The Silly Branch Banking Debate

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An email from BAI Strategies tells me that:

With the coming launch of his Movenbank venture, Brett King intends to prove that banks can replace branches with all-digital service delivery, “The core difference for us is that our cost-of-distribution is so much lower than a traditional retail bank.”

My take: Not true. Brett King isn’t trying to prove that at all.

With the coming launch of his Movenbank venture, Brett King intends to prove that he can create a profitable business providing financial services without having to invest in a physical presence.

Perhaps, in other contexts, like speaking at conferences, Mr. King advocates for the elimination of branches in favor of “all-digital service delivery.” I don’t know.

If he does advocate for that, then he’s right….IF. However, he’s wrong….IF.

IF a bank is willing to forego business from a certain segment of the population, then it certainly can dump its branches (or not create them, in the first place) and go all- (or predominantly-) digital. This isn’t new. ING Direct reached oodles of billions (you can look up the exact amount, I’m too lazy) in deposits without having branches (cafes don’t count).

However, IF a bank still wants my parents’ business (see my dad’s banking story), it needs branches. Not a question. The guy isn’t going to bank with an all-digital bank.

Talking about the future, and whether or not today’s Gen Yers, and future generations, will want and need access to branches makes for nice conference and blog fodder, but it ignores current realities. There are tens of millions of Boomers and Seniors who would like banks to know — like that guy in Monty Python and the Holy Grail said — “we’re not dead yet.”


The bigger issue in my mind relates to Brett’s comment regarding the “cost of distribution.”

He’ll tell me if I’m wrong here, but I think he’s referring to “cost of delivery.” And, if so, he’s 100% correct, and I doubt we’ll find too many people who would dispute that.

But the challenge for established banks isn’t whether or not some upstart can provide services at a lower cost through all-digital channels. The challenge is three-fold:

1. How many customers will an all-digital bank acquire?

2. What is the cost of acquisition (not delivery) that established banks have to incur with a cost structure that includes branches?

3. What is the political feasibility of reducing branch presence?


As far as I’m concerned, many of the digital advocates (and hello, I’m one of them), tend to ignore this third challenge.

  • Want to close branches where my parents live? The AARP will be on your case.
  • Want to close branches in poor, urban areas? Consumer advocate groups will be in your face.
  • Want to close branches in affluent suburbs? Why the hell would you want to do that?

Earlier this year, I wrote about what I called “political tightroping” — the need to tread carefully with policy decisions that might have political ramifications. This is not a good time for banks to invite negative publicity.  

The reality of today might just be that established banks can’t significantly reduce their branch presence. 

So the real question isn’t “Do we need branches?” but “How do we attack the cost structure to more profitably deliver services?” 

I’d start by eliminating checks. But damn, that’s just going to invite more political pressure, isn’t it?

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