These 3 steps can keep in-person banking alive

With the rise in popularity of digital banking, FinTech and cryptocurrency, here are 3 ways traditional retail banking can stay relevant in today's market.

Old bank teller window

You may have noticed that most of your finances can now be done digitally. You can have paychecks directly deposited into your bank account with a digital pay stub. Credit and debit cards are accepted most places for most transactions. Personal payments can be made via apps like Apple Pay, Venmo or PayPal. And checks, for those of you who even know what they are, can be deposited directly through your phone.

With this rise in popularity of FinTech, digital banking, and fully digital cryptocurrency on the horizon, is there a future for traditional, in-person banking?

Well, yes and no.

Note: For the purpose of this article, "traditional" and "in-person" banking will refer to the same act of physically going to a banking location and interacting with someone or something.

The problem facing traditional banking

A large percentage of routine purchases are now done either through mobile or online methods. This, and that fact a majority of in-store purchases are card-based means that the number of cash transactions has significantly reduced.

As the adoption of mobile and online banking continues to grow, there will be less need for individuals to come into a physical branch to do simple banking tasks such as check deposits, bank transfers and paying bills.

So this sounds like the slow death of traditional banking, right?

A four-year study published by ValuePenguin shows that while mobile banking rates rose, and online banking was widely used, the percentage of people using physical branches and ATMs did not change much.

Shouldn't the increase of mobile and online banking reduce the need for physical branch and ATM usage, especially when cash payments are also in decline? If all things were equal, maybe, but you need to look at the main reasons people use each platform.

That same study showed that individuals who primarily used mobile banking were using it mostly for checking the account balance or recent transactions (94%), transferring money between bank accounts (58%), receiving alerts (56%), depositing a check (48%), paying a bill (47%) and locating in-network ATM or bank branches (36%).

Mobile banking showed to be very helpful and highly used for simple activities and checking on your account, but for more complex banking tasks (loans, refinancing, etc.), or things that need to be done in person (notarizations, money orders, etc.), physical branches were still important to customers.

But at the very least, ATM usage should have dropped, right? Maybe these stats are just too old to show the current state of banking. Why would you need ATMs when most transactions are cashless?

A 2019 payments study performed every three years by the Federal Reserve showed that even though the total number of ATM withdrawals has slightly declined since 2012, the total value of those transactions has gone up.

This means that the number of times that the average person uses an ATM has decreased, but the average amount of money withdrawn from an ATM has increased. In fact, the average amount of money withdrawn has increased so much, that the total amount withdrawn continues to grow, even as the total number of transactions shrinks. It doesn't seem as if cash withdrawals are going away any time soon.

So if people are still using physical banks and ATMs, do banks need to adapt at all?

Traditional banking still runs the risk of becoming unsustainable as a business, or inconvenient to their customers if they cannot adapt to changing expectations. In order to adapt to the new expectations of their customers, banks will need to recognize what changes are happening to retail banking, and be willing to adapt their traditional way of doing things into a more modern way of doing things.

In the past, "bank hours" were often joked about because they were so restrictive. It made going to the bank somewhat difficult if you couldn't match your schedule with theirs. Now, customers are used to convenience. They can shop at any hour of the day, get anything they can think of delivered to their doorstep in 2 days and are used to being able to call up customer service whenever is best for their busy schedule.

Mobile and online banking normally don't have these kind of limitations, so they can be more convenient for basic banking tasks. COVID-19 didn't start the movement to mobile and online banking, but it may have accelerated it, and banks will need to make sure they are adapting to their customer's needs if they want to maintain relevance.