Will Cain examines the decision by Jyske Bank to shutter
some of its branches five years after launching a major
refurbishment programme across its entire network. Large branch
networks are becoming increasingly costly at a time when customers
focus on digital channels. What is the future of the


So, just what is the future of the humble bank branch? Jyske
Bank’s decision to close branches and cut staff because of
“changing market conditions” is another stark reminder of the
challenges faced by banks in a number of markets – even in the
relatively prosperous Nordic countries.

The announcement by Jyske,
Denmark’s second-largest independent bank, that it would cut 250
staff, increase its lending rates and merge six of its branches,
also provides an opportunity to reflect on one of the retail
banking industry’s great preoccupations of the boom years – the
desire for ever more glamorous and expensive branches.

Some banks have already admitted
that expanding branch numbers aggressively in the 2000s was a
mistake. Sanjeev Gupta, Shinsei Bank’s head of retail banking, said
funds spent establishing fully-fledged bank branches across Japan
between 2000 and 2006 would have been better spent on smaller,
kiosk-style branches that are able to turn a profit more

Jyske was one of the many banks
which was attracted to another type of strategy – to turn their
branches into the envy of the high street. In 2006, it redesigned
all 119 of its branches to a new open-plan layout featuring
touch-screen videos and free coffee for customers – as well as a
DKK100m ($18.7m) investment in IT.

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Its branch concept included
different areas within branches – a reception area called an
AskBar, a Market Square area where customers could buy products, a
CoffeeBar and Oasis area which featured magazines and offered a
place for customers to relax.

These features were part of a
project the bank called Jyske Differences and the early signs were
that it was delivering on its investment. Differences helped raise
customer acquisition rates and also increased the average number of
products held by clients in the years after it launched.

In the first six months after Jyske
Differences was completed, net new customers increased from 4,200
to 8,000 – although information on the results of the project was
not given in the bank’s annual reports after 2008.

What lessons are there to be learnt
from Jyske and the many other banks which spent large sums on
branch expansions and wholesale branch renewal?

The general experience among banks
which implemented large-scale branch redesigns has not been a good
one, according to Benjamin Ensor, an analyst specialising in
e-business and channel strategy at Forrester.

There is a feeling that branch
networks in many European countries are over-extended –
particularly in Italy, Spain and Germany – and that the ongoing
consolidation of the continent’s highly fragmented banking industry
is likely to address this over-supply of branches in some part.

“The strategy of investing heavily
in branch redesign doesn’t seem to have paid off,” Ensor says.

“We haven’t seen much evidence that
banks which completely re-did their branches that had these branch
renewal programmes had worthwhile benefits from those

“Having said that, we think it
makes sense to do it as part of an ongoing process of branch
refurbishment. Branches need to be refitted every 10 to 15 years or
they start to look tatty and tawdry.

“Refitting them then and as you do
that changing the design of the branch makes a lot of sense. Doing
‘big bang’ renewals when you revamp the entire network is very
costly and we haven’t seen the evidence that the returns on that
were worth it.

“To be clear, branch redesign makes
sense. Doing a ‘big bang’ branch redesign I don’t think makes

The key requirement for banks is
not necessarily getting the design right within their branches,
according to Ensor. He concedes that initiatives like free coffee
in branches have not been particularly effective but there is
nothing fundamentally wrong with using it as a tool to make the
branches more appealing.

“Certainly I think there is a lot
to be said for trying to make a branch a more welcoming environment
and somewhere where customers can take a step back and think about
their finances rather than just somewhere where they come in to
deposit a cheque or withdraw £20 [$31.90],” he says.

Instead of the focus on design, he
says the real key to success for banks is integrating their
offering across all channels – internet, telephone, mobile and

“I think one of the challenges some
banks have is their strategies are being determined by where they
were historically rather than where they are today,” Ensor

“Branches organisationally have a
lot of the power because it’s where a lot of the sales take place.
They have a lot of power, a lot of influence and a lot of the chief
executives are former branch bankers. Yet the reality is that’s not
where the customers are going to be in five and 10 years’

Ensor highlights SNS Bank in the
Netherlands as one example of a bank which has managed to use
technology to create a more integrated multi-channel strategy –
including in its branches.

SNS, which was formed by a merger
of a number of Dutch savings banks and has around 200 branches in
the country, has ditched its legacy systems in favour of a new IT
system which links its call centre, internet banking and branch

Essentially, its online banking
system is used across all channels, meaning that customers, branch
staff and call centre staff are all using the same resource. The
benefit of using this kind of system is that it overcomes the
hurdle of identifying a customer’s activity across different

If the same platform is used for
all of the bank’s channels, branch staff are immediately able to
find out what types of products customers have been browsing on
their website or enquiring about through the call centre, helping
them to give better advice and generate greater sales.

SNS Bank highlights the benefits of a leaner, better integrated
branch network with nimbler technological capabilities across
channels. Other banks, such as Metro Bank in the UK, are having
some success using this approach – though the question of what
older, more established banks can do with their bloated and
expensive branch networks remains a difficult one.