The Young Are Ready for Branchless Banking

The recent growth of both cashless transactions and mobile banking technology are causing some to question the role of the traditional bank branch. While many people still covet the convenience of branches, an increasing number of younger Americans say they would happily do without them.

A study of 4,000 retail bank customers in the United States and Canada by management consulting firm Accenture finds that there is a generational divide growing over the attractiveness of branchless and alternative banks.

In the survey, 39% of customers 18 to 34 years old said they would consider switching to a branchless bank. This compares with only 29% of customers 35 to 55 and just 16% of customers over age 55.

Significant percentages of younger respondents said they would even be open to banking with big technology and retail firms like Google, Amazon and Apple – if these companies were to develop such services.

Accenture said that 40% of respondents aged 18 to 34 would consider banking with Google, while 37% would consider banking with Amazon. Another 34% said they might be OK with making Apple their banking services provider.

Older banking customers were not so keen to bank with these non-traditional (hypothetical) providers: only 23% of those aged 35-54 said they would be willing to bank with Google, for instance. This dropped to just 5% of customers over age 55.

The younger respondents were also far more likely to want their bank to help with the “heavy lifting” of car-buying (and provide discounts in that process), Accenture said.

Also, 68% of the 18-34 respondents said they would be interested in having their bank offer a real-time analysis of their spending, with a “safe-to-spend” limit provided. That openness was shared by only 24% of customers over age 55.

In an age where nearly 90% of transactions are cashless, and check-writing is fast becoming a thing of the past, it’s not surprising that notions about what a bank should be are changing.

However, customers should be cautious about rushing to embrace alternative banking schemes – no matter how convenient they may seem to be. After all, traditional banks and credit unions are specifically regulated to ensure they meet minimum standards for risk-taking. Traditional financial services providers also offer federal insurance on deposits.

Any move to expand banking further into the realm of technology, consumer electronics and retail needs to be very carefully handled.