The bank is dead. Long live banking.
Are predictions about the death of bank branches or even banks, exaggerated? Likely. But there's no denying the decimation of the bank, and especially the branch, as we know it: it is estimated that branch activity in the developed world is down by 90 percent compared to what it was around 20 years ago. In his latest book, "Branch Today, Gone Tomorrow", bestselling (and controversial) author Brett King declares that his children might never need to enter a branch when they're older. I think he has a point.
But, even as haloed banking institutions make headlines for closing down the largest number of branches (they're also cutting ATMs), banking itself is coming along just fine. With the emergence of a host of alternative financial service providers - from retail chains to mobile operators to social lending startups - the fate of banking is no longer tied to that of the bank. Indeed, going by indications such as Walmart's success with their debit card, the growth of peer-to-peer lenders like Zopa, or even the popularity of the exploitative Payday Loan, it's clear that banking, while it has broken its traditional mould, is very much alive and kicking. Only, lending and borrowing is no longer the sole prerogative of the traditional bank. Nor is product innovation or process design.
Where does this leave the bank? In a pretty optimistic place, I'd say. In my view, by disrupting the status quo, these developments have forced banks to look at new revenue opportunities and elevating their role of financial intermediary to that of trusted financial advisor. The good news is that this is where banks have the upper hand over all their new rivals, for they are the only ones with access to rich historical data and expertise built over decades of existence. What's more, they also have a tailwind in the rising demand for advisory services among consumers who continue to search for ways to preserve their financial resources. There are options aplenty. At the top of the list are Personal Financial Management tools; tools such as financial modelers, comparators and simulators that banks are already providing to relationship managers - or their customers - to help with budgeting, expense management, retirement planning and investment decisions. Imagine the impact banks could make if they could link up these tools to their customers' accounts and thereby proactively make recommendations that are relevant up to the minute!
Thanks to advances in mobile and social technology, banks can leverage their vast structured and unstructured data resources to provide consumer friendly financial advice anytime, anywhere. Think advisory apps that customers can download for a fee from the Internet onto their smartphone or other mobile device... an example could be that of a social investment advisor application, which tells users which products their friends or social network community members have purchased recently.
Also, starting now, banks must take their usage of analytics to a higher level, where insights are not only used to understand the past, present and future, but to actually provide financial advice to customers before they ask for it. So, yes, the old bank is dead. Long live banking in its new avatar!