Forget about the burden of increased regulations — bank executives may face much bigger problems.

On a day when approval of the Volcker Rule dominated the headlines out of Washington, executives at companies such as PNC Financial Services Group (PNC) and Wells Fargo (WFC) focused elsewhere: the demographic and technological threats to their retail business.

Regulatory costs "are almost irrelevant" when compared with the massive changes ahead as banks try to engage young, tech-savvy customers who do not bank at traditional branches, William Demchak, the president and CEO of PNC, said Tuesday in New York during a financial services conference hosted by Goldman Sachs.

"We're in the midst of a fundamentally changing retail-delivery channel for these products," Demchak said. "Regulation costs are almost irrelevant to the change I think we're going to go through in retail banking."

While many bankers cite new regulations or sluggish loan growth as their primary challenges, Demchak said the bigger hurdle involves transforming physical branches.

"Today, 90% of our physical branches are traditional branches. In five years we want it to only be a third of them," he said of Pittsburgh-based PNC. "We're going to remove tellers so that we have more automation, have more universal sales people in a branch, have much smaller square footage [and] introduce technology. We'll drop the operating costs out of it, and it will deliver a service that tomorrow's bank client expects."

Wells Fargo (WFC) has also been grappling with the impact of rapid technological change on customer behavior, CEO John Stumpf said at the same conference.

Five years ago, when Wells merged with Wachovia, the San Francisco bank had about 116 million square feet of physical space, Stumpf said. Today that number has fallen to around 93 million square feet. "And I think we still can reduce more," Stumpf said.

Wells Fargo has been experimenting in Washington, D.C., with a 1,000 square-foot mini-branch - a tiny footprint compared with the roughly 5,000 square feet of a traditional Wells branch.

But even at a time when 11 million of Wells Fargo's customers are using mobile banking, the company still sees the branch network as a critical element of its customer acquisition strategy, Stumpf said.

"Even for the millennials, who don't visit the stores often, stores are still critically important to setting up the account, and being there if there is really a need," Stumpf said.

Since PNC acquired the retail operation of Royal Bank of Canada, it has focused on growth in the Southeast, increasing staffing levels in wealth management, commercial-and-industrial lending and other niche services, Demchak said. The bank also plans invest more to automate its operations and cut costs.

Demchak reiterated a theme he has harped on before, that banks need to let customers pick and choose the products they are willing to pay for, like paper bills, and stop giving services away for free.

"We come from a world where everything was free, banking was free... and in the future it's all about choice," Demchak said. "So think of a menu where you literally go through choices and click boxes. Maybe I don't need physical checks but I need a debit card and want online banking. People are willing to pay for things they value and want. "

He also believes consumers will start consolidating disparate bank accounts and go with one primary bank provider.

"We've made progress on planning and branch format, but if you think about the path to a seamless digital physical branch network, we have a lot of work to do," he said.

Bank of America CEO Brian Moynihan made similar comments about the changing nature of retail banking at a conference last month. B of A had has cut 11% of its branches, to 5,400, and aims to cut more. It will increasingly rely on a mix of megabranches that offer many services, express outlets and mobile or other electronic offerings to reach customers.

"Everybody is carrying a branch in their pocket right now with a smartphone," Moynihan said last month.

Neither Demchak nor Stumpf mentioned the 70-plus-page Volcker Rule, issued Tuesday, during their presentations at the Goldman conference.

Citigroup's (NYSE:C) chief financial officer, John Gerspach, said he wants to study certain details of the newly approved rules, such as the documentation banks will be required to maintain in order to qualify for exemptions from restrictions on trading activity.