The end of a calendar year, and the beginning of the next, ushers in prognostication season. I smile when asked for predictions about the banking industry in the upcoming year, and I tend to politely decline to make bold ones.
I do believe that real, fundamental changes are occurring in our industry. But I've believed for some time that we're being changed by evolution, not revolution. This is particularly true when it comes to bank branches.
Not all that long ago, one of the most important tasks individuals and households needed to accomplish on a regular basis was handled almost exclusively in bank branches.
Just for kicks, sit down with a 14-year-old and explain the old way of depositing a paycheck. "You wait in line for someone to hand you a piece of paper (paycheck), get in a car and drive to another building (bank branch), wait in another long line to give that piece of paper to another person to hold for you (teller), so you could then write on other pieces of paper (personal checks) to pay for stuff." When you're done, he'll ask you about what life was like before electricity or indoor plumbing.
Shopping for products like loans and investments happened almost entirely in branches as well. It makes absolute sense that bank branches became the center of the financial services universe.
Today, most people in banking agree that the branch's historical function as a "transactional factory" is becoming a thing of the past. Improved digital technology, and increased adoption of that technology, means that fewer customers need to go to branches on a regular basis.
The branch-centric model has relied for decades on steady streams of customers who need access to services that are only available in branches. Now those streams are drying up.
Customers' desire for convenience is the driving force of this evolution. Convenience once meant providing customers with branches in easily accessible locations. Now customers increasingly define convenience according to their ability to handle their banking whenever, and wherever, they choose. You can build a bank branch on a person's front lawn, but if you don't give him ways to bank from his living room sofa, he's unlikely to consider you the most convenient bank for him.
Some organizations have been more progressive than others in developing sales cultures in their branches, which should help banks weather the change. But many of their best practices rely on an aforementioned stream of customers who come to branches by necessity.
Many people also argue, quite accurately, that branches are still the place where the great majority of accounts are opened. However, fair-minded people can debate whether that will remain true for the foreseeable future.
Consider the purchases you made during the most recent holiday season. Only a few years back, it was hard to imagine people making the number or variety of major purchases that they now make online. Even ingrained behaviors and habits evolve.
All that said, I'm hardly preaching doom about branches. Yes, branches are part of an increasingly outdated business model. But they will also be part of most successful business models to come.
The main reason I remain pro-branch is pretty simple. Branches and the bankers they house are the only real differentiator that banks have. The idea that thousands of banks can thrive by shedding their branches and shifting to purely online, or even predominantly online, operations is specious.
Think about it. How many online-only booksellers can survive in an Amazon.com world?
If an individual bank is going to remain relevant in its markets, it will be because of the business and relationship-building efforts of the bankers based in their branches. Many of those efforts will increasingly be made outside of the four walls of their branches. Bankers may spend a morning visiting local businesses or manning promotional kiosks and tables at a college campus or town fair. Opportunities like this multiply exponentially when our teams are occasionally untethered from their home bases. We will increasingly need to engage and initiate relationships with people where they work, shop, and play.
For the overwhelming majority of banks that survive and thrive going forward, branches and their personnel are not the factors that will hold them back. They'll be the human interfaces that keep them relevant.
Of course, some branches will inevitably close. Businesses open and close locations all the time.
But the winners going forward will keep a majority of their branches. They will reconsider their purpose, reformatting and retooling branch layouts and rethinking the roles that team members must play within, and away from, their branches.
When it comes to our banks' future, branches matter both lessand morethan ever.
Dave Martin is an executive vice president and chief development officer at Financial Supermarkets Inc., a Market Contractors subsidiary that offers design, construction, consulting and training services for retail banking programs. He can be reached at firstname.lastname@example.org and on Twitter at @instorebank.