Are bank branches becoming obsolete?

http://www.americanbanker.com/bankthink/Are-bank-branches-becoming-obsolete-Brett-King-Movenbank-1043219-1.html

Great article by Brett King;  But I dont fully agree ; Here are my thoughts

Brett - I think as you have pointed out internet and mobile technology have greatly changed customers' banking experience. Yes , there has been a big drop in customer traffic as also banks have closed a lot of their branches. But I am not sure that this is due to customers moving away from branches. Here are some of my thoughts -
a) BoFa, HSBC and JPMC have closed their branches or have put off plans for branch expansion; this is largely due to the economy ; Branches are the first casualty in cost reduction;

b) In Europe and UK in particular, the conditions are not that different. Overall bank profitability is in the dumps.

c) Overall branch activity in the last 3 years or so has been on the decline due to a variety of reasons - most important being credit contraction. 

d) Branch traffic is also geographical; warmer states see more people going to branches to transact business

e) As you have pointed out, branches continue to provide great cross sell opportunities to the banks.

I think given all this, I certainly do not believe branches will be history; Yes , banks will continue to close them in poor economy; Will they open more branches if the economy improve - well I don't know; But certainly we have not seen the last days of branch banking;

Mobile Banking hits Critical Mass

This week industry observers saw Mobile banking reach key milestones. According to Javelin Strategies, consumer adoption of mobile banking jumped 60% in 2011. This is because a large number of banks and financial institutions launched their mobile apps for their customers.  Bulk of these apps has been in retail banking – helping customers manage their checking and savings banking. The chart below shows customer used their mobile devices for checking and savings transactions – like viewing their balances, bill pay and simple fund transfer.

The second important milestone is that in 2011, 50% of US cell phone users will switch to Smartphones. This is a very key development because it offers unprecedented opportunities for banks, credit card companies and other players in financial services to reconfigure their service offerings to their customers.

Expansion in Mobile banking is also happening globally.  According to TNS MobileLife, global use of mobile finance surged in the past year as the spread of new technology and mobile banking infrastructure drove a huge increase in take-up rates around the world. In the UK the proportion of people using mobile banking increased from 9.7% in 2010 to 20.4% in 2011, while in the USA the rates from 11.4% to 21.9%. In Sweden it was greater still: 8.1% to 20%.

What is the takeaway for Banks, Financial Services and other key players in the sector?  What are the implications for technology companies that offer mobile technology and sell solutions to their financial services clients?

My personal view is that the data that we have seen above is only the tip of the iceberg. We are witnessing a paradigm shift in Banking and Financial services offerings.  Mobile banking offers a big opportunity for small and mid-tier banks to leapfrog into big league by offering better customer experience. Banks that do not provide mobile services or are late to hit the market will be left behind.  

For technology companies, this represents a golden opportunity.  Companies like MicroStrategy who have invested in mobile solutions - both financially and built key vertical expertise to scale - are in the sweet spot to exploit the huge surge in service opportunities. 

As the saying goes, success happens when preparation meets opportunity.

Google Wallet – The Industry Changing App

Google recently announced the launch of Google Wallet, the new point of sale payment app.  This cool Android app was launched by Google together with Citi Bank, MasterCard, First Data, Sprint  and some big name retailers.  This app is all set to revolutionize the dizzy world of payment technologies. 

No more bulky wallets with so many cards – the debit card, the reward cards, the airline cards ; You can also use coupons and other discounts at check out.  Wow, what a relief to have all these rolled into one app on your cell phone.  

Right now, the app will run on Android only.  However, given the size of the payments business, it is not hard to foresee that Google will enable the app on iPhones and Blackberry in the coming months.

According to Google, the Wallet app incorporates sever security features including PIN requirement before payment as well as the encryption of MasterCard’s PayPass technology.  Industry pundits   seem to have different views on this. But that’s beside the point.   How will this impact the payment industry? 

Ø  Definitely it is going to smoothen customers’ shopping and payment experience.  Paying at the checkout will never be the same again. I would expect the younger population segments to adapt quicker to this mobile payment technology. The older generation and baby boomers may not be far behind, though.

Ø  The credit card majors are nervously watching this development.  I think Google is just a step away from launching its own card business, or shall we say mobile payment business.  Banks get a share of the revenue Retailers generate from their rewards programs. This revenue share or at least parts of it for a start could now be up for grabs.  It will certainly eat into the profit margins in an already troubled credit card industry. 

Ø  Google Wallet has the potential to realign payment industry. The coming months should see clearer battle lines drawn between Google and friends on one side and the big boys of banking on the other side. They will be fighting for the consumer’s wallet share. Consequence - Most banks will be forced to invest in mobile technology to protect their customer base and market share and will offer huge opportunities for MicroStrategy on a platter

Ø  Will Google Wallet cause the disappearance of the plastic card? Don’t think so. While it is too early to predict how this will impact the plastics, I certainly think that the usage will start declining. I don’t think it would disappear altogether in the near future.  Well, you never know and I could be horribly off the mark.