Banking today: From somewhere you went to something you do

Change comes in all shapes and all sizes, touching virtually all aspects of your life.  Growing up in rural Louisiana, I bought my bacon and eggs at the local Piggly Wiggly.  But today, I can get them, all my other groceries and a new set of tires in one trip to the local Super Walmart.  The community doctor has been replaced by telemedicine with highly specialized teams of physicians capable of curing illnesses once considered fatal.  And banking—from Mermentau, Louisiana to midtown Manhattan—has undergone a transformation too.   

Over the last decade or so, three major disruptions have impacted the banking industry:  one technological, one economic, and one regulatory.  Any one of these would have been trying, but all three at once created a perfect storm.  Through it all, banks provided a valued and essential service to consumers. 

{mosads}Banking today looks very little like the banking of yesterday.  The revolution started with the introduction of the ATM and has evolved further with internet banking and the adoption of mobile banking.  Of the two-thirds of Americans who own smartphones, many do all of their banking via an app, only rarely setting foot inside a bank branch.   

Some products are still best delivered in a face-to-face interaction, and certainly some consumers prefer that way of doing business.  But for our increasingly cashless, checkless society on-the-go, and especially among younger consumers, the convenience of mobile banking is irresistible.  Banks have adopted new technology and found ways to compete using it.  

Among the consequences of this almost entirely customer demand-driven change, banks have been closing branches and otherwise reallocating resources that in years past would have gone to physical properties and paper transactions.  Given the new security challenges raised by the move to mobile and online transactions, banks have also made a significant investment in personal data security, technology useful both inside and outside the banking industry.  Innovation and industry-wide transformation will continue in these and other areas, so regulators—and consumer groups—need to recognize the rapidly changing world consumers demand and support bank innovations to meet these needs. 

In addition to the ongoing technological changes in the industry, banks also have weathered the poor economic climate of the last six years.  Even though banks have made progress since the fall of 2008, we all know the economic recovery has been anemic.  Despite declining unemployment numbers, the labor force participation rate hovers near levels last seen in the 1970s.   Even with relatively strong job growth, economist Dino Falaschetti points out “growth has not been fully translated into economic opportunity.”  Consequently, human capital and financial capital sit on the sidelines.  This—without question—limits the opportunities for consumers banks serve.   

One further consequence of the late economic crisis is increased government intervention in the banking industry.  Banks took more than their fair share of the blame for the 2008 crash, and Congress and the regulators seized the opportunity to pass the Dodd-Frank Act into law.  Some of Dodd-Frank’s reforms were needed—for instance, stronger mortgage underwriting standards have been a good thing for consumers and the economy. However, because we did not know then what we know now, the one-sized-fits-all Dodd-Frank model often serves more as a consumer hindrance than a protection.  Regulators are increasingly limiting consumer choice and access to capital.  If this holds true and is permitted to continue, it will severely constrain capital investment and inhibit the growth of personal wealth, business development, and economic prosperity.   

Having navigated these troubled waters, my job now is to provide guidance and support for the industry.  It’s said the only certainties are death and taxes.  Everything else is uncertain and changeable—it is the nature of any marketplace.  New technologies and contingencies require flexibility and new strategies to meet them.  They also provide an opportunity for industries to change the way they serve consumers and give birth to innovation.  Only those who can continue to adapt will survive.  Like the last half century, it will be exciting to see how our nation, economy, and consumers benefit from banking’s ever changing transformation. 

Hunt is president and CEO of the Consumer Bankers Association (CBA) representing the retail banking industry, including the nation’s largest bank holding companies as well as regional and super community banks. He can be found on Twitter at @cajunbanker or @ConsumerBankers.