What Bankers Have To Say On The Future Of Banking

Seeing The Future of Banking

Yesterday, the new operating system came out for iPhones and iPads and its pretty slick. Moreover, Apple announced last week some radical new enhancements to almost every product. No matter what your view is on Apple you have to admire a company that continues to strive for improvement and relevance. You would be hard-pressed to find another company in this world that has the 2x per year pace of innovation that Apple does. While banks aren’t Apple, one consistent message that we received from our recent Future Forces Of Banking Survey is that banks now overwhelmingly know they have to change and innovate for the future. This wasn’t the case just two short years ago when less than 25% of bankers admitted they had to change.


Attached (HERE) is a joint survey conducted by CenterState Bank and CS Consulting LLC that asked a variety of questions on branching, competition, margins, business model and consolidation. One key focus was to determine the bankers’ ability to change, given existing and future levels of disruption, in order to remain relevant among their customers. 


In the coming weeks, we will be exploring some of these topics more in depth, but today, here is a quick summary of the findings:


  • Competition: Over the next 5 years, 42% of bankers consider non-traditional, all digital, finance competitors such as Prosper and On Deck a serious threat. This is dramatically different than the 17% of bankers that consider them a threat today. Moreover, almost 40% of bankers see the digital disruptors as niche competitors, meaning that 81% of bankers expect to be losing business to digital disruptors in just five years.
  • Need to Change: Bankers widely recognize their world has changed for the long term, with 99% of them seeing the “new normal” of greater competition and tighter margins persisting.  While recognizing the change, most are ill-prepared currently, with only 5% saying their current methods are well suited for the future.  Conversely, 69% of bankers indicate they will need new strategies, lines of business, and other methods to compete effectively in the future (below).  Another 26% suggest a significant transformation of their business model will be required.


Bank Survey


  • Desire to Change: Bankers are not sitting still as 46% of respondents indicated they are making changes to their lines of business and delivery methods, in order to be faster and easier to use by their customers.  Another 15% of bankers say they are making other preparations, meaning that 61% of bankers are taking steps to compete more effectively against the disruptors.
  • Turning in Their Charter: A surprising 12% of bankers would consider the radical step of surrendering their current charter to become a shadow bank in order to escape regulation.

Future of Banking


Of course, most all bankers thought consolidation will continue, with 76% of respondents saying that despite the consolidation, community banking will be around for the long haul.


One area of concern for us was the fact that there was wide disagreement on how to size branch networks in the future.  Over the next 24 months, 26% of bankers indicate they will be increasing their branch network; and 52% will keep their network constant. Only 22% of banks will be decreasing the size of their branch network. Given demographic shifts, falling branch traffic, low-interest rates and branch economics we scratch our heads trying to figure out why, save for a few exceptions, banks feel this way given the alternative is investing in technology.


While this is editorial on our part, some of those findings were even more perplexing when you hear that most bankers look for decreasing margins in the future and more than 66% of the respondents foresee another recession in the next three years or less. If true, this might be the exact wrong time to expand or maintain your branch network.


In addition to the data, we received a slew of great comments that we put in the back of the presentation. Comments on the de facto nationalization of banks caused a healthy debate here as did the rural vs. urban banking future.


You can download the presentation HERE and get more data, trends and comments. Until then, thanks to all those that participated and we do agree with the overall theme of most of the comments – while the future will be challenging, banks are preparing to change and adapt.