The transformation of customer needs has largely outpaced the systems banks have in place to support them. Those customer shifts have been driven by innovations in connectivity, social media, and devices such as smartphones and tablets. Innovative banks are indeed rethinking channel options in response to evolving customer expectations, but much of the change is being driven by FinTech innovations capturing market share.

Let’s use recent headlines to examine the major banks and how they have reacted to the continuing downward shift in physical branch transactions. “JP Morgan to close 300 retail branches,” “PNC to close over 200 branches,” “Bank of America to close over 10% of its branches,” “Regions to close 63 branches.” When you listen to the rationale provided in each story, it sounds like a reaction to a shift in customer behaviors (i.e. away from branches). It does not sound like a proactive approach to finding better or innovative ways to serve customers. In other words, we are hearing, “The definition of a branch is changing” instead of “We are creating new and improved ways to serve the retail community.”

Where does this leave the nearly 6,900 banks and 6,300 credit unions in the United States? With those kinds of branch trends, the message should be loud and clear: Banks must become more innovative and customer-focused in the design and delivery of banking and related services. And they must have a sense of urgency in doing so. Yes, there are innovative banks including USAA, Umpqua, BBVA Compass, and City National to name a few, but the vast majority are not responding adequately to this unprecedented time in banking history. Every bank should understand its unique differentiators (e.g. regional commitment, industry focus, products, affinities, etc.) and completely rethink where the customer delivery must be today and five years from now. A recent study by TransUnion shows that FinTechs outpaced banks, credit unions, and traditional finance companies for loans to prime and near-prime borrowers. That’s an eye opener. 

It is time to engineer the future of banking and to redesign the underlying systems and processes that will make banking as easy, efficient, and exciting as the FinTechs.