Business Matters: The Future of Retail Banking
Retail banking faces a period of uncertainty. Just last week, Minneapolis-based U.S. Bancorp announced it could close up to 450 U.S. Bank branches or up to 15 percent of its more than 3,000 branches in the coming years. We don’t know yet which branches will be affected. U.S. Bank has branches in Brooklyn Park, Robbinsdale and Plymouth. It also has branches inside Lunds & Byerlys stores in Golden Valley and in Maple Grove.
The closures come as more customers shift to online and mobile banking. University of Minnesota Carlson School of Management professor George John says it’s a trend that will continue.
“In some sense, it’s a replay of what we see in retail, you know Wal-Mart’s got to contend with Amazon,” said John. “However, there are differences, so in banking there’s a consolidation going on for a good 25 to 30 years, since we deregulated banks essentially. So we’re unique as a country having tens of thousands of banks, not to count credit unions. Most countries of the world your have three or four or five big banks and that’s it.”
It’s not just U.S. Bank closing branches. Wells Fargo and Bank of America were among other big banks to close branches in 2018. (U.S Bank had 76 net closings last year, while Wells Fargo had 293 net closings and Bank of America 193 net closings, according to S&P Global Market Intelligence data.) Professor John believes there’s one reason for that.
“Banks are notoriously poor at customer service,” John said.
Rise of Credit Unions
Not all banks are closing branches. The northwest suburbs has seen a number of recent credit union openings, such as Firefly Credit Union in Brooklyn Park. Wings Financial Credit Union has a grand opening Wednesday, April 24 in Maple Grove.
“I’ve seen data which shows that people think of credit unions as our old-style local banks. Whether it’s objective or not, we perceive them as having as better, friendlier consumer service,” said John. “Some credit unions are actually national and large in scope. But conceptually we think of them as small and local. And I believe they are picking up the slack from large banks closing branches, consolidation happening, and customer service getting a little more ragged.”
While credit unions may see opportunity with big bank branch closings, places like U.S. Bank are in the midst of a digital makeover, recently rolling out a new app for customers. On Monday, U.S. Bank also announced it will open branches in Charlotte, N.C., where it will test a new branch design that puts greater emphasis on digital banking.
But experts say what comes next for big banks is hard to predict.
“The digital thing is more complicated than we think,” said John. “If you asked any banker, say 15 years ago, say 2001 or 2002, around that time frame, ‘oh what do you think banking is going to look like in 2020?’ They’d say ‘oh, we’re not going to use cash, we’re not even going to use checks, it’s all going to be cards,’ whatever. That day hasn’t arrived.”