Are the Branch Survey Results Meaningless?
It was inevitable!
Apparently there’s enough buzz in the blogosphere about the uncertain future of bank branches that last week’s AmericanBanker.com poll addressed the issue of whether or not bank branches are going the way of the buggy whip.
Here are the predictable results.
71% of those taking the poll believe that while branches might become fewer and smaller, they remain important to consumers.
To put these results in their proper perspective, imagine the results of a similar, yet hypothetical, poll taken during the third quarter of 2005 where the question would have been something like this: “Do you believe we are experiencing a major housing bubble that might burst at any time?”
At the time, it’s likely that as many as 90%+ of the poll taking bankers would have selected “No.”
And we all know how the housing bubble turned out for all of us – especially the banks.
Bottom line, results such as these are basically meaningless and definitely not actionable. They should not be taken seriously.
Why is this?
One reason can be found in a familiar Upton Sinclair quote: “It is difficult to get a man to understand something when his salary depends upon him not understanding it.”
Another possibility is the old quote about not being able to see the forest for the trees.
We’ll never know the reasons why the 71% currently believe that branches will remain a viable component of consumer banking in the future.
The real question here is whether or not the future of consumer banking includes brick and mortar branches of any kind.
The idea that branches might become fewer and smaller is more than an idea – it’s inevitable. It’s already happening. The only open issue is the pace of such change.
Perhaps we can find a clue across the pond in England.
According to Movenbank’s Brett King, UK branches have dropped by half since 1990.
As I see it, the issue here is consumers’ perceptions about the purpose of bank branches.
Historically, branches were places where consumers went to deposit or withdraw money, apply for a loan and make loan payments. Oh, and keeping stuff in safe deposit boxes. Today, most consumers no longer need a branch to perform any of these activities.
Now that the need for bank branches is being questioned, we encounter blogs and articles where the authors are attempting to make the case that the branches are needed for cross-selling and consultation and privacy. Instead of a place to open checking and savings accounts and apply for a loan, the product line has shifted to insurance and investment products, estate planning, and financial counseling.
At issue here is whether or not the masses believe bank and credit union branches are the best choice for acquiring these products and services. After all, they’ve been available from a variety of other providers for some time.
And then there’s the issue of employee quality and qualifications to sell these more complex products and services. Ask yourself this question: Would you visit a local bank branch for estate planning or for financial counseling? Be honest!
If you wouldn’t, then why would you expect millions of other consumers to do so?
After all, what’s being proposed is a dramatic change in consumers’ perceptions of the role of the neighborhood branch. Personally, I doubt that it is possible.
It would be a bit like McDonald’s shifting its menu from burgers and fries to steaks, lobster, and fine wine.
Which gets me back to why 71% of the poll taking bankers believe branches will remain viable.
I have some thoughts about the reasons for their selection:
One, some actually believe that branches are here to stay in some form or other.
Two, others want to avoid the self-fulfilling prophecy belief which goes like this – if we avoid talking about the demise of branch banking then it won’t happen. In other words, let’s not create a bandwagon effect.
Three, some feel it’s always safer from a career perspective to go with the flow. Don’t rock the boat.
Four, there’s a group who’ll immediately remind us that we’re still writing checks, using land-line phones, and shopping at neighborhood grocery stores in spite of predictions about their ultimate demise.
Five, some people simply refuse to consider any major changes – especially those that would impact their livelihood.
And finally there’s the issue of costs.
Imagine the huge increase in branch costs from adding the high-salaried people qualified to sell insurance, investment products, and provide estate planning and financial consulting services – not to mention the cost of marketing these products and services.
One thing is certain – the future of branches remains uncertain and a lot more dialog and experimentation is required before we know the ultimate outcome.
In the meantime, remain skeptical of survey results like those shown above.