{"id":15711,"date":"2023-10-06T12:10:27","date_gmt":"2023-10-06T10:10:27","guid":{"rendered":"https:\/\/affidaty.io\/blog\/?p=15711"},"modified":"2023-10-06T12:31:55","modified_gmt":"2023-10-06T10:31:55","slug":"branches-banks-future","status":"publish","type":"post","link":"https:\/\/affidaty.io\/blog\/en\/2023\/10\/branches-banks-future\/","title":{"rendered":"Will Banking be 100% Digital?"},"content":{"rendered":"\n
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Declining branches<\/strong>: if the future<\/strong> will be branchless, what impacts and changes might occur?<\/p>\n<\/blockquote>\n\n\n\n

<\/div>\n\n\n\n

Introduction<\/h2>\n\n\n\n

The banking industry is undergoing profound changes, and one of the key questions in the sector concerns the future<\/strong> of bank branches<\/strong>. Traditionally considered a fundamental element of the Italian business landscape, data from the Bank of Italy (source: statistiche_STAATER_20230331.pdf (bancaditalia.it)<\/a> page 7) show a clear decline. In the last 10 years, the number of branches<\/strong> has dropped from nearly 32,000 units to less than 21,000, with a general decrease across Italy, without significant differences between the North and the South.<\/p>\n\n\n\n

We also know that banks<\/strong> still employ a significant portion of the population, 264,000 people in 2022 (source: statistiche_STAATER_20230331.pdf (bancaditalia.it) <\/a>page 34), and many of them work in branches<\/strong>. However, there is also a decline, much more pronounced in large banks<\/strong> (-10,000 units from 2021 to 2022, -29%), compared to medium and small banks<\/strong> (which have stable or slightly increasing numbers).<\/p>\n\n\n\n

So, it’s reasonable to wonder if the future<\/strong> of banks<\/strong> is, in fact, without branches<\/strong>, and what the impact of this change is on the banking workforce.<\/p>\n\n\n\n

<\/div>\n\n\n\n

The Digitalization of the Economy as a Fundamental Driver<\/h2>\n\n\n\n

Certainly, the digitalization of the economy is playing a primary role. In the first half of 2022, the volume of digital<\/mark> payments in Italy reached 182 billion euros, a +22% growth compared to the same period in 2021, approaching the level of cash transactions (now below the 50% threshold). Italian digital payments grew by +22% (osservatori.net)<\/a><\/p>\n\n\n\n

Simultaneously, the emergence of fully digital<\/mark> neo-banks<\/strong> (e.g., Revolut, N26) is pushing various segments of the population to adopt entirely digital<\/mark> banking solutions without branches<\/strong>, getting accustomed to automated processes, from onboarding to loan requests to investments.<\/p>\n\n\n\n

<\/div>\n\n\n\n

One Zero Bank: The AI Bank Made in Israel<\/h2>\n\n\n\n

In this context, the case of One Zero<\/mark> in Israel is interesting. It’s a neo-bank that has been active since 2019 and has developed an innovative, highly technological, and branchless banking model that is gaining success and acceptance.<\/p>\n\n\n\n

Currently, manual processes represent a bottleneck in banks<\/strong> and are often delegated to branches<\/strong>.<\/p>\n\n\n\n

One Zero<\/mark>, on the other hand, has found a way to automate them with artificial intelligence<\/mark>.<\/p>\n\n\n\n

Eyal Gafni, co-founder of the Israeli neo-bank, explained in an interview how banking processes can be effectively categorized into five areas that can be almost completely automated by AI:<\/p>\n\n\n\n

    \n
  1. Data Gathering: Data is automatically collected from various sources, including open banking, customer portfolios, chat interactions, and customer behavior.

    <\/li>\n\n\n\n
  2. Data Analysis: All collected data is automatically analyzed 24\/7 using machine learning algorithms.

    <\/li>\n\n\n\n
  3. Deriving Insights: The bank automatically identifies patterns and significant changes.

    <\/li>\n\n\n\n
  4. Giving Recommendations: Most financial advice, such as investment proposals, is already automated (92%), while the rest is subject to human review for security reasons.

    <\/li>\n\n\n\n
  5. Customer Communication: Interaction with customers largely takes place through an AI-based chat available 24\/7, effectively eliminating the concept of traditional working hours.
    <\/li>\n<\/ol>\n\n\n\n
    <\/div>\n\n\n\n

    A Completely Different Workforce<\/h2>\n\n\n\n

    With processes like these, the workforce also changes radically. One Zero<\/mark> currently has 420 employees, of which about 200 are responsible for value proposition and R&D (product managers, designers, software engineers, etc.), about 150 are in banking roles (financial consultants, back-office, etc.), while the rest are in general functions: marketing, compliance, legal.<\/p>\n\n\n\n

    In practice, the workforce is divided 50-50 between a financial company and a cutting-edge technology company, where financial skills are becoming less predominant. This effect is even more pronounced for administrative skills.<\/p>\n\n\n\n

    Therefore, it’s not surprising that One Zero<\/mark>, since its founding in 2019, has not had bank branches<\/strong>. So far, they have not been necessary, even though One Zero<\/mark>‘s target demographic is not Generation Z but rather the population aged between 34 and 49.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Customer Service 2.0<\/h2>\n\n\n\n

    But what if someone has a question? Who can they turn to?<\/p>\n\n\n\n

    This is often a consideration when discussing branches<\/strong>. However, even in many traditional banks<\/strong> today, customer service is semi-automated, with phone or branch assistance as a last resort.<\/p>\n\n\n\n

    In this regard, One Zero<\/mark> is also interesting because customer service processes are almost entirely automated through a bot (the AI<\/mark> banker called “Ella”) based on OpenAI’s LLMs and One Zero<\/mark>‘s proprietary technology.<\/p>\n\n\n\n

    It’s worth noting that in most customer satisfaction surveys, One Zero<\/mark>‘s AI<\/mark> banker achieves higher satisfaction scores compared to humans.<\/p>\n\n\n\n

    However, according to Eyal Gafni, this data is the result of a combination of factors. Certainly, credit goes to AI<\/mark> for smooth interactions in most activities. But it’s also true that humans handle more complex situations that AI<\/mark> can’t resolve, so they need time to make decisions and sometimes have to say no.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    So, what will remain of branches<\/strong> and their bank staff?<\/h2>\n\n\n\n

    The more we delve into the One Zero<\/mark> case, the more we can sense the direction of this market.<\/p>\n\n\n\n

    As algorithms improve, they can handle increasingly complex tasks, leaving people with one primary responsibility: managing relationships. Machines are not (yet) experts in relationships and do not receive the same trust as human interactions.<\/p>\n\n\n\n

    Emotional intelligence and empathy emerge as irreplaceable elements, adding value to interactions and gaining customer trust in ways an algorithm cannot replicate.<\/p>\n\n\n\n

    The banks<\/strong> of the future<\/strong> will be the product of a symbiosis between the efficiency of artificial intelligence<\/mark> and the depth of human relationships. The balance between the speed and convenience of technology and the warmth and human understanding will define the success of banks<\/strong> in the near future<\/strong>.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Towards a New Banking Model<\/h2>\n\n\n\n

    Based on the case of One Zero,<\/mark> we can conclude that the future<\/strong> of banks<\/strong> seems to be an intertwining of technological progress and the authenticity of human relationships.<\/p>\n\n\n\n

    Looking at the numbers and observing the case of One Zero<\/mark>, my consideration is that traditional branches<\/strong> with a focus on processes will see an inevitable decline, while there is a market space for branches<\/strong> with a different focus, more human-centered.<\/p>\n\n\n\n

    Human connection emerges as an essential last stronghold for balanced and customer-centered banking. Banks<\/strong> will, therefore, need to navigate wisely between innovation and humanity, creating a model that harmonizes technology and empathy, accessibility, and trust.
    <\/p>\n\n\n\n

    I would like to thank Eyal Gafni,<\/mark> co-founder of One Zero Bank<\/mark>, and Guy Bertolozzi<\/mark>, Managing Partner of BIIB, for making the interview possible.<\/p>\n","protected":false},"excerpt":{"rendered":"

    It is questionable whether the future of banks is, in fact, without branches, and what the impacts of this change are.<\/p>\n","protected":false},"author":210,"featured_media":15772,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override_template":"0","override":[{"template":"2","single_blog_custom":"","parallax":"1","fullscreen":"0","layout":"right-sidebar","sidebar":"default-sidebar","second_sidebar":"default-sidebar","sticky_sidebar":"1","share_position":"float","share_float_style":"share-normal","show_share_counter":"1","show_view_counter":"1","show_featured":"1","show_post_meta":"1","show_post_author":"1","show_post_author_image":"1","show_post_date":"1","post_date_format":"default","post_date_format_custom":"Y\/m\/d","show_post_category":"1","show_post_reading_time":"1","post_reading_time_wpm":"300","show_zoom_button":"1","zoom_button_out_step":"2","zoom_button_in_step":"3","show_post_tag":"1","show_prev_next_post":"0","show_popup_post":"1","number_popup_post":"1","show_author_box":"1","show_post_related":"1","show_inline_post_related":"0"}],"override_image_size":"0","image_override":[{"single_post_thumbnail_size":"no-crop","single_post_gallery_size":"crop-715"}],"trending_post":"0","trending_post_position":"meta","trending_post_label":"Trending","sponsored_post":"0","sponsored_post_label":"Sponsored by","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo_enable":"0","sponsored_post_logo":"","sponsored_post_desc":"","disable_ad":"0"},"jnews_primary_category":{"id":"","hide":""},"jnews_social_meta":{"fb_title":"","fb_description":"","fb_image":"","twitter_title":"","twitter_description":"","twitter_image":""},"footnotes":""},"categories":[601,525],"tags":[794,820,183,844,147,812],"coauthors":[1006],"class_list":["post-15711","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-real-applications-en","tag-ai-eng","tag-artificial-intelligence","tag-pos-en","tag-speed","tag-transaction","tag-trust"],"_links":{"self":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts\/15711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/users\/210"}],"replies":[{"embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/comments?post=15711"}],"version-history":[{"count":0,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/posts\/15711\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/media\/15772"}],"wp:attachment":[{"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/media?parent=15711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/categories?post=15711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/tags?post=15711"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/affidaty.io\/blog\/wp-json\/wp\/v2\/coauthors?post=15711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}