The Evolution of Banking Delivery Channels

As a banking customer it’s safe to say that the way I’ve banked has changed drastically since I opened my first checking account. I remember having to physically take my paycheck to a branch every two weeks for deposit. Eventually, I was no longer confined to business hours, teller lines and traffic congestion at the drive-thru window, as I could deposit my checks directly into the ATM, and when I thought things couldn’t get better, mobile banking was introduced and I could easily deposit checks from the comfort of my own home.

The Top 4 Services of Regional Banks

When economist William Smith wrote his appropriately titled book “Banking,” he discussed four main services for banks:

1. The safekeeping of money and other valuables
2. The making of payments
3. The making of loans
4. The making of investments

To this day, these four fundamental services are the foundation of all commercial banking. In 1914, when the book was written, these services were offered by the bank and were used through the bank. Banks continually update their products and services to meet customer expectations, as in the case of the first ATM in 1967 in London, the development of at-home banking services in the early 1990s, to the new millennium, where more than 80 percent of U.S. banks offered internet banking. However, the channels in which customers choose to access and use these four fundamental services has rapidly changed.

How People Access Their Banking Products Today

Emerging Fintechs

Today, the banking environment is saturated with fintechs offering banking services such as payments and investments. It’s no secret that e-wallets like Apple Pay, and fintechs like Venmo and Zelle are growing in popularity. In 2017, Bank of America found that 36 percent of adults and 62 percent of millennials in the U.S. are using P2P apps, with more than 45 percent of adults saying they plan on using the service in the next year. Apps like Acorns, take the difficulty of investing and make it easy by rounding up transactions to the nearest dollar and investing that spare change in Exchange-traded funds (ETFs).

Mobile and Online

Both loan and deposit services stay with banks today. In a study by Creditcards.com, 62 percent of Americans cited digital banking as their top method of banking. To no surprise, millennials and Gen Xers are most likely to use mobile and online banking as their primary way to access their banking services.

What’s in Store for the Future of Banking?

It’s hard to tell, but based on current trends and Smith’s four fundamental banking services, industry experts predict more capabilities and conveniences from digital banking, increased fintech partnerships, and hands-off investing, while loans and deposits continue to stay with government-regulated financial institutions.

More Technology

The industry will continue to see a rise in demand for less human interaction and more innovative technology. In late 2016, a Forbes survey on banking customer engagement said 86 percent of banks indicated that digital banking technology and services was one of their top investments for the future. This will ultimately look like the addition of artificial intelligence and chat bots to help customers with easy transactions and questions.

Increased Partnerships

In the same survey, Forbes forecasts that more than 48 percent of bank leaders expect to see an increase in fintech partnerships over the next two years. Ceto and Associates previously discussed that fintech partnerships are worth exploration, and a great way for financial institutions to innovate quickly to meet customer expectations. Many banks already leverage fintech technology when it comes to payments as both large and small banks partner with Zelle. This P2P app functions within the bank’s own mobile app and helps customers transfer funds instantaneously to other customers at a wide variety of banks. As time goes on, industry experts predict partnerships like this are inevitable for specific banking services.

Hands-off Investing

Popular apps like Acorns are just the beginning for easy, hands-off investing. Big players like E-Trade continue to build and enhance strong online and mobile platforms to make investing easy and efficient. One of the reasons for digital banking’s popularity is due to the convenience and time it saves customers. The same goes for investing. According to Investopedia, hands-off investing is well-suited for customers who may not have the time to routinely monitor their investments, and as time passes, this trend will continue to grow as customers switch to strictly digital investing.

Even though there are a lot of changes coming to how customers bank and use banking services, the consultants at Ceto and Associates expect no immediate threat of a non-regulated entity providing banking services such as deposits and traditional lending. Customers will continue to want to use these products and services through digital platforms, and banks are investing heavily in technology to do just that for customers.

It’s impossible to predict what another five years will look like, however, research predicts increased efficiencies and technology updates within a variety of banking services. Overall, the changes in the past five years, due to rapidly evolving technology, will continue to change the way customers engage with their banking services and products.