“Finance will be the most disrupted industry in the next 10 years”
That was the message delivered by Peter Diamandis, executive chairman and co-founder of learning community Singularity University, at an Exponential Financial conference sponsored by his organization and CNBC.
Significant changes in the banking landscape—specifically, changes in branch banking—are a key example. Diamandis predicted in his Exponential Financial address that bank branches will soon be mostly obsolete, while Brett King, founder of mobile banking app Moven, told CNBC.com that the banking industry “will experience more disruption in the next 10 years than in the previous 100 years,” with bank tellers becoming “the telegraph operators of the 21st century.”
More Branch Closings
Statistics show a lower bank branch count now than in the past: CNBC reports that according to the Federal Deposit Insurance Corporation (FDIC), “last year saw the highest level of bank branch closures in the U.S. in history,” and that “the U.S. bank branch model, which peaks at a total of roughly 95,000 branches, is now down to 86,000 branches.”
According to S&P Global Intelligence, 1,947 bank branches closed in 2018, up from 1,919 in 2017. A report from S&P Global also revealed that last year, Wells Fargo bid farewell to five percent of its branches—for a total of 293 gone. During the same 12-month period, Capital One Financial Corp. decreased its branch footprint by 15 percent, and BB&T Corp. shuttered eight percent of its branches. At the time the report was published in late 2018, BB&T had put into place plans to eliminate an additional 150 branches in 2019. Citibank has also reduced its branch count.
While some of these changes are attributable to consolidation by financial institutions, there’s more to the story than that. Experts say a strong preference among many consumers—particularly millennials—to handle their banking digitally is likely among the catalysts for change. According to a recent report by consulting firm Accenture, 40 percent of millennials would consider banking without a branch. A whopping 700 million global consumers have begun banking on their phones, CNBC reports.
Additionally, more and more consumers are coming online. Ph.D. Ventures estimates that another three billion global consumers will be online by the end of 2020, bringing the share of global consumers with an online presence to 66 percent. Diamandis told Exponential Finance attendees that the number of new global consumers entering the marketplace will exceed these estimates, with as many as five billion new consumers—spurred to action by Internet expansion projects like Mark Zuckerberg’s Internet.org and Google’s Project Loon—joining the online fray.
The burgeoning number of fin-tech startups is another catalyst for this type of change. According to CNBC, there are 8,000 such companies in the U.S. today, “more than the number of savings and loans with charters,” and venture capital investment in fin-tech exceeds traditional banking industry investment in bank transformation. And as King told CNBC.com, “The biggest banks in the world in 2025 will be technology companies, and banks that grew through branch acquisitions in the ‘80s and ‘90s, that grew by physical presence, will have a real problem.”
A New Model
But even if they aren’t disappearing, bank branches are changing. In a blog post on Forbes.com, Trevor Dryer, a member of the Forbes Finance Council and executive vice president and general manager of CUNA Mutual Group, points out that Signal FCU has re-designed a branch to support a consultative atmosphere. Moveable walls allow staff to “easily re-configure the space for whatever members need at that moment, creating a semi-private space for a member consultation or a wide-open space for a community gathering.” Capital One has created cafes in its branches, where consumers can get one-on-one financial coaching and other advisory services as well as enjoy co-working space and lounge-like seating.
For its part, Bank of America is rolling out Advanced Centers, small branches equipped with videoconferencing capabilities and sensors, but no tellers.
Changing consumer attitudes should propel the transformation forward, Dryer notes. For example, 52 percent of consumers who participated in a 2018 Fiserv survey said they had visited a brick-and-mortar branch within the past month, and 80 percent stated that they had done so within the past six months. “But why?”, Dryer writes. “In the Fiserv survey, consumers reported visiting branches to deposit checks and withdraw cash. I believe that in the future, neither of those reasons for visiting a branch will hold true,” particularly as banks are making it easier for consumers to handle simple banking needs online and in a mobile fashion.
“The branch of the future will, undoubtedly, look and feel quite a bit different…more focused on providing advice and personal service—tasks that (unlike making deposits and withdrawals) are difficult to accomplish well online,” Dryer concludes.
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