Banks Scale Back The Brick And Mortar
March 13, 2015 by Patricia Sabatini, Pittsburgh Post-Gazette
March 13–Big banks have been scaling back their massive branch networks in recent years — closing offices and designing smaller ones — as more customers have fewer reasons to do their banking any way but electronically.
At least one industry player believes it won’t be long before traditional brick-and-mortar branches completely disappear.
Think about what happened to the video rental chain Blockbuster, said Ben Katz, co-founder and CEO of Card.com in Santa Monica, Calif., an online purveyor of customizable, reloadable debit cards and credit cards.
“The CEO of Blockbuster thought the company was doing fantastic in 2004,” said Mr. Katz, referring to the year the chain peaked with over 9,000 stores and some 60,000 employees.
Just a decade later, the company has all but vanished, killed off by low-overhead DVD kiosks and technology that conveniently streams movies on-demand directly into people’s homes.
In a few years, 10 years or less, Mr. Katz said, there still may be people who prefer branch banking, but there won’t be enough of them to justify the significant brick-and-mortar costs.
Mr. Katz, who spoke during an interview following a presentation at a Banking and Payment Innovations conference in San Francisco this week, expects traditional banks will move to a flagship model, similar to an Apple store.
“They’ll have one or two [locations] in business areas so they can meet with CFOs, and in fancy parts of town where they can meet with high net-worth people for retirement planning,” he said.
“For 90 percent of us, banks will keep our deposits and not see us face-to-face.”
In Pittsburgh, PNC Financial Services Group has been working to redesign its branches to address the shift to more electronic banking. The bank has said it expects, by the end of the first quarter, to have converted about 300 offices of its 2,700 branches to a smaller format that relies more on technology and eliminates teller windows.
PNC said close to half of its customers now handle the majority of their transactions electronically.
Mr. Katz, 36, a graduate of the University of Pennsylvania’sWharton School, said debit and credit cards should be around for at least another 20 years. But there will be fewer reasons for people to pull them out of their wallets as the payments industry transitions to using smartphones.
“Now, the main payment route is swiping a card. The new route is tapping your phone,” or holding it next to a contactless reader, he said.
Companies are already working on the next generation of technology for authenticating payments using biometrics, such as fingerprints and voice or facial recognition software.
“Very likely in the future, instead of entering card data, you will enter a fingerprint,” he said.
Patricia Sabatini: PSabatini@post-gazette.com; 412-263-3066.
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