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Saturday, December 03, 2016

Bank and Financial Products

The Death of Bank Products has been greatly under-exaggerated   by Brett King
This is an excerpt from my new book Augmented: Life in the Smart Lane
Since 2005 I’ve been predicting the decline of branch banking. For almost 10 years I fought bankers who decried my assessment that branches would cease to be the most important channel in banking, to be replaced by far more efficient mechanisms for revenue generation and relationship. Today the discussion is increasingly resorting to a sort of desperate plea — “but branches aren’t going to die completely, are they?” No one is saying branches will grow.

The United Kingdom, the United States, Spain, and a host of other countries are seeing the lowest number of bank branches in decades. For the UK you’d have to go back 60 years to find lower numbers of bank branches than we have today, and 2014 saw the use of bank branches fall 6% in a single year — the biggest reduction ever. In the US banks like BofA, Chase and Wells have cut more than 15% of their branches in just the last 4 years, bring their branch levels back to that of the early 1980s. While the US has only seen declines of 1–2% per year in branch numbers, branch footprint may be a much better indicator of the waning support for branches. Wells Fargo has reduced their branch square-footage by 22% in just 6 years, and for BofA it’s one-fifth of their branches that have 
already disappeared in just the last 5 years. .... 

“We don’t know how to grow without [branches]… But, we have taken the total square footage of the bank from 117 million square feet at the time of the merger with Wachovia in January of ’09, to about 92 million square feet today, and we’re continuing to go down from there.”

John Stumpf, Wells Fargo CEO — ClearingHouse.org interview
The reason we’re reducing branch numbers and square footage is obvious — customers just aren’t using branches as much as they used to. They don’t need to. It’s not a branch design problem; it’s a customer behavior problem.

When it comes to customer behavior, however, the greatest challenges for banking are yet to come and they aren’t channel-based, they’re product-based.

Products that make sense in a digital world
By 2020 we’re going to see 50 billion new devices connected to the Internet — everything will be smart. Smart Fridges that order your groceries or can tell you what you can cook with the remaining items inside, sensors you wear on your wrist or in your clothes that monitor your health and activity, cars that will talk to each other and drive themselves, smart mirrors that will show you how you look in that new shirt, robot drones and pods that will deliver you groceries or Amazon order — the world will be filled with smart stuff.

We live in a world where new technology emerges and is adopted in months today, versus the years it took previously. It’s all moving so quickly. As more and more technology is injected into our lives, we become acclimatized and just accept the increased role technology has to play. This is known as technology, adoption diffusion.    .... " 

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