Needless to say, over the last 12 years the Internet has dramatically changed the bank-consumer relationship. Mobile technology promises to accelerate that dynamic and make the physical branch less relevant.
At the turn of the century, banking was being disrupted by online upstarts such as NetBank, Wingspan Bank and TeleBank. At the same time, many of the larger regional and money-center banks saw the importance of the online channel and built rudimentary websites that allowed for basic tasks such as checking balances and account history. These services were followed by online bill pay – perhaps the most talked about feature of the day. Over time, additional self-service features were added allowing online customers to manage the bulk of their banking needs via the Web. As a result, many predicted the imminent demise of the physical branch.
But branches never died and, in fact, they seemed to flourish. In Manhattan, where our offices are located, there seems to be more bank branches popping up than Starbucks locations. But then something happened in the form of a little black box called the iPhone. Only five years old, the iPhone has ushered in the smartphone era and, with it, changes in consumer behavior that will affect banking in the years ahead. This includes
- Instant access to answers: The always-on, always-connected nature of the mobile phone allows us to answer almost any question anyone ever has. This will bleed into financial services by requiring firms to answer questions like "What's my balance?" or "What are the best mortgage rates right now?" or "What are CDs paying now?"
- Video chat: Oh how the Jetsons were right. FaceTime and Skype continue to become more widespread and this increased comfort with video conversations will help bring virtual tellers to the ATM.
- Location awareness: GPS systems in mobile phones allow consumers to be tracked wherever they go. Not only are we already seeing banks use this ability with ATM locators, but location-aware "deal" functions are surfacing in a number of financial firms' apps (see Amex's MyOffers and BankAmeriDeals).
- Integrated cameras: One of the biggest things to hit mobile finance in the past couple of years is remote deposit capture. Since USAA first launched it in 2009, we've seen widespread adoption of this feature by other banks. We are even starting to see this affect bill payment. Next year U.S. Bank plans to launch a service that will allow customers to take a picture of a bill and import the data directly to the bank's bill-pay service.
- Cashless payments: While debit and credit cards are arguably the reasons consumers are comfortable with cashless payments, mobile payment systems are becoming more enticing. Starbucks' app showed one way mobile payments could be made without NFC, and Apple's new Passbook has the potential to make mobile payments mainstream. We're already seeing banks dip their toes into digital wallets and merchants are experimenting with systems like Square.
Where does this all lead? Will the branch finally die? Who knows? But to paraphrase Mark Twain, the reports of its death have been greatly exaggerated. It seems certain that technology will continue to reshape the customer experience and probably for the better.
Consumers will have more control over the banking relationship and as banks develop tools to meet this need, customer loyalty should increase. It seems unlikely that brick-and-mortar locations will ever completely disappear. It is likely, however, that technology will affect branch design by incorporating increasingly sophisticated ATMs, enabling smaller branches to be staffed by fewer people.
Michael Ellison is president of Corporate Insight, a firm that provides intelligence and user experience research to financial institutions.