It seems unlikely now that retail banking as we know it could face serious decline. Sure, banks have consolidated a lot recently, just like many types of businesses, but the neighborhood bank branch, whatever name it bears, has been a fixture of American life almost as long as America has existed.
But technology has a way of quickly disrupting whole industries in ways that seemed inconceivable before said technology took hold. My sister, for instance, used to be a manager at a Borders book store in the Washington, D.C., area. Then the Kindle happened, and Borders, which once smothered a lot of mom and pop bookstores on its way to a major share of the U.S. book retail market, is itself likely on its way out.
The retail banking industry is facing some similarly disruptive products and technologies right now. As I wrote last week, American Express is releasing a low-fee reloadable debit card that will allow unbanked folks to have debit card functionality without a checking account.
Walmart also recently announced a pilot program for automated kiosks that could provide customers many of the functions of its popular MoneyCenter financial services desks. From Sara Lepro and Sean Sposito at American Banker:
The "MoneyCenter in a box" concept will feature ATM-like machines positioned in Wal-Mart stores that do not have full MoneyCenters, said Jane Thompson, the outgoing president of Wal-Mart's financial services unit.
Though the move might seem less ambitious than Wal-Mart's other forays in banking, competitors should take it seriously.
"Retailers should shake in their boots, banks should shake in their boots," said Brian Riley, a research director in the bank cards practice at TowerGroup. "Because if Wal-Mart starts linking their kiosks to doing reloadable gift cards, they have the power to move a lot of transaction money."
The idea of a financial services machine in every Walmart in America that cashes checks, reloads a prepaid debit card and arranges bill pay without a formal checking account should scare banks. While the kiosks will likely have their own set of fees, such a kiosk could basically do the job of an entire retail bank branch, without the threat of massive "courtesy overdraft" fees, exclusion via ChexSystems, and other barriers that have gradually pushed millions of people into the ranks of the "unbanked." Those barriers will only get higher if banks decide to react to the phasing-in of the Durbin Amendment by raising fees on checking accountholders or putting draconian limits on debit card purchases.
I'm not suggesting retail banking will go away entirely. And this Walmart kiosk may not be the same type of "killer app" that Amazon's Kindle ended up being for brick-and-mortar bookstores. There are still plenty of bank services that a machine won't be able to perform for you, including, of course, auto and mortgage loans, and a certain portion of the public will always want a physical branch staffed by human beings. The question is, what percentage will that be, and how much will they be willing to pay for the privilege? Will that percentage be enough to sustain the number of retail banks we have now?
What do you think? Would you trade your checking account for a reloadable debit card and other a la carte financial services?