Over 25 years later, branchless banking is not only a service most banking customers expect, but quite possibly “the biggest opportunity in banking today” according to the Wall Street Journal article entitled Veteran Banker Bets Branchless Banking’s Time is Here…Finally. Former Sovereign Bancorp executive Jay Sidhu believes mobile apps are the next wave of innovation for bankers.
“Mr. Sidhu thinks his new venture can steal market share from the nation’s biggest retail banks, catering to a generation of customers under the age of 35 he sees as fed up with high or complicated fees and bad customer service.”
The Wall Street Journal article claims that even today branchless banking accounts for only 5% of US bank deposits. The big deterrent to acquiring and keeping branchless banking customers, says Mr. Sidhu, is the inconvenience of having to boot up a home computer. But smartphone adoption and new mobile apps are expected to change this attitude.
According to Mr. Sidhu, “Millennials embrace technology, they want simplified banking services, hate paying fees and want to open bank accounts on a smartphone.”
This may be true. Accenture’s 2014 North American consumer digital banking survey indicates that a majority of banking customers are shifting toward digital banking products and services, and PricewaterhouseCoopers LLC (PWC) has been recommending branchless banking as a business strategy for boosting ROI to banks since December 2012. In fact, PWC claims that “if the branch model stays on its current course, it will become a financial burden to banks, cutting deep into cross-channel profitability.”
In The End of Banking As Usual, digital publication The Financial Brand claims that “younger financial institution consumers are nearly twice as likely as older consumers to consider switching to a branchless bank” and that there is an increasingly greater acceptance for using non-bank organizations such as T-Mobile, Apple, Google and Amazon for financial services, like pre-paid checking accounts.
So what can banks do? The Financial Brand lists three recommendations:
- Integrate digital banking by allowing your customers to access current products via mobile apps
- Establish partnerships with businesses already present in your customers’ lives to offer advice, discounts, cross-sales opportunities, and more through a “digital ecosystem”
- Provide new, products or services (like automated budgeting) that will make your customers’ lives easier.
In essence, the wave of financial innovation is cresting again. Consumer perception of what a bank is continues to change, and banks will need to adapt quickly.