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Paul,

I think you know where I stand on this. The issue will resolve itself in short order as cheques descend into oblivion. 

The issue is not whether or not there is a ever dwindling segment of customers who demand the right to still use cheques, but whether dominant behavior simply makes cheques too expensive to use for individuals or corporations. The trick is simple. In economies where cheques have already disappeared banks and governments incentivized individuals and corporations by making cheques too expensive, and making alternatives attractive by means of no fees. Given that this mirrors the actual costs of processing paper versus electronic transactions, this would appear to make good business sense also.

The key is for the UK government to stop issuing cheques from the government and for the FSA/Payments Counsel to mandate a minimum processing fee for cheques. Peeps will complain for a few months, but overall we'd all be better off in the end.

BK

Ketharaman,

And that's why I'll eat your lunch as an innovator. Because you think it's far fetched that I can compete with you.

I bet bookstores thought the same of Amazon, and I'm sure record stores and video rental outlets thought the same about iTunes.

BK

All,

The objective is not to completely or effectively circumvent the banking system, although we're seeing that happening in Kenya with M-PESA and in the US with Prepaid Debit Cards. However, to say that non-traditional competitors have no impact is also niave. 

Today banks have to seek the permission of Google and Apple to have access to their own customers through App stores. In the near future, phones will carry wallets undoubtedly owned by non-banks. Does this mean banks are totally disintermediated, no...but it does mean they are once removed from their customers.

Would a regulator stop Google Wallet from operating because of risk to customers? Ketharaman - this is purely wishful thinking. In my view, Google is just as capable as executing a NFC-enabled wallet as a bank, in fact they have much more power to do so in a sensible, secure manner, than a collection of disparate banks fighting over who will own the wallet. Will regulators stop PayPal from their mobile payments play? Not a chance. Believing regulators will save you from your duty to improve the way channels and payments technologies work for your customers is foolhardy.

The fact is, increasingly banks are already competing in fringe areas against non-banks who lead with customer experience. In the case of Google and PayPal, they have banking licenses, but not because they want to be banks, but because it was easier than doing what they're doing without banking licenses.

The future is not as clear cut as it has been. A banking license doesn't offer the barrier to entry it once did.

BK

Bo,

Was very interested in a previous stat from Tieto about 80% of Swedes who didn't visit a branch in 2010? Am I remembering correctly?

BK

Bo,

I agree that the fascination with a 'business case' is a key issue. The problem facing banks today is that technology is moving so fast, that by the time there is enough empirical evidence to show a business case, you've already lost ground and market share.

There will have to be a better way.

In respect to risk - I think the biggest risk banks face in the near term is no longer being relevant to their customers.

BK

Ketharaman,

KYC checks on paper versus "The Branch is always the best place to do banking" are very, very different things. The branch just doesn't add significant enough value to differentiate itself these days.

In respect to demand, look at the take up of mobile banking currently. BofA reported they acquired 250,000 new customers when they launched their mobile App because of the mobile app. JP Morgan Chase and USAA acquired between them more than 400,000 new customers when they launched remote check deposit capture.

ANZ recently launched their Go Money App with Pay Anyone and P2P capability. This App is being used on average 7-10 times per WEEK! How often do your best customers come into a branch? Not nearly that often.

HSBC's Premier customer base has very high internet banking penetration and their average customers use internet banking 10 times per month. On comparison, their best customers don't visit a branch even 10 times a year.

The facts are from a behavioral perspective fighting to argue for the continued support of the branch, is like fighting to argue to bring back the telegraph because you prefer to use it yourself. We must be channel agnostic and embrace any channel the customer WANTS to use. The data is absolutely unequivocal on branch - customers don't want to use it as much as they use other channels. So you can try to force them to use it, but is that really what is best for customers or is that just because we are attached to our old, traditional methodologies of working with customers. The branch has a minor role to play for some time to come, but if you sacrifice investment and mindshare in other channels to prop-up the branch, you're going to be in trouble.

If we are focused on a progressive bank that stays relevant to customers we must embrace a channel agnostic approach to banking. It is as simple as that. Arguing anything else is simply ignoring the most obvious trends because we don't want to change.

BK

Ketharaman,

It's behavior like this that is Killing our industry:

Banks exploit rules to refuse paperless applications

You could hardly call that positive progress...

Let me ask you a simple question to get at the heart of it.

What is it about a face-to-face discussion with a mortgage advisor that makes it absolutely critical to do it at a branch rather than online? Sell it to me... why is the experience better?

You see, I don't think that a face-to-face interaction offers any value at all for a mortgage product. I can get all the details I need, information I need to make a decision on a mortgage product faster and easier online than through a person.

Help me understand?

BK

Ketharaman, There are a plethora of banks who sell mortgages via online or call centre only. BofA/Countrywide sold more than 500,000 mortgage policies online on 2008 alone. UBank in Australia, FirstDirect in the UK, Rabobank, etc, etc. A 2010 research paper by Google showed that 88% of Australians select their mortgage products online today. They spend between 6-11 hours researching online before applying. 27% of those surveyed said they switched banks because they could not fulfill without going to a branch. The paper requirements you cite are just more proof that the current processes are out of date. I simply should not have to visit a branch unless I have absolutely no other choice - that's not great banking... The fact is, behavior has already changed. There's no amount of wishing it isn't so that is going to get people to revert and go back to branch banking. BK

Ketharaman,

I'm afraid the data doesn't work like that. Banking is not a hard goods retail business. It's a service business, when you look at the data for service businesses online the data is completely different.

The ABA figures alone show that since 2009 online has dominated day-to-day banking channel preference. 

http://thefinancialbrand.com/14005/aba-ipsos-banking-delivery-channel-survey/

In respect to sales of financial products. Think about the average basic product like a credit card, checking account, term deposit, mortgage - what special value does a branch experience add to commodity products like this? Service?? Not if I can more quickly execute via a digital channel.

Convenience and utility are the core behavioral drivers, and unfortunately, the branch is no longer a convenient way to bank and the value add of the in-branch experience is not enough to trump that behavior.

The key is understanding that by optimizing customer experience for core, basic, day-to-day products banks can operate far more profitably than based on their current channel structure. Sure there will be branches left for a while yet, but increasingly they will become highly specialized, high-touch environments for only the most complex financial discussions where the banker still adds some value.

I'm sorry - there's just no wishing branch activity back into existence. Better we prepare for the reality of a new world of banking instead of hiding our head in the sand.

Brett

Ketharam,

Unfortunately, you seem to be in a dwindling demographic. In 1985 the average annual visits to a US bank branch was 22 visits a year, today it is 2.3 visits a year. Those stats don't lie. The data is unequivocal. 

So no matter how much you are attached to branches, the data shows we must be fully prepared to write off most of our branches and fully embrace digital support.

In the end it is not about branch versus digital, it is simply about supporting our customers when and where they are. The plain facts are, they are no longer at the branch. So we either get on board with the total customer, or we lose them entirely because we are no longer relevant.

BK