Ghost Branches; FinTechShark


Full service banks exist to satisfy all our banking needs. We go in for deposits and withdrawals. We need loans, investments, and CDs and our ‘relationship banker’ helps us with that. Regarding business banking, we rely on the branches even more for fast deposits, merchant services, and so on. Is that still the case? Does branch banking carry the same need for the customer of today? Even if it did, do the banks still find branches worth keeping open?

The Happenings

Dozens of banks are closing doors on local branches. Wells Fargo has closed over 400 branches, Chase branches have shrunk by 9%, and Bank of America by 15% source. They are consolidating to cover larger geographic areas. They do not have much choice if you look at banks as a for-profit business and not your best friend relationship banker catering to your needs. Banks themselves are to blame for the loss of foot traffic in their branches as much as the revelation of new technology.

Short Dollar, Hard Results

Checking accounts used to be free. One day Big Bank decided to take the short-term view and charge to maintain them. They gave you options to keep it free by maintaining a certain amount of money in your account (to make interest on your money). The easiest option, by far, was to have a direct deposit set up with your employer so you did not have to come to the bank and manually deposit your check. That helped banks trim teller staff and shorten lines for other customers. Since no intelligent customer wants to eat fees, the pendulum swung hard and soon less and less customers were coming in to deposit money. The banks were still getting their deposits but unforeseen consequences kicked into gear.

Consequences of the Short Sighted

Banks sell and cross sell lots of different products for their customers. Some of that comes from literature in the bank with banners and brochures, but most come from the tellers cross selling products that might fit customer’s needs. If a customer does not frequent the branch regularly to deposit their money then how do you cross sell and even educate your customers on bank products? Product numbers dropped with less foot traffic and the more profitable products were struggling to find a way in front of customers.

Products on Dusty Shelves

How do banks market their products now? Perhaps like Amazon or other retail stores. Banks must treat their products like something tangible that can be sold. Target through online advertising, or through 3rd party sites, like Zillow or Redfin, for home loans. They have a large customer list they can draw on, but that is assuming the bankers are making those semi-cold call dials that will lead to business or email drip marketing. Sadly, this is not a far cry from boiler room dial-for-dollar telemarketing.

Lost Customer Service

Bank branches will not go away completely. There is something to be said for face to face customer service and telling a loan officer a story. Engaging the human element of emotion is far better for lending than some online bank dictating help from numbers of some think-tank algorithm. However, for banks to fill the funnel for their other products institutional practices need to change.

Help on the Horizon

As FinTech expands across the landscape and evolves, there are marketplaces for banks to dip their feet in. Regulation slows things down, but banks should stop being gun shy and take a chance integrating with other platforms that will help drive business their way. The sub performing products can be bolstered. Finding and partnering with those marketplace businesses will help significantly.

Orbitz or Bust

Follow the path of the airline industry. When the likes of Expedia and Priceline hit the market and customer traffic left the big airline company’s websites, they formed their own aggregated company called Orbitz. The online lending industry is now ripe to do the same. There are a small number of platforms that are privately owned but becoming more and more known. There are a good option for the big banks to invest in rather than starting from scratch.

Changing of the Tide

As the financial industry changes, new ways of doing business is being conducted. Lending institutions might want to be a part of the change rather than resist it. Empty branches mean pivoting business to a more substantial solution. These changes, away from brick and mortar branches, are a great start to a new world of banking. The goal should be these closures are not forced due to budget and fiscal failures but as a concise, proactive effort to adopt to the financial climate.

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