Morgan Stanley
  • Research
  • Jul 25, 2018

Branching Out

How financial institutions are banking on efficiency.


For many customers, the concept of physically attending a bank building to interact face-to-face with a human being for the purposes of conducting transactions is already largely redundant. For younger generations, or ‘digital natives’ it is a foreign practice altogether.

A global view gives an indication of what Australia can expect as the changes arrive on home shores. At the heart of the revolution is the increasing competition traditional banks are facing from new players, particularly in the digital banking sector.

There is less focus on bank branches, and a throng of consumers championing speed, technology and efficiency as the key determinants of how they select organisations best suited to manage their money.

Rather than bankers who remember a client’s name or systematically greet each customer with a practiced smile, great service is becoming a proxy for efficiency in a time-poor society.

More than two thirds of the global population will be living in a country that has a real time payment system by the end of 2018i.

Branchless banks continue to apply pressure on incumbents and the key challenge is to equal what they offer in the efficiency stakes. Consumers will increasingly demand that all businesses operate on par with digital banks and companies like Apple and Amazon. The battle for market share will revolve around the quest to deliver the most seamless and intuitive consumer experience.

Cutting edge mobile apps; seamless functionality of app interface (both front-end and back-end) and a highly efficient branch network will be the components of a winning strategy for banks in their fight to survive and thrive.


A global trend is emerging for less branch traffic, with a more streamlined model facilitated by a reduction in branch numbers, smaller square footage of branches, and staffing reductions.

Globally, there has also been a notable move toward real time P2P payments, leading to a reduction in cash movement expenses and cheque processing costs. Re-engineered back office processing has streamlined back end functions, while mechanisms such as eDelivery statements, mobile statements and mobile product offers have reduced expenses associated with printing and mail-outs.

However, according to Morgan Stanley Research, branches will not necessarily become obsolete in a digitised banking landscapeii.


For information in investment opportunities across the FinTech and banking sector, please contact your Morgan Stanley Financial Adviser.


i'Global Banks and Diversified Financials: Banking at the Speed of Light.’ Morgan Stanley Research. January 7, 2018.

ii‘Global Banks and Diversified Financials: Banking at the Speed of Light.’ Morgan Stanley Research. January 7, 2018.