Endangered Species of Banking

By Kate Young

As we dive headlong into the 2020s, it’s impossible to stop ourselves from wondering what the future holds for the relationship between banks and their customers. If retail banking represents a sort of ecosystem—with different types of institutions using different types of tools to serve different types of people—what are the endangered species of banking?

It’s not a whimsical question. Banks need to plan for a rapidly shifting landscape while continuing to engage a customer base that isn’t always eager to try new things. “The average bank in America was built with the baby boomer in mind,” says Tim Pannell, CEO of Financial Marketing Solutions. “We built our branches, developed our products and created our service standards around them. However, since all marketing is dependent and dictated by the marketplace—and since baby boomers are being replaced by millennials and Generation Z—then really everything is going to be turned upside and down and replaced by what makes sense for the millennials and Generation Z.”

Anything that’s not mobile-first, Pannell suggests, is facing potential extinction. It seems inevitable, then, that many of the most enduring features of retail banking could go the way of the dinosaur. Which ones? And when will it happen? And how long should we keep such things on life support?

We asked bankers and bank consultants across the country what they see for the future of those banking products, services and marketing approaches that seem to be dying out.  Here’s what they had to say.

1. Checks, passbooks

“On the P2P side, [checking]activity has declined dramatically,” says Siya Vansia, VP of marketing at ConnectOne Bank. “Both Zelle and Venmo present a more convenient, faster solution.” She adds that passbooks are no longer necessary for customers who use online and mobile banking. “I do think businesses will take longer to do away with checks—especially those with more complex businesses,” she says. “Perhaps the use of blockchain technology can help with this shift.”

Steve Reider, president of Bancography, points out that much consumer behavior needs to change before checks can disappear entirely. Passbooks, on the other hand, are “headed that way, but not gone yet,” he says. He adds that there may be little motivation for banks to do away with decades-old accounts carrying very low rates.

Chris Nichols, chief strategy officer at CenterState Bank, poses a philosophical question: “If you don’t write checks, can you really call it a checking account?” He predicts that in the near future, checks will be turned into either real-time electronic payments or ACH transactions and will fade away over the next ten years. “Forward thinking banks will rename the account while combining savings and money market accounts,” he says.

Keep in mind, a product does not need to be particularly old to make the endangered list. Chukwukere Ekeh, VP and marketing manager at Renasant Bank, says, “I think gone are the days of [marketing]bill-pay as a sticky service for banks—especially as a paid service.” He surmises that many people are comfortable enough automating their transactions via their debit card or credit card and don’t need to sign up with their bank to send out a manual check or ACH for them anymore. “Time to innovate,” he says. “Canceling unwanted subscription services would be more useful.”

2. Drive-throughs, teller lines

Bancography’s Reider points out that there are more than 100,000 branches in the U.S.—and the majority have drive-throughs. “Environmental regulations may reduce the number of new branches built with drive-ins,” he notes, but with such a large existing stock, they aren’t likely to go away. He’s also skeptical about the predicted demise of teller lines, “though we’re seeing more dialog-banking stations…but that’s simply another type of teller line, albeit with additional capabilities.”

To that point, ConnectOne Bank has no tellers, only universal bankers. “I’m pretty sure I haven’t seen a line in the branch since 2013,” Vansia says. “And the last four locations we opened didn’t include drive-ups. Yes, we still have foot traffic, drive-throughs and transactional activity, but [they]continue to decline.”

Lance Kessler, bank consultant and faculty member at the ABA Bank Marketing School, notes that “as banks transform themselves, teller positions as we knew them are disappearing.” He’s quick to add that while the branch itself continues to fill a need, it is shifting away from being about transactions to being centers for financial advice and guidance. “Expanding [the]branch employee’s knowledge base and skill sets is the only path for the employees in teller roles and other branch positions to avoid extinction and transform themselves into bankers in the broadest sense of the word,” he says.

3. Account opening premiums

Do you miss the days of giving away a free toaster for opening an account? CenterState’s Nichols forecasts that account opening premiums—in some form—aren’t going anywhere. “Not only will these stay,” he says, but they “will grow in popularity as banks learn that you need to be able to motivate customers without making the customer fee or rate sensitive. Toasters will be replaced by bank-curated experiences.”

Bancography’s Reider concurs, saying that his firm still sees premiums used quite frequently. The difference he’s observed is that these days, the offer is made by direct mail rather than based on a branch visit. “And the premiums have changed,” he says, noting that gift cards and coolers have replaced the traditional toaster. He adds that teaser rates (a premium rate that lasts for a given timeframe before reverting to the normal rate) continue to endure.

4. Christmas clubs

A once-popular tool for preparing for major purchases, Christmas clubs peaked in the 1970s, according to Bankrate. Since then, they’ve been largely displaced by entirely different products, like CDs and credit cards. These days, Christmas clubs are more common at credit unions and smaller banks that serve older markets. John Mondor, AVP and marketing manager at Saco and Biddeford Savings, says, “Surprisingly, this is something that quite a few customers still do. We don’t promote it, but it’s not a total zero.”

David Kreiman, EVP at Glenview State Bank, points out that the benefits of a Christmas club account can now be replicated by a simple savings account that can be “digitally split into as many labeled buckets as you want to set goals for events, purchases, etc.”

Even so, old habits die hard—Reider notes that he still sees a lot of Christmas clubs.  “Stuns me how many,” he says, “but consumers must like them as plenty of banks and credit unions maintain them.”

5. Safe deposit boxes

You’ve probably seen the stories about a declining use of safe deposit boxes—and new branches being built without them. But don’t assume they’re bound for extinction. “In an increasingly virtual world,” Reider says, “no one has yet invented a way to store grandma’s antique necklace online.”  He does see change on the horizon: “What is going extinct is dual-key SDBs,” he says, adding that he has not seen a new branch use those in years. Today, single key w/bio-authentication is the rule. “The consumer doesn’t need the validation of the second key,” Reider says, “only the security that it’s in our nice secure building.”

Kreiman agrees. Safe deposit boxes? “Here to stay,” he says. Safe deposit box staff? “Bye-bye.”

6. Other items to consider

Reider offers several different candidates for possible extinction:

  • The envelope depository at the ATM, to be replaced by image-enabled deposits
  • The 24-hour live-agent call center, to be supplanted by online channels
  • Back-office item processing, versus branch capture

What about the green stuff? Nichols predicts that while cash will never go away entirely, the rise of electronic payments will make cash incrementally more expensive for banks and merchants to process. “Electronic payments are safer, more convenient, yield better data (for all parties) and [are]cheaper.”

Looking at trends in bank marketing, Tom Hershberger, president and CEO of Cross Financial Group, points to efforts that have at times seemed destined for extinction—only to be revived by banks seeking to differentiate. Examples include “popcorn Fridays,” fresh baked cookies in the lobby and bank-branded bottles of water. Rather than focusing on what’s in and what’s out, he says, the focus should be on “using the right idea at the right time for the right reason.”

Jeff Marsico, EVP of the Kafafian Group, offers up some different food for thought: “What will go the way of the flip phone is the traditional bank marketer,” he says. “With the most revealing data about customers at our fingertips, we’re still planning the spring home equity campaign. Is that what the Amazon or Apple Card marketers are doing? It’s time.”

Survival of the fittest

The overriding message is that bank marketers should be thinking like scientists. Hershberger recommends testing, measuring and evaluating everything marketing does, assessing options based on effectiveness and ROI rather than fads, trends or what other banks are doing.  “There are geographic areas of the country where some of the basics still work well,” he says. “The kind of things some banks would put on the endangered species list. A resource used effectively in a rural market could be worthless in a busy metropolitan area.”

“The reality is,” Reider adds, “we’re a slow-to-change industry, and we rarely eliminate anything.  Rather, we simply add without removing.” He notes that the ATM didn’t replace the branch. The call center didn’t replace the ATM.  Online banking didn’t replace the call center.  And mobile has not replaced online. “Every time we’ve given the consumer a new channel or tool,” he says, “they’ve simply said, ‘thank you, I’ll take that too.’”

He concedes that some of these items are expensive or inefficient. In the end, however, he thinks extinction will come down to what the customer wants, not the banker. “This is such a homogenous industry,” he says. “And if the competitor offers everything we do and safe deposit boxes, why wouldn’t the customer chose them over us…just on the off chance that ‘one day I might need a safe box?’”