Financial services providers may be riding a wave of change in their delivery methods, but the role of the United States remains unchanged as the world’s pre-eminent economic and military power. These were key messages from speakers at the Nebraska Bankers Association’s annual convention last month in the Omaha suburb of La Vista.
Eye-opening trends in how customers prefer to do their banking were cited by best-selling author Brett King in his presentation, “Bank 3.0: Why Banking Is No Longer a Place You Go, But Something You Do.” Since 2008, he noted, the Internet has been the preferred financial services channel for most Americans. Now, the iPhone is the fastest-growing channel ever seen, being adopted five times faster than the Internet. It will become the most popular channel soon, he predicted.
At the same time, the number of in-branch transactions is dropping quickly, with the projected number for 2013 less than half the number in 2000. Brick and mortar branches will continue to be needed, he believes, but fewer of them.
King finds it ironic that the primary account banks sell customers — the checking account — is dying, in his view. “The rest of the world has figured this out,” he said, but the United States still writes two-thirds of the world’s checks. Meanwhile, prepaid and debit card use in 2013 is estimated at $297 billion, up from $202 billion in 2011.
The ranks of the unbanked are growing he noted, as consumers opt for pre-paid cards. “Some young consumers are never going to write a check in their lives,” he predicted. For this reason, among others, by 2016 digital financial transactions will outnumber face-to-face transactions by 300–1, King told the Nebraska bankers. He advised them that no matter how great their branch experience is, they need to establish digital relationships with their customers. The next generation could be “de-banked,” he suggested; they will want bank services but will not need a bank.
However, investors will still need the strength and stability of the United States, in the view of economist Sung Won Sohn of California State University. His theme was “What Is Right With America,” and he filled it out with a long list of factors that other countries cannot match. A Californian for many years now, Sohn has Midwest roots dating back to his days as an economist at the former Minneapolis-based Norwest Corp.
Comparing the U.S. economy to China’s — the world’s second-largest — Sohn noted these advantages: U.S. gross domestic product is $14.6 trillion compared to $5.7 trillion for Japan (and size matters, he added); U.S. arable land is 5.3 times that of China; the U.S. has 4.6 times as much water as China; and the average age of “human capital” in the U.S. is 40 compared with 49 in China.
The economist acknowledged the U.S. economy is experiencing a “soft patch.” There is some economic growth but not a lot, he noted, and “the pie is not growing.” On the other hand he noted some positive trends, including “reshoring” or manufacturing coming back from abroad as labor costs rise in China and elsewhere. “Machines here now do the mundane mechanical work that used to be done overseas,” he said. The contribution of an improving housing market to GDP is growing, Sohn pointed out, and should help on the employment front since in good times one out of eight jobs is in housing.
The bottom line for Sohn: If he was going to invest $1 million in China, Europe, the United States or developing countries, 75 percent would be invested in the U.S.
Installed as NBA chairman for 2013–2014 during the convention was John P. Stinner, president and CEO of Valley Bank & Trust Co., Gering. In interviews prior to the start of the convention program, he and the incoming chairman-elect, Craig G. Brewster, president and CEO of Butte State, and George Beattie, NBA president and CEO, commented on the current regulatory climate.
They agreed that federal regulators seem to be listening to the pleas of community banks for regulatory relief. “I think they are out to see where the tipping point is and whether we are past it,” said Stinner. The outreach efforts of the FDIC and Federal Reserve are genuine, in his view.
The new mortgage rules of the Consumer Financial Protection Bureau are problematic, especially in rural communities, according to Brewster, to the point where his bank has stopped making mortgage loans. They are not a very profitable service but are “the right thing to do,” he noted. Stinner added that Wells Fargo and other large banks are not going to serve this market; if anyone does it will be other community banks.
Beattie pointed out that while community banks may have felt that the impact of the CFPB on them would be minimal, that has turned out not to be the case. “And it’s still too early to tell what is coming down the pike,” he said.
Bill Poquette is editor-in-chief of BankNews.
Copyright (c) June 2013 by BankNews Media