Last week I turned 65 years old. It is hard to believe that I’ve reached this milestone, as it seems like just a few years ago that I was in high school. But the calendar does not lie. Another approaching milestone is that I have been associated with the banking business for nearly 45 years. That, too, does not seem possible, as it couldn’t have been that long ago that I began working in a bank as a college student. But the calendar does not lie.
During these 45 years, the business of banking has changed immensely, mostly within five prevalent areas. The first area is technology, particularly customer delivery channels. When I started in banking, customers came to the bank, or handled a limited number of services over the telephone. Today banking services are accessible by ATM, telephone, Internet, mobile and tablet … with far fewer people actually coming to the bank. This trend will continue to change the banking model significantly.
Second, the proliferation of regulations cast upon the banking industry is unfathomable. With over 100,000 pages of federal law to comply with, is it any wonder that banks struggle to know every rule in place? This plight drives many banks to sell, rather than continue to hire more and more non-income-producing employees. This issue is, and will continue to be, much more of a burden on rural communities. Banks are central to economic growth and, if the only bank in town sells, who fills the void to attract new jobs?
This leads to the third trend: bank consolidation. Nationwide there were around 20,000 bank and thrift charters 30 years ago. Today there are about 6,500. Granted, there are more branches today than three decades ago, but that, too, is changing. Since 2010, the total number of branches has declined, and those branches that remain are evolving. The branches that continue into the future will be less transactional and more focused on sales and providing financial advice. Consolidation is far from over, and the unique financial delivery system of the United States will be changed forever.
The fourth change has been the proliferation of unfair competition. Many companies that do not bear the same regulatory burden as banks are entering the financial services arena. This is like a boxing match, with one contestant’s arm tied behind his back. It is just not fair. Other competitors, such as credit unions and Farm Credit System banks, remain exempt from taxation on all or most of their income, yet banks on average pay nearly 40 percent of their net profit to taxes. How is it equitable for tax-advantaged entities to be selling the same services?
Finally, the image of banking has slipped within the past few years from the highest levels of respect to the lowest rungs of distrust – fallout from the financial crisis due to the missteps of a few. In contrast to the misdeeds of some organizations mistakenly lumped in with banks, traditional depository banks did not engage in risky behavior. As a result, the bankers that I know continue to provide the same high-caliber banking services to their communities that they always have. Nevertheless, all banks have suffered image erosion from those who did not adhere to time-tested banking principles.
These five areas have changed banking monumentally during my banking career. I hope that, within the next 45 years, the industry continues to find efficient channels to serve customers. I hope that bankers are able to continue to serve consumers in rural areas. I hope that our legislative leaders come to their senses and recognize that competitors providing the same products should be treated equally under the law. And I hope that banks and bankers soon regain the pristine image that they have worked so hard to earn.
-S. Joe DeHaven