For the majority of its existence, the bank or building society branch was virtually the sole tool for distributing financial services products. Over the course of the last decade, however, the industry has witnessed a revolution in terms of distribution, as the advent of new technology, allied with a sharp intensification in competitive pressures, has resulted in a significant extension to the range of channels through which banks and building societies are now trying to reach their customers.

For the majority of its existence, the bank or building society branch was virtually the sole tool for distributing financial services products. Over the course of the last decade, however, the industry has witnessed a revolution in terms of distribution, as the advent of new technology, allied with a sharp intensification in competitive pressures, has resulted in a significant extension to the range of channels through which banks and building societies are now trying to reach their customers.

The overall impact has been dramatic and no other industry now offers its customers such a wide choice of access points. Unsurprisingly, this increase in the range of delivery mechanisms has placed the branch network's predominant position within the banking distribution mix under intense pressure. Indeed, the development of more cost-effective delivery channels has challenged the fundamental economics of the traditional branch-based form of distribution.

As a result, the traditional players embarked upon a series of major branch closure programmes in the face of increasing price competition from new entrants. Inevitably, the overall impact of this increase in the range of delivery mechanisms and reduction in branch numbers has been a decline in the volume of transactions that now take place via the branch network.

However, any suggestions of the imminent demise of the branch network have clearly been overplayed. For while the banks and building societies have been keen to migrate their customers to the lower-cost channels, such as the telephone or the Internet, their customers have been much less enthusiastic when it comes to abandoning branches. As a result, the banking industry has once more begun to appreciate that a strong branch network can still provide a significant source of competitive advantage.

Although the days when the branch was the sole distribution point are clearly long gone, the humble bank branch is now enjoying something of a renaissance. Indeed, while the majority of banks and building societies have adopted a multichannel approach, the branch generally remains the most crucial element within the distribution mix and this looks set to continue for the foreseeable future.

Aims of the report

This report will pick up on these key themes as well as a whole host of other salient issues. It begins by examining the role of the branch within the wider distribution mix, highlighting the recent revolution in distribution and the subsequent adoption of a multichannel approach. It then goes on to consider some of the key market factors that have had, and are likely to continue to have, an influence on the role of the branch network. These topics include the continuing growth in consumerism, industry consolidation and branch sharing initiatives.

The next section focuses upon trends in the overall size of the bank and building society branch network, both at a total level and by individual organisation, and also looks at the substantial growth in the ATM population over the last few years. The changing face of the bank branch is the topic for the following section, and this looks at what impact the removal of the traditional back-office functions and the new branch design programmes have had on the branch network.

Mintel also commissioned exclusive research which is analysed in two separate consumer sections. The first one begins by using the research to produce an estimate of market share within the current account market. It then goes on to examine the influence of the branch network upon the initial decision to open an account with one particular organisation in preference to another and also assesses how successful the banking industry has been in cross-selling financial products to its current account customer base.

The second consumer section examines the availability of bank and building society branches in the wake of the significant branch rationalisation programmes that have taken place over the last decade. In addition, the research also focuses upon which factors current account holders feel are most important to them when they visit their local branch and explores consumer attitudes towards a number of other salient issues regarding the branch network.

In conclusion, the final section pulls together the various strands of research and analysis contained throughout the report in order to consider what the future might hold in terms of the branch network.

Other Mintel reports of relevance to this market include:

- Electronic Intermediation and Financial Supermarkets - UK, Finance Intelligence, August 2003

- Direct Banking - UK, Finance Intelligence, April 2003

- Direct and Internet Selling - UK, Finance Intelligence, April 2003

- Fund Supermarkets and Online Investing - UK, Finance Intelligence, March 2003.