Digital Transformation Trend in Local Banking

Banks

We have no idea why there are physical banks, human tellers, or what we carry around as money. Do you? According to Brett King, the founder of Moven (as reported by Eric Rosenbaum, 2015):

The biggest banks in the world in 2025 will be technology companies, and banks that grew through branch acquisitions in the ‘80s and ‘90s that grew by physical bank presence, will have a real problem.

The trends are clear:

Since 2011, 700 million global consumers have begun banking on their phone. The U.S. bank branch model, which peaks at a total of roughly 95,000 branches, is now down to 86,000 branches.

Money is also disappearing. Way back in 2012, Jacey Fortin reported that:

In Sweden, monetary transactions made with physical cash are down to three percent of the national economy … in most Swedish cities, public buses don’t accept cash; tickets are prepaid or purchased with a cell phone text message, reports AP. A small but growing number of businesses only take cards, and some bank offices—which make money on electronic transactions—have stopped handling cash altogether. This looks like the beginning of a global trend; people everywhere are noticing that physical cash is becoming less and less common.

Merryn Somerset Webb reported that Denmark quickly followed:

The Danish government is concerned that cash puts too many “administrative and financial burdens” on shops and that it acts as a drag on GDP growth. So, as part of a wide group of proposals to boost economic growth, it is to allow shops to stop taking cash. This makes sense in all sorts of ways. As M&G’s Jim Leaviss points out, handling cash is expensive—you have to process it, give people change for it, provide security for it, take it to the bank, etc. Cash is also a bore for governments because it is the main facilitator of the black economy—anything paid for via the banking system can be taxed; anything paid for in cash can be missed. Plus, physical cash often means physical crime, so getting rid of cash could mean less crime and less tax evasion.

The U.S. lags but it’s only a matter of time and money, especially because of the control that cashless transactions provide governments and the financial gains banks accrue from closing their branches and going cashless.