Old-School Banking: There’s No Going Back

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In an American Banker editorial titled A Return to Old-School Banking (part of a series the publication calls What Bank Customers Want), the author writes:

“I prefer the old-fashioned banking model. I don’t care for mobile banking. I don’t own an iPhone. I like my BlackBerry and I’m fine banking in a physical branch. I live in the city. It’s not a big deal for me to walk into a branch; they’re all over the place. I pay my bills online, but prefer to make deposits and withdrawals (over $500) with a person. I also need a live teller when I manage my brokerage and retirement account. My bank has assigned a person to oversee this account.”

Amazingly, in less than 100 words, the author manages to distinguish herself from practically everyone in (what I’m guessing is) her age bracket.

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My take: The views expressed by the author of this particular editorial do not reflect what “bank customers want.”

Bank customers–OK, not all, but many of them, and especially those in the Gen Y and Gen X age groups–want to avoid talking to people at banks. They:

    • Do not want to make deposits “with a person.” They’re happy to have their paychecks automatically deposited in our accounts, they’ve become increasingly comfortable depositing checks and cash in ATMs, and they’re looking forward to using our smartphones to use some ridiculously-named service called remote deposit capture.
    • Do not routinely withdraw $500 or more on a regular basis. They pay with debit cards, credit cards, prepaid debit cards, and our mobile devices. Theydo not carry around $500+ of cash.
    • Do not need a live teller when they manage their brokerage and retirement accounts. First , because many people in this age bracket don’t have those accounts to begin with. Second, because many do not have nearly enough money in their brokerage and retirement account to warrant having a person assigned to “oversee” the account. And third, because nobody (OK, except maybe the author of the editorial) wants to talk to a “teller” about their brokerage and retirement accounts.
    • Are not OK with going into bank branches. They (think they) have better things to do, regardless if there’s a line in the bank or not.

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There’s more not-so-typical stuff in this editorial:

“Sometimes they call me to discuss my holdings, which is unnecessary because if I wanted to do something, I would’ve approached them myself.”

Most people in this country are not very engaged with the management of their financial lives. They’re not likely to know when they need to change the composition of their holdings, or the allocation of the 401(k) contributions.

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But the part of the editorial that stuck in my craw the most was this:

“The two primary functions of banking should be to take deposits and to make loans. All other services should be supplementary to these two primary activities. I wish banks would refocus more on traditional services. This is particularly true when it comes to making loans, given all that money from the Federal Reserve sitting on the banks’ balance sheets.”

The two primary functions of banking should be taking deposits and making loans? Is that what customers really want? Does the average or typical bank customer know how much money from the Fed is sitting on banks’ balance sheet?

(Full disclosure: I have no idea how much money from the Fed sits on banks’ balance sheets, I don’t know if any money from the Fed actually sits on banks’ balance sheets, and if it does “sit” on those balance sheets, I don’t know what banks do with the money).

I would argue that customers can’t articulate what they really want from banks. Taking deposits and making loans isn’t consumer-speak. If you can find some articulate customers, and asked them what they want, I think they would say:

“Make it simple (and inexpensive) for me to manage my money.”

The problem is the “traditional services” the author of the editorial longs for don’t exactly do this.

Despite the views of the author–which she certainly has every right to have–“old-school” banking is not what most banking customers want. This editorial represents a sample of one.

And while many in the industry are critical of, or disappointed with, the speed with which the industry is moving to “new-school” banking, the industry is indeed moving towards new-school banking.

And (thankfully), there’s no going back.

(Cue Steely Dan: “…and I’m never going back, to my old school”)

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