If banks want to improve returns in an environment of low growth they are going to have to do something dramatic about their costs, such as taking the knife to branch networks or properly embracing innovative financial technology.This is the view of consulting groups reviewing the latest big bank results, which were marked by expenses growing ahead of or at the same rate as income growth, net interest margins at their lowest level since the financial crisis and lower returns on equity.The consensus is that Westpac chief executive Brian Hartzer was right when he said business conditions would be "lower for longer".Two of the big banks, ANZ and Westpac, reported expense growth that was higher than income growth. Those two banks also reported higher cost-to-income ratios.KPMG's review of the results called for the banks to fundamentally change their operating models, including "more radical branch transformations."In Europe and the United Kingdom banks are working on plans to close up to 20 per cent of their branches.In August, Macquarie Securities and researcher RFi published joint research on bank branches, arguing that changes in the way consumers did their banking had created an opportunity for the big banks to close up to 23 per cent of their branches.Australian banks have been trimming their branch numbers but are reluctant to do anything dramatic. They want to avoid the widespread disapproval generated when they last closed large numbers of branches in the 1990s.KPMG Australia head of banking Ian Pollari said the difference between the 1990s and today was that customers were leading the shift away from branch banking. Local banks are reducing branch numbers but the main focus is on making them more automated and smaller.Earlier this year Hartzer said Westpac would achieve branch efficiencies by using systems such as videoconferencing that would allow it to locate its branches in smaller spaces. New branches will be 25 per cent to 30 per cent smaller than current ones.PwC financial services leader Julie Coates said the branch issue was more one of digitally enabling them as part of a multi-channel strategy, rather than focusing on the number.Coates said one of the most striking outcomes in the latest round of results was that the big banks' net interest margins, at an average of 2.02 per cent, had fallen to levels last seen in 2008.She said this was an indication that competitive pressure was very strong across all parts of the banks' businesses.ANZ's NIM fell nine basis points to 2.04 per cent, Commonwealth Bank's fell five basis points to 2.09 per cent and National Australia Bank's fell four basis points to 1.85 per cent.Westpac managed to hold its NIM steady at 2.09 per cent.Pollari said it was not just managing branches that required radical thinking. He said the banks had done a good job introducing new technology into the customer-facing parts of the business but needed to do this across the whole value chain.He said blockchain technology had the potential to transform the back office.