Digital Banking: Is Your Local Bank Branch About to Become a Dinosaur?

Digital Banking – Phasing our the Bring and Mortar Banks Branch

Digital Banking

Digital Banking: Is Your Local Bank Branch About to Become a Dinosaur?

In the past, we have written about digital currencies like Worldcoin and BitCoin. For most, however, the dollar is still king and traditional financial institutions remain a big part of our lives. Until the past decade or so, banking has remained relatively unchanged. Banks consisted of a quiet, almost library-like lobby. Velvet ropes would guide us to the next teller, who would sit behind a window or tall counter. But the banking industry is undergoing growing, and in many cases, shrinking pains. There are big changes taking place in this legendarily stoic business and odds are they will, if they haven’t already, affect you.

The Growth of Digital and Mobile Banking

Banks have always seemed to be just a step behind when it comes to transforming digitally. In part, this reluctance to change has been purposeful. This was to cater to an older customer base who held significant deposits and were less likely to appreciate change. It also was due to security concerns and significant investments in bricks and mortar buildings and infrastructure. In the past, banks dealt with a large amount of currency and needed secure locations to store and manage it. Today, most money already exists in the digital realm.

Since the Great Recession of 2008, bank branches and employees have dropped significantly. This was due to economic concerns, competitive reasons, and the transition of a significant number of their customers to digital banking. Millennials, today’s largest generation, prefer digital banking and is quite comfortable conducting banking tasks on mobile devices. If checks aren’t direct deposited, banking apps can easily scan and deposit funds quickly and securely.

A report by a research firm CACI and quoted in an article in The Financial Brand predicts that physical visits to bank branches will drop by 36% by 2022. It also anticipates mobile banking to rise by a whopping 121% over that same period. This increase in mobile banking will lead to a drop in “old” technology like desktops and laptops by 63% over that five year period. Younger consumers are already comfortable with digital and mobile banking. By 2022, it is expected that these 18-25-year-olds will only find it necessary to visit a bank branch twice annually. Even older customers may find their visits limited to five to seven times per year.

Digital Banking

What Will Happen to Bank Branch Locations?

The American Bankers Association says that the banking industry has lost over 67,000 jobs since 2009. That is a bit deceiving because the industry is in transition and is hiring. Instead of hiring tellers and loan officers, however, banks are hiring more IT and technically adept employees to help facilitate this major shift in their industry.

Traditional banks are looking for ways to reinvent the banking experience into a more contemporary model. The traditional “Bankers hours” will likely become a thing of the past and the sterile bank branches will give way to more convenient alternatives. In Europe, banks are already experimenting with pop-up and kiosks type banking centers in malls and retail stores. In the United States, some large retailers have worked in establishing banking offices in their locations. They still mainly operate like traditional branch locations.

Will your local bank branch become a dinosaur? Well, a report from commercial real estate firm JLL says that bank branches will be reduced by over 25% within the next ten years. That still leaves thousands of bricks and mortar locations. What will they do at these locations and how will banks improve the customer experience with fewer employees?

Digital Banking

The Transition from Financial to Technological

To keep up with their strictly digital competitors, banks are making the transformation to become as much technical organizations as financial. They are also taking the opportunity to expand their services and products into other financial areas. But with a shrinking number of employees and locations, how will they accomplish this?

The answer may lie in machine learning and artificial intelligence.

You see, banking, after all, is a data-driven business making it an almost perfect industry for machine learning and artificial intelligence. Using predictive and customer analytics, your “teller” of the future will know the best time to suggest refinancing your home, changing credit cards, and even when you should start thinking about buying a new car. They know your age and can prompt you to increase your retirement savings. They will learn your willingness to accept or desire to avoid risk and offer investment products accordingly.

Your bank can determine when you get paid and how much you make. Currently, much of this data is siloed in different locations, on different servers in various data centers or in the cloud. It is just a matter of time before this information is connected and machine learning and AI combine to create your teller of the future. Will it actually be a robot? It will more likely be in the form of a digital image on your phone or on a touchscreen in a discrete, cozy private office at a bank branch. It will recognize you, pull up your past transactions and financial history, conduct your transaction, and offer financial advice and products. Some will find it imposing and a bit frightening. Others will embrace the speed, accuracy, and convenience of this new way of banking. They will sell you on the convenience and advantage of having all your financial data with one bank so they can better help you manage an all-compassing financial plan. It will be a compelling argument.

Banking may have been just a tad slow in embracing technology in the past but it is riding a tidal wave of change right now. Bank branches may not totally disappear but they will certainly change in form and function. Considering the drudgery traditional banking has been in the past, most of us will view this as a good thing. A very good thing.

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