By Chanel Smith, EMEA Editor (@PYMNTS_EMEA)
Making a trip to the local brick and motor bank branch is cumbersome enough: imagine if you had to travel outside of your own town to get to one.
Such is the reality for residents living in rural areas in Valencia, Spain, and other countries across Europe where there have been significant cuts in bank branches. European banks are shrinking, cutting costs by releasing staff members and closing down retail branches in remote locations.
The banking industry is still licking its wounds from the financial crisis, but such drastic cuts may not be the answer since customers are being forced to switch banks to find better service. Bankia, a bailed-out lender in Spain, is attempting to counter customer losses and recently announced its new “bank on wheels” for people in the Valencia region.
“When you close a branch, you run the danger of losing at least a few clients,” Paris-based Fabrice Asvazadourian, global co-head of financial services at consultant Roland Berger said to Yahoo Finance. “It’s the moment that gives people an excuse to consider switching banks.
Customers in these isolated areas have to deal with the consequences of such cuts. Some towns in Valencia don’t have a bank nearby, and residents are forced to catch a local bus and travel to another town to find service. Bankia, a Spanish lender that lost 4.9 percent (1,963) of its bank branches last year, was desperate to find new ways to reach customers. Bankia recently announced its new bus service that will be present in locations around Valencia where it was forced to shut down stationary branches.
The bus service will travel to 17 towns in the region, and aims to make up for the bank’s lack of retail presence. Bankia reported that it was willing to provide the service because consumers who have been banking with the company for years needed access to their finances. The bus will provide most financial services, including cash and check deposits, withdrawals, account registration and more.
Spain is the EU country suffering most from bank cuts. Yahoo Finance reported that bank retail locations decreased by 17 percent at the end of 2012, compared to 2008. Despite the sudden drop in banks, Spain continues to have Europe’s largest network of branches in the region. There are about 38, 200 branches in Spain, and there is one bank per every 1,210 consumers.
According to Yahoo Finance, France, Spain and Cyprus were the countries in Europe with the greatest number of bank cuts at the end of 2012. Cyprus had only one branch per 1,265 customers—a result of the country’s financial structure falling apart and having to resort to an EU bailout. The French market admits it is in desperate need of making cuts as well. In the last four years, 5 percent of UK branches closed down, and an additional 8 percent in Germany shut their doors permanently as well. The banking industries in the Netherlands and Denmark felt the pinch as well and had to flip the closed sign for good.
European banks are in a risky transition period that may lead customers to switch banks for the sake of convenience. Banks will need to develop out-of-the-box strategies, akin to Bankia’s bus on wheels service, to make up for the loss of retail branches.
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