In this space, I have recently written about technology trends in banking. Banking is changing rapidly as society changes. Customer preferences are changing and the financial services sector risks changing or becoming irrelevant over the next decade. It’s not just banking. Think about what has happened in the very straightforward and staid grocery industry. Amazon buys Whole Foods and, suddenly, the entire industry is in turmoil. No one quite knows how this will look ten years hence. And this all comes after Amazon has completely reshaped the way consumers think about retail shopping.
I recently sat in the audience and heard a presentation entitled “Banking in 2027.” While these sorts of themes have been hit and miss during my career, it seems to me that this presentation was pointed in an accurate direction. For that reason, I will share insight I gained from the forum as well as other relevant thoughts that can prepare you for the years ahead.
To state the obvious, websites are going to have to improve and, most importantly, continually improve. Our customers have higher expectations than ever before, so the sites must be easy to navigate and fully functional. Whereas few accounts are currently opened online, the percentage of accounts opened online will increase in the next five years. Personal and residential real estate loans? Same thing. Ditto small business loans. The good news is that this is going to evolve and it won’t happen tomorrow. But this is the direction our industry is headed. We have to be ready.
A lady from one of our nation’s largest banks presented. Her prediction? “Passwords may be a thing of the past in two years.” Let me explain. We all know the frustration that comes from changing and remembering passwords. Sometime soon, the claim is that we will be accessing our bank accounts and other secure websites with our fingerprints or, more likely, with the imprint from our eyes. Our phones give us the ability to do this. Additionally, easier authentication methods (once consumers adjust to the new normal) will help improve security and reduce the opportunities for fraud.
A presenter from Visa held yours truly spellbound when he talked about a world where debit and credit cards will be utilized much less than today. Think of it this way: you approach a gas station. Your bank payment app is turned on as you approach. You pull up to the pump and are recognized and authorized to fill your tank. About all you do is open the app and authorize payment. You fill your tank and drive off and your bank account is charged. It is the same at a fast food restaurant or your favorite Dunkin’ Donuts!
And then there is the app I am most excited about, Zelle. Zelle will soon be offered at MidWestOne and we will be one of the first community banks to offer this product to our customers. Zelle is a “P2P” (Person to Person) application that allows customers to access their bank accounts to pay others (or receive from others) via their bank accounts.
So, if you went to dinner with your best friend and your friend paid for dinner, you could reimburse your friend by accessing Zelle and directing it to deposit the funds in your friend’s banking account. You could do this with your children or grandchildren. Yes, it is that simple. If you are under 40 and reading this, you likely know about, or use, Venmo. Guess what? Zelle will be as, or more convenient, and tied directly to your bank account. This is one, of many, game changers for community banks.
How will banking not change? The branch will still be an important delivery point for most customers. But customers will continue to go there less frequently. You will see fewer, but more highly trained, employees in branch offices. A large regional West Coast bank just announced plans to close 1/3 of its offices over the next few years as it transitions to the digital age. You will not see that at MidWestOne.
We understand that in many of our communities, our branch offices play a key role in the life of that community. We also understand that our mission statement of “taking care of our customers and those who should be” will mean something different in 2027 than in 2000 or 1950. It means an excellent customer experience when someone comes in to one of our offices. It means competitive product offerings. It also means MidWestOne must compete in the digital age. What you have read above is evidence that we know we must change. What won’t change is our commitment to our 83+ year mission statement.
We want to remain a relevant provider of financial services for our clients. Count on us to evolve with our customers!