can’t break even.

Eventually, they realised the loud music attracted many people without money, including idlers! Have you ever heard loud music in five-star hotels? 

Banks could have realised the online community is big and noisy but like revellers has no money.

The money is with the older generation, who need the services of physical banks. Who wants to transact Sh100 million online in a week? 

Does this indicate the economy is not growing fast enough to get jobs for youngsters, which would drive online banking?

This older group has the money but mistrusts technology. They want to see a real person. Think of a land deal or contract worth Sh500 million. You need the security and confidentiality of a physical bank.

That is why ATMs before online banking did not stop us from going to the counter despite higher charges. Are physical bank branches a revenge against too much technology?  

Think of it, my bank has assigned me a contact with a phone number and email address in case of any enquiries.

Why should I go to the bank?  It is probably an echo from the past when visiting a bank was a good pastime. Ever wondered how we lived without ATMs, M-Pesa and online banking?  

Reports of online fraud might be driving us back to physical banks. Many people feel more confident when meeting a real person.

Have banks learnt from dating scams? The anonymity of cyberspace is intimidating to many, more so with their hard-earned money, including pension. 

People with disabilities are also more likely to feel at home in a banking hall than online. Personal attention is an asset. There is something magical about talking to someone you can ask questions or clarifications.

Technology has made us impersonal. Noted how everyone is nowadays lost in their phone? When did you last talk to someone sitting next to you on a bus or queuing for services in a bank or hospital? Such physical bank branches enhance the value of real estate. The value of adjacent land goes up.

It would be interesting to know how banks decide on where to locate the new branches.  Do they use census results, talk to local opinion leaders or use hard data like M-Pesa transactions, which can be geolocated? Or do banks simply follow each other or other businesses like supermarkets?

By the way, do bank branch managers still hold the clout they used to? Did I hear that at one time you were charged to see a branch manager? Have you ever paid to do so? Any branch manager of that era to confirm? 

Banking is a highly regulated sector and differentiating yourself is hard. One way out is better customer service, which depends on employees and location. Banks are probably learning from mineral water firms’ slogans like “bottled at the source.” Do they want to get and maintain customers at the source?  

By focusing on the banks, we could be missing an emerging trend. Other sectors are opening branches too.  

Some leading hospitals are opening satellite clinics in other parts of the city or outlying towns. Universities did the same despite online teaching. 

Getting closer to the customers has an unintended consequence - brand dilution. Too much presence dilutes the aura or mystery.

When we were growing up, we could threaten each other: Nitakutwanga upelekwe Aga Khan (I’ll beat you up, you’ll end up being admitted to Aga Khan [Hospital]).

Today, the hospital has a branch in my home town, which I will not disclose for security reasons.

That threat would sound hollow today.  Attending a university that has the same name as your primary school might not be that glamorous. Online classes are convenient but deny you time to interact with other students and pocket money too!  

Let me spin your head. Online dating sites did not kill coffee dates. We still need to meet real people, smile at them, hold hands and more. 

Opening more physical bank branches when online banking is the future might appear a paradox.

But it’s not. It confirms we are human and interacting with each other is almost an instinct. To bankers, is there more than meets the eye in opening the new brick-and-mortar branches?