Have you ever met one of those people who causes you to momentarily question your entire way of looking at the world? An out-of-the-box thinker whose ideas sound radical, yet plausible enough to make you wonder if the things you've always known to be true actually are?
That's the effect Brett King had, at least temporarily, on a ballroom full of bankers at the start of our annual forum on retail financial services. With persuasive data on the changing habits of consumers and keen observations about the power of digital media, King set the agenda for the rest of the event with his forceful case that branches are on their way out-something he hopes to prove (and perhaps hasten) with Movenbank, the all-digital direct bank he plans to beta-test this summer.
King predicted that three years from now, mobile banking services will be used by 70 percent of Generation Y, and the kids presumably won't share older folks' hang-ups about managing every aspect of their personal finances in the ether. "Banking for them isn't a place you go. Banking for them is something you do," King said, putting his bleak forecasts for things like in-branch transactions-which he says will have fallen by half from 2006 to 2015-into a broader, behavioral context.
The atmosphere in the room was charged as King left the stage. There was audible tut-tutting from the naysayers, but also an exchange of apprehensive glances from some audience members, who possibly were rethinking the life expectancy of a career dependent on the future success of branch banking.
For those who doubted King, and even for those who believed him but were made uncomfortable by his conclusions, a welcome reality check came quickly in the form of Ray Davis, the president and CEO of Umpqua Holdings, who immediately followed King on stage. Davis mainly offered up the standard CEO platitudes about building a culture, serving customers and modeling the success of retailers like Apple. But the audience seemed transfixed nonetheless by what Davis had to say, perhaps because Umpqua has been so darn good on executing on all of it, and perhaps because after King's harrowing look into the future, it was comforting to hear from someone who still believes that branches are a viable play long-term.
"If I am a banker, I think that the best way to generate as much business with you as I can is face to face," said Davis, whose Portland, Ore., institution deservedly prides itself on its cheerful staff, devoted customers and sharp-looking branches that are more than happy to host the occasional community yoga class. Davis' speech would have seemed to end the branch debate right there, with most of the crowd seeming to agree on the continued importance of bricks and mortar, especially as destinations for troubleshooting or consultative selling. Yet the question of branches arose over and over for the next two days. Nearly every keynote speaker and panelist touched on the topic, and after conference hours, the subject was the perfect premise for striking up conversations with old acquaintances, or even strangers. "So, are we all dead yet?" was one of the more macabre greetings, though hardly the only one, overheard in the Mediterranean-style outdoor walkways connecting the conference center to the main hotel.
Closely related to the topic of branch utility is mobile, a logical successor to bricks and mortar as the venue for many of the transactions currently taking place mainly at the branch. But while mobile may feel like the right place to invest, many conference speakers and attendees said they still have trouble making a proper business case for it-just one more example of how difficult it is to manage retail in a multichannel world.
"I see mobile technology as very important, but not a replacement" for branches, said Citizens Republic Bancorp CEO Cathleen Nash, a keynote speaker at the event.
Conference panelist Darren King, head of the retail banking division of M&T Bank (and no relation to Brett), predicted that channels will remain splintered for the long term, with customers largely continuing to go to branches to make deposits, to ATMs to withdraw cash, and to the Internet to transfer money between accounts or to research financial products. He advised banks not to worry so much about making sure that all their delivery channels be all things to all customers at all times, noting, "They just have to work well together."
But making that happen will no doubt require changes to the bricks-and-mortar channel, given the gathering momentum of the alternatives. As Movenbank's King observed, between mobile devices and prepaid debit cards, the young and the underbanked have more options than ever to access funds outside of the confines of a branch. "They don't understand checking accounts. They're never going to write a check. Yet this is the first thing we try selling them on" at the branch.
Even the ATM, a dinosaur among "new" channels, is again threatening the relevance of tellers-though ATMs themselves are ceding territory to smartphones with advances like remote deposit capture. Panelist Jay Weber, an FIS executive who has worked in the ATM space for 16 years, said he has witnessed more innovation in ATMs over the past two years than in the previous 14 years.
New security functions and video features might soon have customers handling more complex transactions, like renewing certificates of deposit, at ATMs. As the machines get more sophisticated, and as digital channels flourish, the need for live staff will diminish further. "We're not that far away from having no tellers, or one teller, per branch," said Thomas McDermott, cross-channel strategy manager at SunTrust Banks.
It sounds stark. But what he was really getting at was a hub-and-spoke vision of retailing, with traditional branches placed farther apart, and teller-less branches or ATMs filling the spaces in between. Between conference sessions, he told American Banker reporter Victoria Finkle that 80 percent of SunTrust customers, regardless of age, still want access to physical branches. But they "don't necessarily tell us we have to be on every single street corner."
Heather Landy is American Banker Magazine's editor in chief.
