We’re quickly approaching the end of a crazy year. As a society, we have had to change the way we live, and some things will never be the same. The pandemic has revealed hard realities for many businesses; none more so than banks.
These days, many people would rather bank online than set foot inside a brick-and-mortar bank. Given that the vast majority of banking can be done through apps, one has to ask: Does 2020 mark the beginning of the end for traditional banks?
Only time will tell. But from where we stand, things don’t look good for full-service banks.
Retail Banking Features That Could Go Extinct
Are the most enduring features of retail banking going the way of the dinosaur? It seems that way. Here are a few features of traditional retail banking that could become obsolete over the next decade:
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Bank branches and tellers
Expect to see a decrease in physical bank locations over the next several years. While it’s nice to see the friendly face of a bank teller, the introduction of new technology makes their jobs nonessential.
Just as automated checkouts already exist at grocery stores, so will they soon at traditional banks. Financial security tools should soon be robust enough to spot fraud without the help of a human teller.
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ATMs
As we transition toward a cashless society, ATMs may become like phone booths. While ATM cards haven’t been entirely replaced by dual-function debit cards — which can be used to withdraw cash as well as spend money — they’re already rare.
Without ATMs, what will consumers do on those occasions when they do need cash? They’ll get cash back at checkout. Until cash is truly obsolete, major retailers will keep it on hand.
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Traditional passwords
While passwords are today’s go-to authentication method, they’re neither the most secure nor the most convenient one. Instead of a long alphanumeric password, some banks, such as Bank of America, are already offering biometric sign-in options. Fingerprints, or even iris imaging, are secure and unforgettable ways for customers to access their accounts.
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Checks and paper statements
At one time, paying bills meant hauling out your checkbook; not so much any more. Thanks to online banking and apps like Venmo, paying bills online is now the norm.
Similarly, paper statements may soon disappear. Digital documents are legally equivalent to paper ones. And because digital statements don’t need to be printed, stamped, or mailed, they’re a lot cheaper than paper ones.
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Safe deposit boxes
These days, just 6% of bank customers rent a safe deposit box. What’s more, one-third of them are over age 65.
More and more customers are opting to store their valuables in safes at home. And with safe deposit box fees on the rise, consumers and banks may soon decide they simply aren’t worth the trouble.
As branches and ATMs close, traditional banks will struggle to differentiate themselves. To innovate and restructure themselves, they may need to raise their fees. Eventually, some will throw in the towel.
Brick-and-mortar banks are in for a tough time. The question is, what might take their place?
Fintech Firms Are Stepping Up
Bank closures will lag changes to consumer behavior. The pandemic-driven proliferation in fintech services proves some of these changes are already afoot. Top challengers to traditional banks include:
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Chime
Chime is a banking app that offers no-fee spending, online debit cards and automated savings accounts. Members can opt to get their paychecks up to two days early via direct deposit.
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Prism
Traditional banks have rolled out budgeting and online payment tools in recent years. Prism, however, goes a step further.
This fintech tool tracks users’ bills and sends reminders about due dates. Prism works with more than 11,000 billers and identifies potential errors automatically.
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Acorns
A popular investment management app, Acorns allows users to sink their spare change into stocks, bonds, other equities. A linked Acorns debit card offers no hidden fees and a round-up feature to automate investing.
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Braintree
A division of PayPal, Braintree provides payment services to businesses. Braintree accepts a wide variety of payment types, ranging from credit cards to Venmo.
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Blend
Blend’s digital lending platform simplifies the loan process for consumers. Whether it’s a mortgage or a car loan, Blend’s platform generates terms and offers in minutes.
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Circle
Circle is a crypto-financial company that enables internet-based businesses to use digital currency. Based on USD Coin, a regulated stablecoin, Circle makes global transactions more efficient.
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Brex
Designed to be a replacement for the business bank account, Brex offers cash management tools as well as cards. With Brex, businesses can schedule recurring payments, deposit cash, and track spend.
Brex cards offer tech companies credit limits that are 10-20 times greater than traditional cards with no personal guarantee. Life sciences companies with Brex cards get rewards on lab supplies.
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Tala
Tala provides credit access to people in underserved parts of the world, such as Kenya, the Philippines, and Mexico. The app uses alternative data to underwrite potential users who don’t have a traditional credit history.
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Verifi
Verifi offers payment protection solutions and risk management services to companies of all sizes. The platform provides cardholders, issuers, and merchants with access to real-time transaction data and helps companies securely process payments.
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Enfusion
Until recently, fintech companies haven’t catered to institutional investors. Enfusion built an integrated investment management platform to serve hedge funds, institutional asset managers, and family offices.
Enfusion’s offerings include compliance, trading, risk management, operations, and accounting. Traditionally packaged into separate tools, Enfusion’s services promise efficiency, accuracy, and security.
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TransferWise
TransferWise lets users transfer funds across the world at mid-market rates with no unnecessary fees. Companies can also use TransferWise to invoice vendors worldwide regardless of currency.
The fintech industry has exploded in the past decade. Combined with the pandemic’s hit to traditional banking, expect to see these companies take center stage in the next couple of years.
Traditional banks may not go the way of the dinosaur, ultimately, but they will need to evolve. No matter how established or wealthy, no business can avoid that truth of the market.
Disclaimer: This content does not necessarily represent the views of IWB.