OPINION: Rethinking the Physical Bank Branch in a Digital World

By Michael Jjingo

In recent years, many Ugandan commercial banks have slowed down the opening of new branches. With over 75% of retail banking transactions now happening digitally, the growth of bank branches is undeniably “going south.” As Brett King once wrote, “There’s no reason to assume we’ll see a resurgence of activity at the branch; the mobile app is the nail in the coffin.”

Are we witnessing the death of brick-and-mortar retail banking? Will banking soon be conducted entirely online or outside traditional bank premises? Rather than rushing to close branches, which may not be feasible in our market, leading banks are reinventing themselves through agent banking and digital (mobile and online) technologies—a combination we refer to as “digital.”

As we rethink the physical bank branch, it's important to acknowledge that bank products and services can be complex, and security and trust are paramount. Many Ugandans still prefer to interact with a banker in person, especially for significant transactions like taking out loans or mortgages, or even opening a bank account. In fact, over 75% of account openings are still conducted within bank premises.

Even with efficient digital alternatives, some leading retail banks are resisting the trend of closing branches. While they continue to open physical service centers in strategic locations, they are also developing ways to serve customers outside of the bank, such as through ATMs, mobile banking, online banking, and collaborations with mobile network operators and mega agents.

Banking customers want the convenience of digital solutions, like electronic EFTs, RTGS, instant bill payments, and mobile deposits. Some banks are even exploring voice-activated virtual assistants (bots) for mobile devices, which allow customers to connect with a call center and enable agents to assist based on the customer’s recent actions. However, customers also expect a seamless integration of digital and physical capabilities, where every transaction on one platform is reflected instantly across all channels.

As banks innovate, they are focusing on providing this kind of fusion. Moving current manual processes online makes banking more convenient and helps achieve the digitisation of services, ensuring a smoother experience for customers.

Banks can also create "signature" experiences and new sources of value by focusing on key omnichannel experiences, such as helping customers buy their first car or home. This can be achieved through mobile apps that allow users to search for houses in a database, get advice, and even start a loan application online. Personal bankers can then book in-person appointments for those who prefer to visit a branch.

Hybrid branches, combining both digital and physical experiences, are another innovative solution. These branches can serve as community spaces for financial education, advisory centers for wealth management, or even flexible workspaces. Features like video digital tellers, which are synced with a bank's online platform, can allow customers to perform routine transactions 33% faster than regular methods.

Additionally, streamlined layouts, self-service kiosks, collaborations with fintech companies, and financial wellness centers can enhance the banking experience, providing customers with more convenience while maintaining the human touch they value.

One key lesson from this discussion is that while digitalisation is crucial, we must remember that a large portion of our population is not digitally savvy. Banks must ask themselves what their customers truly want—often, it's a combination of digital advances and the trusted advantages of face-to-face interactions.

Physical banking is evolving but not disappearing. While branch numbers may decrease, their utility and efficiency will improve, and banks without branches may find themselves at a disadvantage. Digital technologies will continue to shape the future of banking, but a hybrid solution will remain essential.

The writer is the General Manager of Commercial Banking at Centenary Bank