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A freeze on hardware and software spending? If that means a general IT freeze including on Mobile and Web, these guys are screwed...

BK

Given that I was on the panel and was supposedly slapped down, I think this article needs a firm clarification.

What Citi demonstrated was it's preparedness to work with partners such as BANK 2.0 players. Antonio did NOT demonstrate anything that was progressive on the user interface, social, mobile or interaction perspective in anyway other than Google Wallet (which is a Google innovation). So a 'slap down' is hardly an accurate representation. 

In fact, my view is that Citi showed they are gearing up fast to allow BANK 2.0 partners like Google Wallet and PayPal to hook into their ecosystem/back-end through APIs. This shows they understand they won't be able to dominate the front-end, and need to be open to new modes and new customer interfaces...

Keith,

How do you see Risk being redistributed?

BK

Alessandro,

Thank you for the local Italian examples!

BK

Anon,

You argue that banking needs to be simple to work. I fully agree. 

There's only one problem - when you simplify it, as needs be, then the 'branch' which is theoretically for high-touch, complex products, reduces in importance for day-to-day banking.

Let's think about the mounting evidence:

1. Cheques in terminal decline
2. Cash in decline
3. Banked engagement levelling off in developed economies, underbanked growing through pre-paid debit cards, etc
4. Mobile and Internet banking engagement rapidly growing in utilization
5. Branch engagement shrinking at 6-10% per year on average
6. Average customer visits to branch declining rapidly
7. Increasing workarounds getting traction due to slow innovation (PayPal, Square, Google Wallet, etc)

The evidence suggests that the future will be painful. A broad defense of branch activity either means we're not prepared for the future, we think consumer behavior will suddenly change and reverse course, or that this fuss around customer engagement is all bunkum.

Apple stores succeeded because they had cool and aspirational products, but even today Apple still sells more iPads through their online store than their physical points of presence. The reality is that banking products are neither cool nor aspirational, and not being physical are poor fits to physical distribution. 

When we move to simplify banking - it will be a move to integrate banking into our customers lives without the friction we present today, and branches will inevitably be a victim of that friction.

But don't worry - you still have a few years left to enjoy the sunset of the branch network. 

Enjoy it while it lasts!

BK

John,

Agree. The path to a solution for this probably lies in a data organization or a new start-up that works to bridge the gap.

It needs someone like Google though with the power to bring disparate parties together. Banks are too insular and the players like Visa, Mastercard, SWIFT that might be able to provide a platform of some sort will be too concerned with owning it that it would never get widespread acceptance...

BK 

Zennon,

You are absolutely correct in your assessment. The nature of China's history means that they are suspicious of the intentions of outsiders, and contracts are largely viewed as constructs to be circumvented in the future in the event that there is a threat to the China partner. Thus, the psychology is always looking for opportunities to gain a position of strengthen for a future position where risk might emerge. 

Anon

Robin,

A simple cost-benefit analysis on that basis would put most of the branch networks today at risk.

Add in staff turnover which in some markets is as high as 40% and you have a real emerging issue that I can't see being solved with a re-positioning of the branch as a high-touch sales centre.

BK

Your phone will do everything you can do on an ATM right now, because you won't need cash...

Alessandro,

In my book BANK 2.0 I posited exactly the same position as you've put forward, but that was 2 years ago (at least when I finished writing it).

Since then, the data I'm seeing in changes in channel utilization, the shifts in other similar industries and the level of commitment by banks to create real service centres is all leading to a crunch. While I agree that some will make the transition, most won't make the transition fast enough, and will come to a cliff in respect to branch activity that will lead to a rapid deconstruction of the business based on poor value chain understanding.

Just like bookstores, a few reinvented branch spaces will undoubtedly survive, but the scale of shift will be earthshattering to the industry as a whole. 

I recently visited a Citi "Apple Store" concept in Union Square in New York. Lots of technology, cool spaces, design, etc. I was there for 15-20 mintues sitting and wasn't spoken to by a single member of staff. The problem here is culture and skillset. The culture of banks aren't to be like Apple Stores as retail spaces. The skillset in current branches is a 90% poor fit to the future you describe.

The question becomes how many of the banks we know and love (sic) can really, truly make this transition?

I'm increasingly doubtful that this transition can occur, because although it has to for survival, there's very few that are committed to that level of transition. Thus it is just unlikely to happen for most, despite it's potential for success and the pure necessity of it.

Regards,

Brett

If anyone has any doubts that retail banking has changed forever, this is the start of the shift in retail distribution. Branches and outdated skillsets to be replaced by alternative distribution and new skills. 

Banking is forever changing. If you don't adapt, it will be costly.