By the year 2030, bank branches will be barely recognizable from the ones we know today, thanks to the ongoing widespread adoption of smartphones.
For one thing, the role of the future branch will be primarily as a marketing and new account indoctrination center. Smartphone use will eliminate most face-to-face financial transactions, as well as paper checks, paper currency and plastic cards – not to mention the costs associated with those media.
Card interface devices, check, currency and coin security and handling devices such as change makers, bill counters and ATMs will also disappear. All of these will be replaced by electronic messages, sent via the Internet, which smartphone customers initiate themselves and which provide the same information as the replaced media.
As smartphone-based banking takes hold, banks will need to make sure they do not lose something they take for granted: the valuable information that is currently gathered by tellers in face-to-face transactions. For example, what language does the customer speak? How familiar is the customer with a bank product and its use?
The advent of smartphone-based transaction applications will require the development of a "personal profile database.” Suppose a customer has bad eyesight. The profile stored in the database will alert the self service unit or smartphone display to adjust the displayed character size so the customer can read what’s on the screen. The profile data will be collected from new customers during their first visit to the new smartphone-based, marketing-oriented, branch.
The new, marketing-oriented branches will require less space. But a high-traffic location will remain a strong marketing advantage. The former transaction-oriented tellers will need to be reoriented and retrained to perform their expanded marketing functions. These will include introducing bank products with smartphone demonstrations. Also, they will offer customers a selection of downloadable smartphone applications for everything from routine transactions to mortgages and other loans (with terms and other options) to fund transfers.
The applications will need to a have a "learning curve of one". That is, the application will need to be constructed so as to be mastered by the customer after one use or one demonstration.
Results to date also indicate the smartphone also provides an economically viable way to acquire unbanked and underbanked customers. These consumers are already big users of smartphones and other mobile phones for social and employment purposes. So the infrastructure is already there – one more reason to have fewer, smaller, more focused branches.
The economics of the smartphone-based bank will be very attractive to management. Smartphone-based economic improvements will make the retail bank a very competitive entity compared to the pre-smartphone model. Banks will be able to respond more nimbly to the challenge from retailers like Wal-Mart that are starting to provide financial services.
Smartphone-based banking offers an important set of functional improvements in a banking world beset with expanded competition and increasing costs. Management teams will need to be aggressive in taking advantage of these improvements before competitors in other industries also offer them.
Jerome Svigals is the director of the Smart Card Institute, a consulting firm in Redwood City, Calif., and the author of “Retail Bank 2020”
