CULTURE AND THE CHANGES IN BANK SERVICES DELIVERY SYSTEMS

By Bob Grasing
President

This past month, my wife Nancy and I saw a play, A. R. Gurney’s The Dining Room, which uses the vehicle of the dining room in a series of vignettes to depict changes in upper-class family culture during the 20th century. Each scene ran into the next almost seamlessly as unconnected events, but you quickly found yourself understanding the time period based on the dialogue and characters’ behaviors. In the early part of the century, the dining room was so formal that children would be rewarded with an invitation to share dinner with the adults. As the century unfolded, it became a point of conflict, where younger family members came to dread the rules of the dining room and actually felt tortured by it as a vestige of old-world decorum. Later in the century, it became a holiday dining room, and everyday dining in larger, open kitchens supplanted “the room” as the norm. The play pointed out how difficult the cultural changes were for some families and made us think about the impact of continuing cultural changes.

We also discussed the play as a metaphor for business, and it led me to think about the branch banking system. When I started banking in the early 1970s, we referred to the teller line as “the cage” (safe money distribution) and, of course, the new-business area as “the platform.” Customers needed to use the branch to make deposits, cash checks, pay bills, learn their balances, withdraw funds from their accounts, apply for loans, and get things like passbook replacements when that critical document was lost. Sales and service were interchangeable as the purposes of this institutional delivery channel.

Over the next 30 years, the delivery channels evolved. ATMs and national networks have virtually eliminated the practice of withdrawing cash at branches. In fact, new ATMs will take cash deposits (no envelope is needed) through scanning devices. Loans can be obtained through the Internet or a call center, with the funds deposited directly into customer accounts. Bills are paid through online banking. Passbooks are long gone (or should be), and in fact the new culture of electronic banking has retail and commercial customers alike depositing checks remotely through scanning devices.

With all the alternative delivery channels available, the question becomes the relevance of the branch. When Nolan looks at customer behaviors reflected in transaction volumes and new account activity, it becomes evident that the efficiency of branch delivery will be challenged; particularly with the narrowing margins we have in the current environment.

We suspect that the 21st century will see continued evolution. Our children and grandchildren will be able to video conference with their bankers easily and will be able to link onto online applications as they talk from a remote location. How soon will this transition occur? When we realize that over the last 10 years the percent of assets controlled by the top 25 banks has increased from just over 30 percent in 1996 to nearly 60 percent today, it seems certain that change will occur at a more rapid pace once one or two of the 25 banks start to gain a competitive advantage with a new “financial dining delivery.”

The second question: Will your bank simply react to the changes set by the industry leaders? Or, will you architect efficient delivery through carefully structured redesign built around your customers’ needs, expectations, and behaviors, all while considering the current culture? Reengineering for efficiency, convenience, and lower cost was never more relevant than it is today, and we believe the banking industry will transform in the near future.