[GUEST POST] Steve Stryker Former Chief Operating Officer at Scott Credit Union.
Approximately 65 million years ago an asteroid collided with the earth near the Yucatan peninsula in Mexico. Thousands of miles away a dinosaur may have no idea what just occurred and no way to escape its impending doom. Ultimately, the extinction of the dinosaur led to the rise of a new species that was until that time existing on the margins, mammals.
We owe our existence to this catastrophe.
Today US financial institutions are confronted with the strategic question of what to do about branches. The influx of technological advances and automation of processes and rise of the smartphone makes one question what is the role of the branch. Many endeavor to transform the branch to a sleek retail high tech environment filled with a plethora of self service solutions for its customers/members. All processes become paperless including the new account and loan applications. This approach is an evolutionary link between the traditional branch, complete with teller line and queuing ropes, and the virtual branch. This strategy is a safe and smart approach to deliver what the consumer ultimately wants, never to have to set foot in the branch again. However is this just a matter of throwing money down the drain to push off the inevitable?
Smart money would be to invest as many resources into achieving the goal of never seeing the consumer at the branch. The financial products offered have no real tangible appeal to the consumer. Unlike clothing or automobiles the consumer does not need to come in and try them on or take it for test drive. They are abstract and can be compared to other products remotely. There is no advantage in coming in to see them. The notion that consumers expect a building is merely a matter of brand. Marketers can work to untether the idea of buil
ding from the definition of financial institutions in the consumers brain. Credit Card companies have proved that the consumer will take a loan product and repay it without ever considering where a branch building is. Deposits have always been the key and historically conveniently located branches meant success in building a deposit base. Then comes mobile deposit. The asteroid may have just hit. We may be thousands of miles from the epicenter but the effects are beginning to take hold. Wells Fargo just announced it will be closing 900 branches between now and 2020. At the same time it is increasing its stake in technology.
The technology startups have been chomping at the bit to blow up banking as we know it. One thing has consistently held them at bay, regulation. The current administration is committed to reducing regulation and the burden it has placed on financial institutions. This approach is welcomed by banks and credit unions alike. However this has served as a significant barrier for non financial tech companies to enter. Will this wall be eliminated? If so, how quickly will service be redefined by convenience? More focus needs to be placed on automation of business processes and development of digital marketing expertise than transformation of the branch building. Like the dinosaurs, once we realize the asteroid has hit it is most likely too late.
