Will the Future of Community Banking Include Banks?

Community banks—at least in my experience—provide banking services to the communities where their leaders and employees live and work. On the consumer side of the equation, they provide home loans, car loans, credit cards, and other deposit and electronic banking services. On the business side, they provide access to small business loans, deposit products, and cash management services. While banks generally, and community banks specifically, seem to provide a valuable service for their communities, the number of banks in the Unites States continues to decrease, in part due to lack of new banks and also due to industry consolidation through mergers. From 1992 to 2018, the number of banks in the US declined by over 61% from 13,935 to 5,406. In addition to this trend, non-bank entitieshave entered the industry in larger numbers and have put additional pressure on the banking industry to compete and stay relevant.

This article at Worldfinance.com makes an argument that I largely agree with. Community banks (more-so than large banks) fill a void by providing funding to small and medium sized businesses that are overlooked by bigger banks, either because they are not as profitable as larger businesses, or because they do not appear as viable, stable, or scalable as bigger businesses. This is where community banks flourish because they understand the local economy, opportunities, and what will work in the area. They also have a vested interest in seeing local business succeed. Consumer products, on the other hand, are becoming commoditized in the sense that technology has allowed many new players in the field for basic banking services. Because of the rise in non-banks providing financial services, what will the banking industry look like in another 10 or 20 or 30 years?

Brett King, a well-known and outspoken technologist who has been preaching for innovation in the banking industry for a number of years, and has written several bookspredicting changes in the industry, sees banking happening largely without branches in the future. Banking, according to King, will be imbedded in consumers’ everyday lives and tool and they won’t need to visit—or even identify with—a traditional bank. In order to succeed, banks will need to adopt this reality and provide “frictionless” banking where people can get banking services seamlessly and electronically, in a way that provides convenience.

I think there will be a niche for community banking for many years to come, but I agree with Brett King that the industry will continue to consolidate as a large number of banks will refuse to move beyond traditional banking to the way of the future.

The Networked world: What does it mean for work?

The internet has had a profound impact on the way the world functions and interacts. There may be no better example of this impact then to look at the top 10 work skills in 2020 as identified by top10onlinecolleges.org. Of the skills mentioned, the majority of them have little to do with physical or technical skills and more to do with skills of discernment, comprehending, communication, literacy in new media, social intelligence, and novel intelligent thinking. What does this mean practically for organizations working in this new environment where job skills are more about navigating the new, visually networked world of the internet above all else?

According to an article by Aaron Smith about finding work in the digital age, it means that workers are more comfortable conducting a job search and all that entails on their cell phones even if it means the quality of the search is lower because of the limitations presented by a phone. It also means that a minority of job-seekers lack basic skills necessary to land a job where they can practice the new job skills mentioned above. According to Smith, 17% of seekers polled were uncomfortable putting together a professional resume, 21% were not sure how to use social media to promote their job skills, and 11% and 12% respectively were uncomfortable using email and completing an online application for a new job.

In a separate article by Aaron Smith and Janna Anderson, they express concern that while some high-skilled individuals will have incredible success because of this new world, there will be plenty of people who are left behind. Blue collar workers may not have the skills or education necessary to adapt to a new way of working and job-seeking. The education system as a whole is not equipping students to thrive in the new world of the internet and networks.

However, there are opportunities for networked workers to make significant contributions to the organizations they join. First, networked employees have access to an infinite supply of information. If they need answers, they know where to go to ask the right questions. Second, these networked workers likely have a large number of connections from all over the country—and the world—that can be used as a resource. Ready resources improve efficiency and profitability, so using this information and workers’ connections can provide a channel for high performance within an organization.

The challenge to effectively utilizing networked users is the flipside of the same coin. There is so much information on the internet that it may be difficult to find useful and relevant information in a manner that is cost-effective and efficient for the company. Kevin Kelly, in his book The Inevitable: Understanding the 12 technological forces that will shape our future, he talks about the phenomenon of tracking and how developing technology will enable us to locate everything in an organized and simple way. If his prediction is true, this particular challenge may be solvable. Second, and this depends on each individual and his or her work ethic and drive, but the internet and a significant network of connections can supply an endless stream of distractions that can have the exact opposite effect described earlier in the paragraph. The easy access to the entire network in one’s pocket means that networked individuals must use discretion in order to find the right balance of using the internet for work production and using the internet for everything else when work production is the stated priority.

The internet provides vast opportunity, but it also presents an equally vast challenge. When it is just as easy for the internet to control you as it is for you to control the internet, care must be taken to make sure the internet is the solution to the problem and not the problem itself.

Does your iPhone do your Banking?

Right now I’m reading a book about banking called Bank 2.0 by Brett King that feels completely out of date. It was written in 2010.

Banking is changing so fast because of technology that many banks–and consumers–may be having a difficult time keeping up. A few short years ago mobile banking (banking on a mobile phone) was a novelty. Now almost every Top 100 bank (biggest banks by size in the United States) and many community banks like First National offer mobile banking.

At FNB (and many community banks) the branch has traditionally been where all business is transacted. With the introduction of various technologies (online banking, mobile banking, direct deposit, etc) now only about 15% of First National Bank’s client transactions happen physically in the branch. The rest happen electronically or online.

I’m curious to know what your experience has been with banking and technology. Do you use mobile banking? If so, what do you like? And if not, is there a specific reason?

There are still only a few of the largest banks that offer check deposit with a mobile phone. Do you use this service at Chase, PayPal, or another institution? Does the service work as promised?